A small Florida trucking business may have to shut-up-shop if a Florida bill targeting risk retention groups and surplus lines carriers is passed into law.
“If this bill goes through, I might have to either close my doors or I might have to relocate to another state,” Linda Allen, CEO at Hardcore Trucking, told Captive Intelligence.
“I have a small trucking company, and I have two trucks. Florida is one of the most expensive states to have truck insurance, and I pay $36,000 a year. I carry a $1m coverage on each truck.”
Under the current proposals, any RRGs operating in the state would require 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.
“I mean, the big thing they need to do is all the AM Best rating language needs to be removed and a hundred million of reserve money needs to be removed,” said Lewie Pugh, executive-vice president at Owner Operator Independent Drivers Association (OOIDA), which owns a RRG with members operating in the state.
“If they take that out, the bill would be fine.”
Pugh said the proposals could be very damaging due to small business truckers operating on very tight margins. Bill 516 could see insurance premiums hike substantially.
“If you take the RRGs out of the insurance market, you’re just going to make prices go up because there is less competition,” Pugh said. “That’s normal capitalism and basic economics.
“Everything’s very expensive for truckers with very little profit. Insurance is one of your biggest expenses and Florida is one of the top three most expensive states to procure insurance for commercial auto. So, it makes it very challenging for small business truckers to find affordable insurance.”
As a result of costly insurance prices, small business truckers often join an RRG as a means of bringing their costs of insurance down.
Joe Deems, executive director of the National Risk Retention Group Association (NRRA) previously said that imposing the requirements would eliminate coverage for 96% of the companies that use RRGs for commercial auto coverage.
“If this bill passes,” Deems said, “it will destroy everything they have that’s working.
“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.”
Hope?
However, there is hope that law makers in the state might reverse their decision after hearing industry concerns about the impact the proposals could have on RRGs in Florida.
“Lawmakers were very open to what I said and very sympathetic and very understanding,” Pugh added.
“I don’t think they realised the unintended consequences of the way this bill was written, and the effect it was going to have on small business truckers and other RRGs.”
Pugh said he was 75% confident that the bill would not go through in its current format.
Allen highlighted that when she testified against the bill, her senator said “I don’t even know why you’re concerned about this?”
“And I said I’m concerned because I do business in the state, and I want to continue to do business in the state.”
Last week, NRRA announced three stages of fundraising plans to in order to combat the Florida bill.
If the Bill passes with the current language, NRRA said its final phase of the campaign would be to commence litigation to and challenge it at the federal level, with an estimated cost of $150,000.