Tiffany Varn from FSLSO said, “The most common misconception is that we are the State of Florida and/or that we levy the taxes, assessments, and surcharges that we collect on behalf of the state. Many filers do not understand that we are collecting on behalf of four different entities and that the monies that are invoiced by our office are not funds of FSLSO. They do not make the distinction between the State of Florida and our office.”

FSLSO Assistant Director of Education and Information Services Sean Fisher stated that “FSLSO is the only stamping (office) that bills and reconciles the state's taxes, as well as assessments for various state entities, i.e., Department of Community Affairs, Florida Hurricane Catastrophe Fund (FHCH) Emergency Assessment, and Citizens Property Insurance Corporation. The collection of these various assessments has everything to do with the efficiency of our filing and accounting systems.”

Weber said that while the FSLSO is focused on important issues such as collecting taxes and assessments, much of the office's resources are directed toward agents. The service office provides agents and brokers with educational courses, while maintaining a host of market data. The FSLSO just published its 2006 annual report, which paints a picture of a robust surplus lines' market. Looking at last year, the service office reported that 153 eligible surplus lines carriers provided coverage in Florida, of which 121 were foreign insurers and 32 alien insurers. The FSLSO had 1,061 licensed member agents and 570 submitting agents. Those agents reportedly wrote nearly $4 billion in premiums–which when combined with the $ 600 million in independently procured coverage (IPC) premiums–equaled a total industry premium of $4.6 billion. This makes Florida the second largest surplus lines market in the country, a fact that is unlikely to change.

By the Numbers

To gain some perspective of the volume of activity proportionate to the premiums, in the past three years (through the 3rd quarter for each year), the FSLSO has handled the following transactions and premiums:

As expected with this level of volume, FSLSO exhausts a great deal of resources to make sure that the reporting of surplus lines tax and fees are accomplished in a timely and accurate fashion. Surplus lines agents are required to report all transactions and FSLSO tracks such reporting on a continual basis. It's complicated, so there has to be a pretty sophisticated system in place to handle of all this and it's good to know that there is, including a well developed electronic filing system.

Fisher noted that there are 14 states currently with some version of an electronic filing system in place. However, he said, Florida is the first to do so through a service office. Receiving the phenomenal number of transactions coming to the service office is just the beginning; that information has to be reviewed, corrected if necessary, and efficiently and securely stored. (Just think for a moment about your office handling more than one million transactions a year!)

As to the methodology, Fisher offers this: “The accuracy of the information submitted to the FSLSO is measured on two different platforms. The first is an Agent Report Card. Each quarter agents receive a report card relaying their level of compliance with Florida's surplus lines filing procedures following a set of four criteria which include measures such as timeliness and accuracy.” The overall industry average for each quarter is available in the chart below:

YearQuarter 1Quarter 2Quarter 3Quarter 4

200586.34%91.21%87.14%88.32%

200687.43%88.31%87.97%88.47%

200786.69%88.68%87.24%TBA

In addition to the report card, there is an ongoing review process administered by FSLSO. That process is focused on review of the conduct of a surplus lines agent regarding submissions by the agent to FSLSO. “The Compliance Review Program utilizes the expertise and experience of contract analysts in reviews that compare a sampling of a surplus lines agent's policies to the transactions submitted to the FSLSO,” said Fisher. “Agents reviewed in a particular quarter who write surplus lines business are provided a compliance review score. This overall score is based on the elements of the compliance review where the information on the declarations page of the policy is compared for its accuracy with the information that is filed with our office. The grade represents the compliance performance with respect to filing transactions with FSLSO.” (See table below)

YearQuarter 1Quarter 2Quarter 3Quarter 4

200595.7%92.4%94.4%95.1%

200693.5%90.6%93.7%90.6%

200794.5%94.8%93.3%

While there are many other details to consider regarding the filing process, one of the areas that presents some confusion is the “export” requirements. Retail agents must perform a “diligent search” in order to export coverage to the non-admitted market, and they must document three declinations from admitted companies. This area can be a challenge for the surplus lines agents who are required to receive and maintain those documents in their file. To this point FSLSO Agent Services Administrator Matt Wester states, “An agent must remember that he or she must be licensed and appointed for the types and class of business in order to properly export the coverage. In other words, they cannot use a life company as a rejection in order to export a general liability policy. They must also remember that if they do not have three companies that they are licensed and appointed with, they must check with their competitors first in order to properly execute the due diligence.”

Agent Resources

To help with these and other issues, FSLSO does a tremendous job of providing education and training to Florida insurance agents and surplus lines agents involved in the transactions. CE classes and joint presentations to and with many of the local independent agents' associations (FAIA, PIA, etc) are one method. Fisher also points out, “there's an 8-minute DVD regarding the retail agents' role in the surplus lines marketplace, as well as an online 2-hour CE class for retail agents explaining their role in surplus lines market.”

Other educational tools include a free online electronic bulletin subscription announcing status changes of surplus lines insurers, OIR or DFS bulletins, and changes in filing requirements. Agents and brokers also can receive a free subscription for the quarterly newsletter, The Advisor. The FSLSO provides Florida licensed surplus lines agents' contact information to Kirschner's Red Book – Southeast Edition.

FSLSO are also associate members of the Florida Surplus Lines Association and several key national surplus lines associations. FSLSO works closely with those organizations through industry meetings, panel discussions, and committee/project work, along with other state stamping offices to stay current with (or ahead of) the myriad issues involved with the insurance industry, including legislation, technology, and the like.

When working with surplus lines business, questions are bound to arise. If a retail agency has a question or concern about a surplus lines' carrier or a surplus lines' agent, Ashlee Weber recommends the FSLSO web site (www.fslso.com). “Through FSLSO's web site, an agent or consumer has the ability to research any eligible Florida surplus lines insurer by checking our Insurer Financial Data reports,” says Ashlee. “These reports compile financial information for all surplus lines insurers eligible to operate in Florida, five years for foreign insurers, and four years for alien insurers.” These reports can be found by visiting www.fslso.com/market/insurer/.

For information concerning agents, Ashlee also recommends a program called the Market Data Reports. “Through the Market Data Reports, a retail agent or a consumer may look up the top (surplus lines) agents writing a particular coverage for a specific time period,” she said. This report further provides the contact information for agents, including mailing address and phone number. These reports can be accessed by visiting www.fslso.com/market/reports/. Finally, Ashlee reminds you that “beyond the web site, FSLSO provides assistance via e-mail and most predominately by telephone.” Anyone searching for additional information may do so by calling 800-562-4496.