The Florida Senate
BILL ANALYSIS AND FISCAL IMPACT STATEMENT
(This document is based on the provisions contained in the legislation as of the latest date listed below.)
Prepared By: The Professional Staff of the Committee on Banking and Insurance
BILL: CS/SB 846
INTRODUCER: Senate Committee on Banking and Insurance and Senator DiCeglie
SUBJECT: Risk Retention Groups
DATE: January 18, 2024
ANALYST STAFF DIRECTOR REFERENCE ACTION
1. Thomas Knudson BI Fav/CS
2. AEG
3. FP
Please see Section IX. for Additional Information:
COMMITTEE SUBSTITUTE - Substantial Changes
I. Summary:
CS/SB 846 amends s. 324.021, F.S., to provide that motor vehicle liability insurance coverage
issued by a risk retention group operating in accordance with 15 U.S.C. ss. 3901 et seq., which
conducts business in this state pursuant to s. 627.943 or s. 627.944, F.S., satisfies the financial
responsibility requirements of state motor vehicle law.
Risk retention groups sell insurance to eligible members, do not submit rate and form filings to
state regulators, and are not members of state guaranty associations that manage claims if an
insurer becomes insolvent. Members of a risk retention group must be engaged in similar
businesses or activities that have similar exposures due to the type of business, trade, product,
service, premises, or operations.
The bill does not appear to have a fiscal impact on local or state government revenues or
expenditures.
The bill has an effective date of July 1, 2024.
REVISED: BILL: CS/SB 846 Page 2
II. Present Situation:
Risk Retention Groups
Federal law treats risk retention groups (RRGs) – which may sell insurance only to eligible
members – differently than traditional insurance companies. Members of a RRG must be
engaged in similar businesses or activities that have similar exposures due to the type of
business, trade, product, service, premises, or operations.
1
Authorized insurers must be licensed in every state in which they operate and the domicile state
serves as the primary regulator. RRGs need to be licensed as a liability insurer in only one state;
further, those that were chartered prior to 1985 may operate under the laws of Bermuda or the
Cayman Islands.
2
State regulators may require RRGs to comply with state laws relating to claim
settlement and false or fraudulent acts, pay premium taxes, register with the designated state
agent for service of process, and submit to financial exams if such exam has not been completed
by the state in which the RRG is chartered.
3
States may not require a RRG to participate in any insolvency guaranty association.
4
However,
states may require notice that insurance provided by a RRG is not protected by an insolvency
guaranty association.
5
Unlike authorized insurers, RRGs do not submit rate and form filings with
a state regulator. Instead, RRGs apportion risk among their members; thus, rates are based on an
actuarial analysis of the membership and policies can be tailored to suit the needs of the
membership.
6
RRGs may only provide liability insurance; the law defines liability insurance as coverage for
liability for damages to persons or property arising out of any business, trade, product,
professional service, premise, operation, or activity of a state or local government.
7
Liability
insurance does not include an employer’s liability to its employees; thus, RRGs may not issue
workers’ compensation insurance policies to their members.
8
RRGs may operate in Florida if they obtain a certificate of authority as a liability insurer, or are
licensed in another state and provide a copy of their business plan and annual financial statement
to the office of Insurance Regulation (OIR) and designate the Chief Financial Officer as agent
for service of process.
9
According to the OIR, 146 RRGs are licensed in a state other than
Florida and registered to do business in Florida.
10
1
15 U.S.C. §3901(a)(4)(F) and s. 627.942(9), F.S.
2
15 U.S.C. § 3901(a)(4) and s. 627.942(9), F.S.
3
15 U.S.C. § 3902(a)(1).
4
15 U.S.C. § 3902(a)(2).
5
15 U.S.C. § 3902(a)(1).
6
National Association of Insurance Commissioners, Risk Retention Groups, Risk Retention Groups (naic.org) (last accessed
January 9, 2024).
7
15 U.S.C. 3901(a)(2)(A) and s. 627.942(9)(g), F.S.
8
15 U.S.C. 3901(a)(2)(B) and s. 627.942(4), F.S.
9
Sections 627.943 and 627.944, F.S.
10
Florida Office of Insurance Regulation, Active Company Search, https://companysearch.myfloridacfo.gov/ (last accessed
January 9, 2024). BILL: CS/SB 846 Page 3
RRGs licensed in Florida pay the same premium taxes as Florida-licensed insurers.
