2024 Florida Legislation Session Begins with NRRA on the Offense

Following the Association’s scramble with the Florida Legislature this past Spring, and the death of the H57 & S516 Bills on May 6, 2023, NRRA has undertaken some proactive steps to create a more balanced effort to counteract the reputational challenges which RRGs have been needlessly encountering in the state. 

This is our report on NRRA’s proposed non-combative and non-controversial statutory amendment(s) seeking to simply reinforce the legally correct observation that RRGs categorically are “insurers authorized to do business” in the state. Yes, there are still groups out there that continue to repeat the false notion that RRGs are somehow not “insurance companies!” Keep reading, as you can’t make this up.

According to NRRA Chairman, Tim Sullivan, “At our very successful recent National Conference, November 13th through the 15th, in Chicago, we reported that by no means is Florida going to be easier this time; indeed, the “maneuvering” will be deeper and more subtle for this upcoming session. But knowing the past in this business is critical in preparing for the future. So, from an equally different perspective, it is far more difficult to get legislation passed than it is to defeat it.” 

Two Contrasting Strategies Back-to-Back

The Earlier Defense Campaign.

Earlier this year, we found ourselves on the defense, having learned about this stealth legislation just about six (6) weeks before the legislative session ended. The bills were supported and/or sponsored by a few state public works contractors seeking to reverse the messaging of an intentionally misleading and prejudicial communication about risk retention groups (RRGs) in general, published by the Florida Office of Insurance Regulation (FOIR). We call this the Florida website “pop-up,” which had caused the Florida Department of Transportation (FDOT, not to mention certain public entities) to discriminate against RRGs.

What followed were two bills (H57 and S516) drafted by dedicated and experienced legislative staff groups who nevertheless were not fully informed that RRGs are indeed legitimate insurance companies created by the federal LRRA (15 U.S.C. §3901 et seq) and which is categorically reinforced by Florida’s two RRG statutes, §627.943 and §627.944 (governing domiciliary and non-domiciliary RRGs, respectively.)

 Since the Bills, however, were limited to changing only FS §324.021(8) (a subsection of Florida’s commercial auto financial responsibility law) solely to help those few contractors to overcome the “pop-up” and resulting FDOT discrimination, the effort resulted in a legislative conundrum, potentially threatening over 90% of the RRGs doing business in the state which ironically (as we showed) had already been doing their business in the state writing the same coverage for decades! Evidently, no one knew that.

We realistically knew, and reported extensively on our website, that this two-time failed legislation would be resurrected this coming legislative session because the agents and brokers and the powerful traditional insurers lobby did not oppose it!” They knew it could be used successfully against RRGs.

Game Change - The Truth about the Vital Role RRGs Play in Florida

What no one realized, until we began to show them, is that RRGs fill a significant void and role in Florida’s economy. There are 128 RRG insurance companies registered in Florida, accessed by literally tens of thousands of Floridian small and mid-sized businesses in numerous industries and professions, to secure liability insurance which is otherwise unavailable or unaffordable to these businesses.  Indeed, 63% of RRGs insure health care businesses alone where Florida is one of the most expensive states in the country within which to buy liability insurance. 

2024 Session Begins - NRRA’s Campaign goes on the Offense with Reputational Education.

First, we began educating the key people that RRGs fill that void but are sometimes thwarted because we need to educate everyone that these are legitimate insurance companies. They are licensed and admitted, e.g., formed and regulated the same as, or substantially similar to, traditional insurance companies in their states of domicile, requiring the same or similar types of actuarial analyses and underwriting criteria consistent with their required capital surplus requirements for their size and complexion. Virtually all RRGs carry reinsurance with many of the major domestic reinsurance companies and Lloyd’s of London syndicates, with collectively billions of dollars of capacity, most of which are supporters of NRRA and our initiatives.

