The Florida Bill 516 will have a “devastating impact” on every risk retention group (RRG) writing commercial liability, including auto, according to the National Risk Retention Association (NRRA). 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” if passed. The legislation would 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 AM Best. The bill would also impose an AM Best rating requirement of “A” for surplus lines carriers writing commercial auto coverage in Florida. In contrast to RRGs, there is no FSC requirement for surplus lines carriers in the current bill. 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.” Both of the aforementioned are categorically preempted by the Federal Liability Risk Retention Act, an initiative the NRRA has helped establish through numerous legal decisions in recent years. As of 2021, the most recent year for which the Risk Retention Reporter has complete NAIC financial data, 13 transportation RRGs wrote commercial auto liability in Florida for a total of US$41.3 million — 10.2 per cent of all commercial auto liability written by RRGs in 2021. Through those premium dollars Florida collected over US$2 million in premium taxes. However, only one transportation RRG operating in Florida carries an AM Best rating — National Independent Truckers Ins. Co., RRG (B++) — and no other is rated as an FSC VIII or above. Were the bill to go into effect these RRGs would be barred from writing commercial auto liability in the state. Very few RRGs across all business sectors meet the stringent requirements set forth in the bill, says the NRRA. There are only 25 RRGs rated by AM Best of FSC VIII or above, it adds, most of which are affiliated with other entities, as is the case with MedPro RRG Risk Retention Group and The Doctors Company RRG, a reciprocal exchange. Of those, 21 carry a rating of “A” or better — less than 10 per cent of operational RRGs. 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 says: “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.”