11
RRGs
registered to operate in Florida but licensed in another state pay the same premium taxes as
surplus lines insurers that are allowed to sell lines of insurance that consumers cannot obtain
from Florida-licensed insurers.
12
All RRGs operating in Florida must use agents who are licensed
and appointed in Florida.
13
It has been reported that confusion exists as to whether “a non-domiciliary or foreign RRG
registered in the State is indeed deemed an ‘insurer authorized to do business in the state’
consistent with” federal law.
14
This confusion has been an issue especially for Florida trucking
companies seeking to prove financial responsibility under Florida motor vehicle law. However,
in a memorandum written in 2012 by the General Counsel of the Department of Highway Safety
and Motor Vehicles, a RRG:
can be accepted as an insurer writing commercial vehicle coverage for vehicles owned or
operated by their members, so long as the policy does not extend to coverage for
members who own a taxicab, limousine, jitney, or any other for-hire passenger
transportation vehicle, as set forth in s. 324.031 Fla. Stats.
15
Presently, there are 40 RRGs authorized to sell commercial automobile liability insurance to its
members.
16
Florida’s Motor Vehicle Financial Responsibility Law
Chapter 324, F.S., sets forth the financial responsibility laws for owners or operators of motor
vehicles in Florida, whether they be used for personal or commercial purposes. Generally, a
motor vehicle owner or operator is required to insure against losses from liability for bodily
injury, death, and property damage by 1) purchasing auto insurance from an insurance carrier
authorized by the OIR to do business in Florida;
17
or 2) obtaining a certificate of self-insurance
from the Department of Highway Safety and Motor Vehicle (DHSMV) after demonstrating the
ability to cover potential losses arising out of the ownership, maintenance, or use of a motor
vehicle.
18
11
Section 627.943(4), F.S. Pursuant to s. 624.509, F.S., premium taxes (typically 1.75 percent of the premium) are collected
by the licensed insurer and paid to the Department of Revenue on or before March 1 of each year.
12
Section 627.944 (3), F.S. Pursuant to s. 626.932, F.S., premium taxes (4.94 percent of the premium) are collected by the
licensed insurance agent and paid to the Department of Financial Services on a quarterly basis; premiums are also reported to
the Florida Surplus Lines Service Office (FSLSO) which oversees the reporting requirements of eligible surplus lines
insurers. The FSLSO website is https://www.fslso.com/.
13
Sections 627.943(1) and 627.944(12), F.S.
14
Email to Staff Director, Senate Committee on Banking and Insurance, James Knudson, from Joseph E. Deems, Executive
Director, National Risk Retention Association, November 1, 2023 (on file with the Senate Committee on Banking and
Insurance).
15
Memorandum to Julie Gentry, Chief of Motorist Compliance, DHSMV, from Stephen D. Hurm, General Counsel,
DHSMV, May 25, 2012 (on file with the Senate Committee on Banking and Insurance).
16
Florida Office of Insurance Regulation, Active Company Search, https://companysearch.myfloridacfo.gov/ (last accessed
January 9, 2024).
17
Section 324.021(8), F.S.
18
Sections 324.161 and 324.171, F.S. Also see Florida Department of Highway Safety and Motor Vehicles, Self-Insurance,
https://www.flhsmv.gov/insurance/self-insurance/firm/ (last accessed January 9, 2024). BILL: CS/SB 846 Page 4
The OIR licenses insurance carriers and reviews policy contracts and premium rates of its
licensees.
19
An insurance carrier may not issue an auto insurance policy in Florida unless the
policy includes coverages for both personal injury and property damage.
20
The DHSMV administers the Financial Responsibility Law by requiring all licensed insurance
companies to provide electronic notification of all policies that are issued or cancelled.
21
Vehicle
owners must show proof of personal injury protection and property damage liability coverage to
register a vehicle,
22
and must provide proof of bodily injury liability coverage if they are
involved in an accident and charged with a moving violation.
23
A vehicle owner who fails to
maintain continuous coverage may have his or her driver’s license and registration suspended.
24
Required coverages vary based on the use of a motor vehicle. For individual motorists, the law
requires $10,000 in personal injury protection and $10,000 for property damage.
