The controversial Florida Bill 516 on motor vehicle liability policies has been approved for review by the Florida Senate.
The Appropriations Committee on Criminal and Civil Justice voted 11 to one in favour of the review.
The legislation would change the definition of the term “motor vehicle liability policy” and also define the term “risk retention group (RRGs)”.
It would also require RRGs writing commercial auto liability in Florida to carry a Financial Strength Rating of “A” or higher and be of a financial size category (FSC) of VIII, or above, from ratings company AM Best.
In recent weeks, the National Risk Retention Association (NRRA) has said the bill will have a “devastating impact” on every RRG writing commercial liability, including auto, if passed in its current form.
The association made the statement on 5 April in which it also predicted that the bill could see “hundreds, if not thousands of RRG owner-insureds lose their coverage.”
According to the NRRA, the proposed bill could halt the business of, or negatively impact, 96 per cent of the 140 RRGs registered in Florida.
“If history is any example, regulatory intervention calculated in response to the bill could actually disqualify or interfere in a number of ways with RRG commercial liability insurance,” it says.
The NRRA adds: “By imposing the requirement of an AM Best “A” rating and a minimum financial size status of US$100 million in capital surplus — in order for an RRG to write commercial auto liability in Florida — the bill unlawfully seeks to regulate RRGs, and discriminates against RRGs that do not have to, or cannot obtain, such ratings.”
If passed into law, the bill would go into effect on 1 July 2023. The National Council of Insurance Legislators has also opposed the bill as it stands.
On behalf of the NRRA, its executive director Joseph Deems has said: “We need to stop this bill before it passes because, if it passes, suing the state will take years and it will be too late to help RRGs impacted.”
“If Florida can get away with violating the federal law, by making any financial rating a requirement to do business in their state, it may set a precedent to make other states bolder to do the same thing.”
