A. If we are to be effective surplus lines agents we need to be a resource to our retail customers. In the same way, we feel FSLA is and will continue to be a resource to our membership. We are constantly communicating legislative issues and changes to our members and alerting them about how specific statute or code changes impact them and their customers. Our legislative committee (and liaison Doug Mang) has been working very hard to keep up with legal changes and the opportunities and/or challenges they present. We have become much more proactive in communicating with members of the Legislature and educating them about our industry in general and the surplus lines industry in particular.

Additionally, FSLA is developing a PAC to take specific action when necessary regarding key legislation. The FSLA was instrumental in helping to avoid a huge mess for brokers, agents and their customers in the Essex v Zota case. Currently, our focus is on the National Reinsurance Reform Act (NRRA), which establishes a new set of guidelines regarding handling payment of the surplus lines tax on multi-state risks.

We continue to bring important speakers to our meetings and events. For example, guest speakers at our most recent convention included William Berkley, chairman of W.R. Berkley, and Hank Watkins, chairman of Lloyd's North America. Our members and associate members also learn from one another and help each another as we work through the issues brought about by economic conditions and the resulting insurance marketplace conditions.

Q. To follow up on NRRA and the current market conditions: First, what is the likelihood that the marketplace will change in the next 12 months?

A. I am an optimist, so I believe that we are close to seeing the market start to turn and become a little harder. I wish I could say it is going to happen in the last quarter of 2010, or it is going to be a major change, but right now with all of the capital still available in the worldwide insurance market, a fast or significant change does not seem likely (that's of course excluding any catastrophic events that could change some things much faster).

Q. You mentioned the NRRA. Can you explain what is happening and why it may be an issue for Florida agents?

A. There are a number of elements to the legislation, and I would encourage anyone seeking more information on this or any federal legislation involving the insurance industry to go the NAPSLO web site http://www.napslo.org/, and for Florida legislative issues, go to FSLA's web site http://www.myfsla.com/. As for NRRA, we are most concerned about the treatment of insured operations with multi-state locations. The heart of the problem is this: The legislation states that the surplus lines tax is paid to the “home state” of the insured's business operations. The problem is, the details of this have been left to be worked out among various state insurance departments, surplus lines associations. and other possibly competing entities.

The legislation was passed in July of this year and goes into effect one year from the date of passage, or July 2011. While that seems like a lot of time, the logistics of effectively implementing this are daunting. Some entity, either currently in place or yet to be established, has to find a way to bring together 50 different state surplus lines departments, insurance departments, stamping offices, etc., for this to work.

In addition, the term “home state” has not been defined to the satisfaction of everyone involved. Also, the who, how and where the tax is to be remitted is still not clear.

Along with these administrative issues, agents face the problem of being in a state (possibly Florida) that could be “uncompetitive” due to a higher surplus lines tax rate and/or a greater amount of fees to be applied to a policy premium.

It is understood that this is not going to impact every agent in terms of individual accounts because there are many accounts written that do not have multi-state locations. However, it may impact agents here if the state receives less revenue from surplus lines tax, or if the perception of clients ultimately is that buying insurance in Florida costs them more than other states because of higher taxes and fees.

Q. What's on tap for the next year for FSLA?

A. We will do much of the same things that we have been doing; all of the items noted above. FSLA will continue to work with the various state associations, including FAIA and PIA-Florida, to the benefit of our combined memberships. We will continue to work with and to help educate our elected officials and those involved with shaping our economic future. It is critically important that the insurance industry be allowed to compete in a free market — and that includes the surplus lines industry. FSLA will do its part to help ensure that happens.