Florida Surplus Lines Service Office Board of Governors Meeting Report: September 22

On September 22, 2009, the Florida Surplus Lines Service Office (“FSLSO”) Board of Governors (“Board”) met to approve the proposed budget for 2010.  The meeting agenda and materials are attached.

The meeting was led by FSLSO Executive Director Gary Pullen, who reviewed the FSLSO Budget Committee’s 2010 recommendations from its September 15 meeting.  To view a summary of that meeting, click here.

The Board discussed proposed software programming upgrades, general FSLSO operation and disaster preparedness.

It was noted by Mr. Pullen that, after the initial development of the FSLSO reporting software and management system, the Board recognized that this proprietary system may have economic value to other entities performing service office functions. In an attempt to recover some of the system’s development costs, a decision was made to market the suite of automation products to other states and stamping offices.

Concurrently on the federal level, earlier attempts to create a national tax clearinghouse to facilitate the placement and taxation of multi-state surplus lines policies were being renewed.

These efforts consisted of the development of a voluntary state compact agreement and the introduction of federal legislation.

Meanwhile, with the subsequent increase in Florida premium, the FSLSO’s financial need for recoupment of development costs was temporarily alleviated.

However, the national legislation now is moving forward, as evidenced by the U.S. House of Representatives’ adoption of HR 2571, the Non-Admitted and Reinsurance Reform Act of 2009 on September 9, 2009.

In 2008, the Mississippi Surplus Lines Association adopted the FSLSO platform for the reporting of surplus lines policy data, including the FSLSO management system and variance application.

Earlier in 2009, the Washington Surplus Lines Association also adopted components of the FSLSO automation suite and management system.  Further, California recently decided to utilize the FSLSO’s Surplus Lines Information Portal (“SLIP”) interface as the front-end component for its filing system.

Discussions are also ongoing with other states regarding the adoption of the FSLSO automation suite.  Those states include Tennessee, New Mexico, Virginia, and Massachusetts.

These recent developments warranted the proposal of a new FSLSO Product Management Initiative.  This Initiative is expected to:

• Define, manage, and protect the code, documentation, and other products that comprise FSLSO’s intellectual property;
• Create a “Functional Catalogue” that would define the functions of each of the current Surplus Lines Automation Suite (“SLAS”) implementations;
• Create standards related to data submission;
• Create a dictionary of terms that will assist in communication between states; and
• Create a “Requirements Catalogue” of each state’s requirements as related to the SLAS. These requirements could include specific business rules, organizational mandates, and/or legislative rules.

The Board also considered a recommendation from the Budget Committee to reduce the anticipated 2010 operating deficit by approximately $356,000 by eliminating the following computer software initiatives:

• Creation of software to be used in reviewing and reconciling Lloyd’s policies written under binding authority contracts, thereby increasing FSLSO revenue.
• Addition of the capability to submit batch data submissions through SLIP, which would reduce costs by eliminating the need for additional File Transfer Protocol submission software.
• Creation of a web services application that would allow agencies and insurers to interact with the FSLSO’s application servers remotely, improve network security by utilizing protected ports and help facilitate batch filings through SLIP.

After discussion, the Board decided to add the software initiatives back into the 2010 budget.

Notable program expenses that were approved included:

• A $49,296 increase to cover the additional costs due to an increased number of compliance reviews to be performed and additional travel expenses associated with out-of-state compliance reviews.
• A reduction of $9,038 to reflect the anticipated costs associated with providing insurer financial information on the FSLSO website for 2010.

The Board approved the 2010 budget for $6,272,732, with an operating deficiency of $2,090,093. 

 

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

 

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