Second, we immediately went to the people who supported H57 and S516, literally our opponents who/which supported the fatally defective legislation which hit a roadblock in May of this year. We have worked with them in an effort to secure their support for our newest initiative:  legislation we (NRRA) have proposed to easily solve the problem for all RRGs, once and for all.  On this front, our gratitude must  go out to Ananth Prasad, President of the Florida Transportation Builders Association, who opened more than just a few doors for us in the State.

Third, NRRA’s proposed solution is actually very modest and not combative, and our proposed amendment incorporates that simplicity. The problem that exists in Florida, however, remains similar to what we see in other states. It revolves around the simple use of nomenclature that can be used to discriminate against these legitimate RRG insurance companies.

The Nomenclature Problem Explained.

In our recent letter to the Senate Staff, Executive Director Joe Deems quotes the NRRA view: “The current problem often encountered by RRGs is the confusion created by the usage of the term ‘authorized insurer,’ which is defined within Florida’s insurance code to mean only an insurer which is licensed and admitted (aka) ‘certificated’ (as Florida calls it) in the state, and the alternate phrase, an ‘insurer authorized to do business in the state’ that is used throughout Florida’s broader statutory provisions. This latter phrase denotes a larger group of insurance companies that includes not only insurers that are licensed and admitted in the State, but also other insurers that are not licensed in the State but are otherwise authorized to do business in the state (such as non-domiciliary surplus lines carriers and non-domiciliary (aka) ‘foreign’ RRGs. These latter two are distinctly different types of insurance companies and our proposed amendment only addresses and clarifies the language in Florida’s specific state statute defining ‘foreign' [referred to as ‘uncertificated’] RRGs in the state.)

Under the regulatory scheme of the federal Liability Risk Retention Act (LRRA), an RRG may only be licensed by a single state, its domiciliary state, and is not to be licensed in any other state but is by definition authorized to do business in any other state, including Florida, based on an informational or ‘registration’ submission to that non-domiciliary state.” 

The NRRA Amendments.

In an effort to keep this approach neutral and simple, therefore, NRRA proposed language, using the same words, in the alternative, to two (2) separate statutes, i.e., the foreign RRG statute, section 627.944, and the aforementioned financial responsibility statute, section 324.021(8). We stressed the fact, Deems said, “that these very simple clarifications do not in any way change what either of these two terms mean.” Rather, the intent is only to solve the current problem by clarifying that a non-domiciliary or foreign RRG registered in the State is indeed deemed an “insurer authorized to do business in the state” consistent with the LRRA.  

Our Campaign Moving Forward – and the Bigger Picture: RRGs on the Long Haul… 

As of just recently, the FOIR has now removed its damaging pop-up from its website and, in its first meeting of the session on December 12, 2013, the House Insurance and Banking Committee (I&B) has passed a first amendment, so far, containing the language that NRRA has recommended.

In contrast, reputational damage inflicted upon our industry via residual ideological bias and selected negative communications concerning RRG insolvencies, continue to be pushed back against our industry using statutory inconsistencies. We hasten to point out that so-called RRG insolvencies are actually dwarfed in number by insolvent traditional insurers. Indeed, Florida alone has experienced more insolvencies in the past three years than RRGs across the nation.

These biased and misleading communications cry out for the RRG industry to continue its support of our campaign. The legislature goes into full swing after the first of the year, where the rest of the committees will entertain what is expected to be multiple attempts to “amend” the Bill. Of course, the devil is always in the details when it comes to the evolution of legislative wordsmithing in these affairs, not to mention its extent tempered by political will.

This is obviously a long way from being over! We are managing expectations that Florida will be our starting point in creating an appropriate reputational standard and resolution to this long-standing problem. This conundrum does not exist just in Florida – thus the basis for NRRA’s ongoing Advocacy Campaign.  We appreciate everyone’s support.

Stay tuned to NRRA’s newsletters and our website for further details. Best wishes that you all are enjoying a happy holiday season and a prosperous new year!