A Florida bill that would harden certain financial standards for risk retention groups (RRGs) and surplus lines carriers could cause a “devastating” impact on most of the RRGs doing business in the state, the executive director of the Risk Retention Group Association (NRRA), Joseph Deems has said.
RRGs are regulated differently from captives and commercial insurers because they come under the Federal Liability Risk Retention Act (LRRA) of 1986.
Deems highlighted that by imposing a requirement of an AM Best “A” rating and a minimum financial size of $100M in capital surplus in order for an RRG to write commercial auto liability in Florida, the Bill unlawfully seeks to regulate RRGs, and unlawfully discriminates against those RRGs that do not obtain such ratings.
“If passed, Florida Bill 516 will have a devastating impact on not only trucking and transportation risk retention groups registered in Florida, but actually every RRG writing commercial liability, including auto,” Deems said.
“Hundreds, if not thousands of RRG owner-insureds could lose their coverage.”
The Bill’s passing may also open the door to significant threats to RRGs in other states.
If passed, starting 1 July 2023, Bill 516 will potentially impact 96% of the 140 risk retention groups registered in Florida from continuing their business, according to NRRA.
“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,” Deems said.
The Florida House Commerce and Senate Appropriations Committee hearings are set to take place 10 April and 12 April respectively.
“We need to stop this bill before it passes because, if it passes, suing the state will take years and will be too late to help these impacted RRGs,” Deems said.