Florida Insurance Legislation 2010: Ambitious Goals, Limited Success

When the Florida Legislature began its 2010 regular session on March 2, 2010, the insurance industry and its supporters hoped to achieve several ambitious goals. By the time the session ended on April 30, 2010, the industry was forced to settle for a few minor successes.

After Florida Governor Charlie Crist vetoed 2009 legislation that would have deregulated residential property insurance ratemaking for certain highly capitalized companies, proponents of deregulation hoped that in 2010 they would be able to pass a rate deregulation plan that addressed some of the governor's objections. Other insurers sought legislation to address the state's dramatic increase in auto insurance claims fraud. A legislative task force recommended a complete rewrite of the laws regulating title insurance. None of these initiatives succeeded.

The Legislature did, however, enact measures affecting solvency, regulatory authority over affiliates, property insurance claims, rate deregulation for commercial insurance, guaranty funds, and other important matters. This article describes the highlights of these and other insurance-related enactments.

Property Insurance

SB 2044 (http://tinyurl.com/38lzr6t ) includes several issues that were sought by the Florida Office of Insurance Regulation, including increased surplus requirements and increased regulatory authority over managing general agents and other affiliates. The bill also contains provisions sought by insurers, including restrictions on public adjusters. The major changes in the bill include:

Minimum surplus: The bill requires new residential property insurers to maintain at least $15 million in surplus as to policyholders. For existing residential property insurers, the minimum surplus is raised to $5 million through July 1, 2015, $10 million from that date through July 1, 2020, and $15 million thereafter. Under current law, residential property insurers must maintain minimum surplus of $4 million. Affiliates and managing general agents: When a residential property insurer sustains a loss of surplus of 15 percent or more in a year, it will be required to provide the regulator with detailed financial information about all affiliates. The bill also expands regulatory authority by allowing the regulator to examine any managing general agent as if it were an insurer and requires any insurer to change the accounting firm used to prepare its annual report once every five years. Claims: The bill requires all claims for residential windstorm or hurricane losses to be filed within three years after the date the windstorm caused the loss or the hurricane made landfall. The bill also provides that under replacement cost coverage, the insurer may hold back a portion of the payment for dwelling losses, but it does not change the current prohibition on hold-backs for replacement cost coverage of personal property. Public adjusters: SB 2044 imposes several new restrictions on public adjusters, who assist claimants in the settlement of claims. The bill prohibits public adjusters from making certain statements in the course of soliciting business. Public adjusters also are prohibited from preventing insurers' access to an insured person or property. The bill requires public adjuster contracts to include specified information and limits commissions on supplemental or reopened claims to 20 percent of the additional claims payment. Ratemaking: The bill continues the prohibition against property insurer implementing a rate change before it is approved by the regulator ("use-and-file" rates) through December 31, 2011. It also revises provisions for expedited rate review to allow expedited review of filings that reflect only adjustments in reinsurance costs, financing products used in lieu of reinsurance, and inflation trend factors. The bill also prohibits the regulator from using the ratemaking process to directly or indirectly affect an...