25
If a driver has
been convicted of driving under the influence of alcohol, the motorist must maintain liability
coverage of $100,000 for bodily injury to, or death of, one person in any one crash and in the
amount of $300,000 due to bodily injury to, or death of, two or more persons in any one crash
and in the amount of $50,000 because of property damage in any one crash per accident, for
three years after the license is reinstated.
26
For leased motor vehicles, the lessor is not liable for the actions of a lessee so long as the lease
requires $100,000/$300,000 bodily injury liability and $50,000 property damage liability or not
less than $500,000 combined property damage and bodily injury liability.
27
For-hire passenger
vehicles like taxicabs and limousines must have bodily injury liability coverage of $125,000 per
person and $250,000 per occurrence, and $50,000 property damage coverage.
28
Commercial motor vehicles operating on Florida’s highways are subject to state and federal
regulations related to size and weight limits, safety standards, and registration requirements.
Commercial vehicles that weigh 10,001 pounds or more, and engage in interstate commerce or
haul hazardous materials, are subject to federal law, where required coverages range from
$750,000 to $5 million.
29
Commercial vehicles that weigh 26,001 pounds or more, operate only
within Florida, and do not transport hazardous materials are subject to Florida law, where
required coverages range from $50,000 to $300,000.
30
When the owner or operator of a motor vehicle purchases liability insurance to satisfy the
financial responsibility law, the policy must be issued by an insurance company authorized to do
19
Sections 624.404, 627.062, 627.410, and 627.4102, F.S.
20
Section 627.7275, F.S.
21
Sections 324.0221, 324.252, F.S., and Rules 15A-3.007, and 15A-3.012, F.A.C.
22
Sections 324.022, 324.023, F.S., and Rule 15A-3.006, F.A.C.
23
Section 324.021, F.S. Also see, Florida Highway Safety and Motor Vehicles, Florida Insurance Requirements,
https://www.flhsmv.gov/insurance/ (last accessed January 9, 2024).
24
Section 324.0221, F.S.
25
Sections 324.021(7), 324.022, and 627.736, F.S.
26
Section 324.023, F.S.
27
Section 324.021(9), F.S.
28
Sections 324.032, F.S.
29
49 CFR § 387.9.
30
Sections 207.002(1), 320.01(25), and 627.7415, F.S. BILL: CS/SB 846 Page 5
business in Florida.
31
When an owner or operator self-insures a vehicle or fleet of vehicles, the
owner or operator must obtain a certificate of self-insurance from the DHSMV.
32
III. Effect of Proposed Changes:
The bill amends s. 324.021, F.S., to provide that motor vehicle liability insurance coverage
issued by a risk retention group operating in accordance with 15 U.S.C. ss. 3901 et seq., which
conducts business in this state pursuant to ss. 627.943 or 627.944, F.S., satisfies the financial
responsibility requirements of state motor vehicle law. The change should eliminate any existing
confusion of whether these RRGs are permitted to sell commercial motor vehicle liability
coverage to its members.
IV. Constitutional Issues:
A. Municipality/County Mandates Restrictions:
None.
B. Public Records/Open Meetings Issues:
None.
C. Trust Funds Restrictions:
None.
D. State Tax or Fee Increases:
None.
E. Other Constitutional Issues:
None.
V. Fiscal Impact Statement:
A. Tax/Fee Issues:
None.
B. Private Sector Impact:
The bill may end the confusion regarding the ability of RRGs to offer commercial motor
vehicle liability insurance to its members. The bill may benefit members of RRGs who
are able to buy their motor vehicle policies through the group at a lower rate.
31
Section 324.021(8), F.S.
32
Section 324.171, F.S. BILL: CS/SB 846 Page 6
C. Government Sector Impact:
None.
VI. Technical Deficiencies:
None.
VII. Related Issues:
None.
VIII. Statutes Affected:
This bill substantially amends the following section of the Florida Statutes: 324.021.
IX. Additional Information:
A. Committee Substitute – Statement of Substantial Changes:
(Summarizing differences between the Committee Substitute and the prior version of the bill.)
CS by Banking and Insurance Committee on January 16, 2024:
The committee substitute removes the entire substance of the bill and amends s. 324.021,
F.S., to provide that motor vehicle insurance coverage issued by risk retention groups
operating under federal law, and conducting business in the state, satisfies the financial
responsibility requirements of Florida motor vehicle law.
B. Amendments:
None.
This Senate Bill Analysis does not reflect the intent or official position of the bill’s introducer or the Florida Senate.