Q. Florida's legislative session convenes in January next year to accommodate redistricting efforts. What legislative issues will FSLA be working on over the coming months and through the 2012 session?
A. With next year's session focused on redistricting, the likelihood of too many other issues being tackled is unlikely. That having been said, some insurance issues will be front and center. Auto insurance and personal injury protection (PIP) is expected to be one of the top insurance priorities for the Florida Legislature in the 2012 session.

Another major property bill is not likely, but a “clean-up” bill to address any technical or non-controversial issues is a possibility.

Legislation to force the implementation of actuarially sound rates in Citizens Property Insurance Corp. is another area that may be addressed, and we would follow that closely. We would certainly like to see the suspension of the multi-peril program for Citizens as we believe Florida has a vibrant and competitive commercial lines market.

Q. This past summer, Florida joined NIMA, a compact allowing tax revenue sharing of surplus lines premiums among states.  The surplus lines national association officially endorsed the other program, SLIMPACT.  What kind of feedback are you getting from FSLA members on how the NIMA process is working?
A. It really is too early to answer this question and provide real feedback. At this time there are attempts being made to come to some sort of compromise between NIMA and SLIMPACT, and we are keeping tabs on these changes. Our association is concerned about protecting our members and their ability to compete fairly in Florida. We also strongly support the capability of the state of Florida to protect the valuable tax revenue derived from surplus lines writings in the state. There should be nothing wrong with the attitude that our association's desire is to keep Florida business written by Florida surplus lines and independent agents, which in turn benefits the state.

Q. NIMA and SLIMPACT are the result of the federal Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010.  Are there any activities currently brewing in Washington that may affect—for better or worse—surplus lines?
A. We are always monitoring issues that may affect FSLA members, but try not to get involved with federal issues. There are times that some issues do require our involvement, especially when we find them to be detrimental to the state of Florida. In these cases we try to work hand in hand with national organizations such as the American Association of Managing General Agents and the National Association of Professional Surplus Lines Offices.

Q. In 2009, the Florida Office of Insurance Regulation (OIR) approved 12 new surplus lines carriers. In 2010, we added none and lost two. Where do you think we will be at the end of 2011?  Do we even need an influx of new carriers here, or are the ones we have offering sufficient capacity?
A. While it is true that no companies were added to the White List, [a listing of surplus lines companies eligible to write business in a state] Section 524 under the NRRA provides that, “A State may not … (2) prohibit a surplus lines broker from placing non-admitted insurance with, or procuring non-admitted insurance from, a non-admitted insurer domiciled outside the United States that is listed on the Quarterly Listing of Alien Insurers maintained by the International Insurers Department of the NAIC.”

This had the effect of making Florida's White List, as well as other states that have a White List, inapplicable as to alien companies. Therefore, quite a large number of carriers were made eligible in the state of Florida. 

We do not believe that Florida needs an influx of new carriers. The only area in which Florida has a problem is in homeowners' insurance. If the playing field is made even by bringing Citizen's rates to where they should be and making Citizens what it was intended to be—the carrier of last choice—there wouldn't be a capacity problem in that market.

Q. In recent years, some industry observers have noted a blurring of the traditional “areas of responsibility” between the admitted and non-admitted markets. At Kahn-Carlin, you service Florida-specific, multi-state and international risks and work with both admitted and non-admitted markets. What is your take on the admitted/non-admitted market relationship?
A. As a retail agent in Florida, the use of admitted and non-admitted markets works hand in hand with one another. Our number one concern at Kahn-Carlin & Co. is providing our clients the most comprehensive and competitive product available. We achieve this through the relationships we have with both our standard carriers and surplus lines brokers. 

We have been through numerous cycles where one market was capable of stepping up to the plate and providing capacity and proper terms of coverage. I wish we could avoid the cyclical swings we have seen in the past, but this seems to be an inherent trait of our business.

Overall, this relationship has worked well. It will be further enhanced by recent legislative changes that deregulate commercial lines coverages from rate approval by the OIR and at the same time eliminate the requirement for due diligence by the retail agents. This will effectively permit the agent broader markets and greater efficiency in placing coverage.

Q. What are the three biggest challenges facing Florida's surplus lines market today?
A. Rate equalization of Citizens: We are certainly not in favor of increasing rates for the consumer, but we are concerned about Citizens—which was set up as the carrier of last resort—operating in its current state. Its pricing, terms and underwriting allow it to be the most competitive facility in Florida for both habitation and commercial lines business. One needs actuarially sound rates to protect the policyholders from assessments in the future. This would open the doors to more financially sound carriers that would then be willing to provide additional capacity.  Competition in the long run is the best protection for this industry.

The economy: We all are hoping for positive signs that will lead to an increase of momentum within construction, manufacturing, small business, and all areas of the job market. An upturn in the economy would provide a much needed boost to the insurance industry in the form of increased writings and employment opportunities.

Regulatory actions that restrict the freedom of rate and form on non-admitted carriers: This is a major factor in the competitive response and flexibility currently afforded the surplus lines industry. We are always concerned over both state and federal regulation that would impact and impede our business.

Roy V. Fabry, CPCU, is president of Kahn-Carlin & Company, Inc., a full-service agency based in Miami. He has been a member of the Florida Surplus Lines Association since 2003, and was named president in 2011. Fabry may be reached at 305-648-7495; [email protected].