Under new governor, Florida begins to
ease market access, but there is still some distance to
On the federal level, several states have helped confuse the
implementation of surplus lines reform tax collections by
promoting agreements like NIMA, the Nonadmitted Insurance
Multistate Agreement, or SLIMPACT, the Surplus Lines Insurance
Multistate Compliance Compact. The agreements leave brokers
scratching their heads wondering to whom and to where they will
pay future premium taxes.
Last year at the state level, however, Florida approved
legislation exempting certain commercial lines from the
state’s file and review requirements as of Oct. 1, 2010.
In this year’s legislative session, lawmakers exempted
more lines from rate regulation with the passage of H.B.
Surplus lines carriers, wholesale brokers and their
customers will also notice changes with the passage of H.B.
1087. The bill, signed by Gov. Rick Scott in June, includes a
provision that simplifies the placement of non-admitted
insurance by eliminating an arduous due diligence requirement.
Instead of forcing brokers to scour the market and document
rejections by three admitted carriers, the new law requires a
simple disclosure form.
The form states that coverage may be available in the
admitted market at a lesser cost and that E&S carriers are
not covered by the Florida Insurance Guaranty Association. This
disclosure, which must be signed by the insured, helps to limit
potential liability for agents. The due diligence requirement
still applies to residential coverage placed in the surplus
The new law continues to require the use of a Florida
surplus lines broker who shares commissions with retailers to
place non-admitted coverage.
The due diligence requirement was lifted for the following
lines as of July 1: commercial excess; surety and fidelity;
boiler and machinery; errors and omissions; directors and
officers, employment practices and management liability;
intellectual property; advertising and Internet liability; and
properties under high-risk rating plans. On Oct. 1, the list
expanded to the lines deregulated under H.B. 99: fiduciary
liability; general liability; commercial property; commercial
multi-peril; excess property; and burglary and theft.
“Prior to the recent law change, an agent with access
to an admitted market that has experienced a downgraded rating
[or] offers unfavorable pricing or coverage [was] obligated to
offer that market to the insured vs. an excess and surplus
lines offering,” says John Laurie, agency manager of
BB&T Insurance Services in Bradenton, Fla. “In a way,
that punishes that agent because a competing agent may not have
that same market and have unimpeded access to an E&S market
that is stronger financially, offers better coverage,
In addition to cleaning up the surplus lines premium tax
payment mess, further reform at the state level could be on the
agenda. Laurie believes further reform is a good thing.
“I would like to see more deregulation. The current
changes are not applicable to all lines, but what we have now
is certainly better than it was.”
Getting the disclosure form signed is the responsibility of
the retail agent. The form was designed with the intent of
reducing the retailer’s liability due to an
insured’s lack of understanding the differences in the
E&S market. The onus used to be on the retail agent to
explain differences in placing business in the E&S market
to the customer. The new disclosure form helps alleviate some
of that risk. Even though the law exempts commercial lines from
rate approval, carriers must be able to justify the rates if
questioned. The new law allows for rates to be challenged if
they are considered excessive.
“Twenty years ago, non-admitted policies were largely
manuscript policies for high-risk accounts. Now, many of these
policies have become almost duplicates of admitted
forms,” says Tom Terfinko, assistant director of Agent
& Insurer Services for the Florida Surplus Lines Service
There was a great deal of frustration dealing with
solicitation practices under the old due-diligence effort. If
caught, agents who didn’t comply faced sanctions, but
some took the risk. “There were those who abused it,
those who never complied. Others thought it was unfair or
redundant,” Terfinko says. “With the change, the
attempt is to free up the marketplace.”
Amrhein is wholesale editor.