Just days before a final committee vote on a bill that would establish a clearinghouse for Citizens’ commercial policies, Florida’s insurance commissioner has offered his own rewrite, one that would give regulators more authority over who runs the clearinghouse and would limit how much an administrator could charge brokers.
The bill is state Sen. Joe Gruters’ SB 1028. The final Senate panel, the Fiscal Policy Committee, last week approved an amended version of the bill that supporters said would underscore admitted carriers’ ability to take out Citizens’ commercial policies.
But Insurance Commissioner Michael Yaworsky’s version would go further. He and others hope his changes can be added into a House version of the bill, House Bill 943. The House Commerce Committee could meet next week—the last stop before floor votes in both chambers.
Until last week, Gruters’ bill and its House counterpart had sailed through committees with almost no dissenting votes. But some Florida brokers, insurance agents and the commissioner have been critical of the bill, arguing that it appears to be written to favor unregulated surplus lines and Ryan Turner Specialty, one of the largest wholesale insurance brokerages in the country.
Gruters’ plan would cost millions and would effectively put one brokerage in charge of the clearinghouse, giving it authority other brokers who may want to take out Citizens’ commercial and condominium policies, critics have said.
“I just don’t think it’s necessary,” said Phil Masi, agency president of AssuredPartners, one of the largest writers of condo insurance in Florida. “It’s a waste to do it, on the commercial side. The market is functioning the way it’s supposed to, especially now.”
Others, including Ryan Specialty leaders, have said that few organizations are better equipped than a large brokerage like Ryan to administer a clearinghouse, and the plan could help reduce Citizens’ exposure while facilitating a more market-based insurance system.
Commissioner Yaworsky, who spoke against aspects of Gruters’ bill at an earlier Senate committee hearing, this week submitted his own version of the bill with some striking differences. A comparison of the versions:
The equalization clause. Gruters’ bill, as currently drafted, would bar Citizens from writing or renewing a commercial policy if the clearinghouse finds a surplus lines’ policy within 20% of the Citizens’ premium, as statutes already require. But the bill would also allow Citizens to add an “adjustment” to make its own premiums the same as a surplus carrier’s, apparently overriding the state-created insurer’s statutory glidepath.
Yaworsky’s version deletes the equalization clause.
Who can play. SB 1028, as it now reads, would let the program’s administrator recommend which insurers can participate. Yaworsky’s amendment makes it clear that admitted insurers would be included in the clearinghouse and that the Office of Insurance Regulation would have to approve all surplus insurers that participate. A clearinghouse also would have to be authorized by Citizens’ plan of operation, a framework that must be reviewed by the cabinet-level Florida Financial Services Commission.
Limits on administrator. A plan administrator could be authorized for no more than three years, Yaworsky’s bill notes. Gruters’ version does not include a time frame. Yaworsky’s amendment also would mandate that the administrator be based in Florida and be “free of all potential conflicts of interest.” That could potentially exclude Ryan Specialty, which is headquartered in Chicago.
Fees and commissions. Gruters’ version would set no parameters on what fees or surcharges a clearinghouse manager may charge—only that they be considered “fair.” Yaworsky’s bill would note that fees cannot exceed $100 per policy. Also, his plan would require that the total cost of insurance coverage includes the premium, fees and surcharges. That suggests that an admitted or surplus lines’ proposed premium on a takeout policy would have to be within 20% of Citizens’ price—including broker fees.
SB 1028 would stipulate that an approved surplus lines carrier pay the producing agent a commission at least equal to Citizens’ normal commission. Yaworsky’s rewrite would cap that commission at 7.5% of the total cost of the coverage.
Fronting. Yaworsky’s version would flatly prohibit fronting, presumably by admitted carriers acting on behalf of surplus lines firms. Gruters’ bill does not mention fronting.
At the Senate Fiscal Policy Committee hearing last week, a Florida Association of Insurance Agents’ representative said the committee’s Jan. 12-approved amendment addresses many of the association’s concerns.
But “there is some language in the bill that we do want to continue to work on to ensure that the admitted clearinghouse does happen,” said B.G. Murphy, FAIA’s director of government affairs. The association also has questions about comparable coverage, as defined in the bill, he said.
Citizens officials have not taken a position on the legislation, but a Citizens lobbyist said at the committee that the Jan. 12 committee substitute is “a worthy amendment.”
The amended Senate bill can be seen here. Yaworsky’s proposed version is here.
Top photo: FAIA’s Murphy speaking at the Senate Fiscal Policy Committee last week. (The Florida Channel)
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