Florida Surplus Lines Service Office Compensation Committee Meeting Report: October 26

 

The Florida Surplus Lines Service Office (“FSLSO”) Compensation Committee (“Committee”) met yesterday, October 26, 2011.  Chairman Dan O’Leary, who called the meeting to order, stated that he requested it because discussions during the FSLSO’s Budget Committee meeting had been confusing.  

FSLSO Executive Director Gary Pullen explained that a merit pay pool, as well as a bonus pool, exists for FSLSO staff members, who can earn per-quarter bonus amounts by achieving certain goals.  Those bonuses are not earned individually, but as a unit.  Additionally, staff members can earn an annual bonus based on their individual performance evaluations.  Bonuses and pay raises are based on evaluations, which are performed in November.  

Committee members discussed how FSLSO staff members can earn bonuses and pay raises if the FSLSO is operating at a deficit.  Mr. Pullen pointed out that the FSLSO budget probably cannot be balanced on salaries alone.  He reminded the Committee that the FSLSO’s per-policy service fee of 0.1 percent funds its operations.  In 2007, the Florida Office of Insurance Regulation (“OIR”) suggested that the FSLSO begin to spend down its reserves, which is why the FSLSO is currently operating at a deficit.  

Mr. Pullen stated that because bonuses are based on performance, and FSLSO staff members have assumed more responsibility and accomplished more, and thus deserve recognition, there needs to be flexibility within the budget items to accommodate the bonus and merit pay pools. 

The Committee discussed the budget process.  It was decided that, in the future, the FSLSO should request that its budget be submitted to the OIR by November 1 each year.  That way, the Budget Committee can meet in person around the time of the October Board Meeting, rather than by conference call in September. 

With no further business before the Committee, the meeting was adjourned.

 

FSLSO Board of Governors Meeting Report

The FSLSO Board of Governors (“Board”) also met yesterday. 

After Board Chairman David Holcombe called the meeting to order, Mr. Pullen gave an update on the implementation of the federal Nonadmitted and Reinsurance Reform Act (“NRRA”) and Senate Bill 1816, which passed during the 2011 Florida Legislative Session.  To assist in compliance with the new legislation, modifications are being made to the FSLSO’s Web portal and software. 

Pursuant to the NRRA, the alien insurer application process has changed.  The FSLSO is making corresponding changes to implement the NRRA provisions in situations where Florida is the home state.

Mr. Pullen stated that 11 states have signed the Nonadmitted Insurance Multi-State Agreement (“NIMA”), while nine states have signed the Surplus Lines Insurance Multi-State Compliance Compact (“SLIMPACT”).  Thirty-one states are waiting to see how NIMA and SLIMPACT are implemented before deciding whether to enter one or the other.  

Further, he explained that the FSLSO Plan of Operation has been amended as required by the NRRA and SB 1816 to include the authorization to perform NIMA Clearinghouse functions.  It is anticipated that the Clearinghouse will be operational on January 1, 2012.  The FSLSO has the infrastructure in place to have the Clearinghouse operational by that date. 

There was discussion among the Board members of how the FSLSO will need to keep its own functions separate from those it performs for the Clearinghouse.  The Board members also discussed the need to schedule regular Board meetings throughout November 2011 in anticipation of negotiating the FSLSO contract for the Clearinghouse.  It was agreed that the Board would post notice of meetings scheduled for every Tuesday and Thursday beginning sometime in November. 

FSLSO Chief Financial Officer Jim Godfrey presented the organization’s financial report.  He noted that the FSLSO’s 2012 budget had been submitted to the OIR for approval, and that he expects Florida Insurance Commissioner Kevin McCarty to sign off on it shortly. 

The projected deficit of $2.2 million for 2012 also was discussed. The FSLSO has been using its reserves to cover the deficit, rather than raise the service fee.  Mr. Pullen stated that, in order to cover the deficit, the fee would have to be raised from 0.1 percent to 0.175 percent for 2012.  The financial report was adopted.

Tom Terfinko, FSLSO Assistant Director of Agent and Insurer Services, reported on agent and insurer services and reviewed the organization’s market monitoring activities.

Board member Dan O’Leary reported on the FSLSO’s Compensation Committee (“Committee”) meeting and made a motion to add the Florida Insurance Consumer Advocate, currently Robin Westcott, as a Committee member.  The motion was adopted. 

The proposal to have the FSLSO Budget be due to the OIR by November 1 in future years was discussed, inasmuch as the Board members would like to have an in-person Budget Committee meeting in conjunction with the October Board meeting.  Bruce Culpepper, an OIR representative, agreed to take this request to the OIR for consideration.

 Chairman Holcombe stated that the FSLSO’s January Board meeting would probably take place around the week of January 17, 2012.

 With no further business before the Board, the meeting was adjourned.

 

Should you have any questions for comments, please feel free to contact Colodny Fass.

 

 

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