Senate Budget Committee Passes Surplus Lines, Commercial Insurance Bills

The Senate Budget Committee (“Committee”) met yesterday, April 25, and considered and passed two insurance-related bills:  CS/CS/SB 1816, relating to surplus lines, and CS/CS/SB 178 relating to commercial insurance rates.  Other insurance-related bills on yesterday’s Budget agenda that were not heard are now on the agenda for the Committee meeting scheduled for today, April 26, and are expected to be taken up at that time.

At yesterday’s meeting, Senator Mike Fasano, who sponsored CS/CS/SB 1816 relating to surplus lines, explained the bill’s purpose pursuant to the Nonadmitted and Reinsurance Reform Act of 2010.  The Committee then considered amendments filed to the bill and took the following actions:

• Amendment 105316, filed by Senator Garrett Richter, provides that the premium tax imposed by Florida, as the home state on a multi-state surplus lines policy, must not exceed the tax rate where the risk or exposure is located.  Senator Fasano stated he supports the amendment.  There were no questions, public testimony, debate, or objections to the amendment.  ADOPTED
• Amendment 507576, filed by Senator Richter, provides that the Florida Legislature may, at its discretion, review any cooperative reciprocal agreement that may be entered into by Florida’s Chief Financial Officer and the Florida Office of Insurance Regulation (“OIR”) with another state or group of states pursuant to CS/CS/SB 1816, and can direct the Chief Financial Officer to withdraw from such agreement if it is not in the best interests of the state.  The amendment also requires that the Florida Department of Financial Services prepare and submit a report to the President of the Senate and Speaker of the House of Representatives by January 1, 2012 describing in detail the terms of any agreement entered into and specifying additional content that the report must include.  Public testimony was given by a representative of the National Association of Professional Surplus Lines Offices (“NAPSLO”), wherein he stated his opposition to the amendment by expressing concerns that the amendment does not go far enough to resolve a possible constitutional issue, because it provides only for the Legislature’s discretionary review of such agreement, rather than legislative ratification.  There was no debate, and no objections to the amendment.  ADOPTED
• Amendment 261954, filed by Senator Richter, provides certain reporting requirements regarding any cooperative reciprocal agreement entered into, as well as sunset provisions if certain actions do not occur by certain dates.  Public testimony again was provided by NAPSLO, wherein it was explained that the plan of operation for a clearinghouse has not yet been adopted, and that there are privacy considerations.  At that point, Senator Richter withdrew the amendment.  WITHDRAWN

The Committee then considered the bill as amended.  There were no questions or debate.  Senator Fasano waived closing on the bill.  A roll call vote was taken and CS/CS/SB 1816 was passed favorably by the Committee as amended. 

Senator Steve Oelrich, the original sponsor of CS/CS/SB 178 relating to commercial insurance rates, explained that his bill amends current law to expand the types of commercial lines insurance that are exempt from prior rate filing and review requirements.  He further explained that these are healthy, competitive lines, and that the OIR still has the ability to disapprove the rates under certain circumstances.

Questions were asked by Senators Joe Negron, Evelyn Lynn and Arthenia Joyner regarding how the provision in the bill would practically affect the market.  Senator Oelrich explained that it is a mechanism to streamline rate changes without waiting for the OIR to approve the new rates, with a protection that if the OIR disapproves a rate increase, a refund will be provided.  He further explained that the OIR may disapprove a rate if it finds it is excessive, inadequate, or discriminatory, though there is no “ceiling” or “floor” on rates.

Public testimony was waived in support of the bill.  In debate, Senator Nan Rich spoke in opposition to the bill, noting her concern that small businesses would be harmed.  After Senator Oelrich closed on the bill, a vote was taken and CS/CS/SB 178 was passed favorably by the Committee.   

Budget Update – During the Committee meeting, Senator J.D. Alexander provided an update on the budget negotiations.  He began by explaining the process of working on the budget with the House.  He noted that there are 12 days remaining in Session, and only nine days for a budget to be finalized and presented in order for Session to adjourn as scheduled. 

While Senator Alexander stated he believes it still may be possible to meet that deadline, it is becoming more challenging.  Specifically, he stated that in his 14 years in the Legislature, they have never before faced the situation they are dealing with this year given the limitations on revenues.  He then detailed the latest Senate proposal on the budget to the Committee members. 

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