Florida Senate Budget Subcommittee on Finance and Taxation Adjourns Before Hearing Surplus Lines Reform Compliance Bill (SB 1816)

CS/SB 1816, a bill that would amend Florida law to bring the State into compliance with the Nonadmitted and Reinsurance Reform Act of 2010 (“NRRA”) was on the Senate Budget Subcommittee on Finance and Taxation (“Subcommittee”) agenda today, April 6, 2011, but was not heard, inasmuch as the entire meeting time was taken up by a bill relating to the remittance of tax by online travel booking services. 

The Subcommittee adjourned prior to hearing CS/SB 1816.

Premiums charged for surplus lines coverages in Florida are subject to a five percent tax and a service fee of up to 0.3 percent.  When a surplus lines policy covers risks over multiple states, Florida requires payment of the five percent surplus lines tax and the 0.3 percent service fee on the portion of the premium which is properly allocable to the risks or exposures located in this State.

The NRRA, which is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, limits regulatory authority over non-admitted (surplus lines) insurance to the home state of the insured.  Under the NRRA, Florida will no longer have jurisdiction to collect taxes and fees on surplus lines policies that cover risks over Florida and other states unless Florida is the home state of the insured.   This may result in significant loss of tax revenue.   

However, the NRRA authorizes states to enter into agreements with one another for home states to collect taxes on multi-state risks and then allocate tax revenue to the state where the insured risks are located

Therefore, CS/SB 1816 amends s. 626.932(3), F.S. to apply the surplus lines tax to the entire premium if the state is the home state of the insured as defined in the NRRA. The bill also authorizes the Florida Department of Financial Services (“DFS”) and the Florida Office of Insurance Regulation (“OIR”)  to enter into cooperative reciprocal agreements with other states to collect and allocate non-admitted insurance taxes for multi-state risks pursuant to the NRRA.

Finally, CS/SB 1816 also provides that surplus lines agents and policyholders that do not use a surplus lines agent to procure coverage have 45 days after the end of the calendar quarter to file an affidavit describing transactions handled during the last quarter and pay the required premium tax and fees.

Two amendments had been filed to CS/SB 1816 yesterday by Senator Ellyn Bogdanoff, one of which would remove the authority that would be granted to DFS and OIR to enter the aforementioned agreement, and the other, which would require Florida’s Insurance Commissioner and the Florida Surplus Lines Service Office to conduct a fiscal analysis by December 31, 2011 of the State’s entering into one of the two NRRA compliance proposals currently pending in state legislatures across the country, the Surplus Lines Insurance Multistate Compliance Compact (SLIMPACT) and the Nonadmitted Insurance Multi-State Agreement (“NIMA”).  

To view complete information on CS/SB 1816, which is considered to be a NIMA bill, click here.

Should you have any questions or comments, please contact Colodny Fass.