Jeffrey Wade
Florida's insurance surplus line law is a set of regulations that govern the state's surplus lines insurance market. This market provides coverage for risks that standard or admitted insurers are unable or unwilling to cover, filling a vital role as a supplement to the admitted market. Surplus lines insurance covers both exotic risks and day-to-day risks that fall outside the standard market's guidelines, making it essential for consumers who cannot secure coverage elsewhere. Florida's surplus lines market is regulated by the Florida Surplus Lines Service Office (FSLSO), which collaborates with state and national trade organizations and stamping offices. The law includes specific requirements for surplus lines agents, such as disclosure forms and policy wording, and outlines the eligibility criteria for surplus lines insurers, who are subject to financial reviews and must meet certain business history requirements.
| Characteristics | Values |
|---|---|
| Purpose | To provide coverage for specific risks that the standard or admitted market is unable or unwilling to cover |
| Market share | 10% of the total Florida property and casualty insurance marketplace |
| Premium volume | Over $9.5 billion in 2021 |
| Number of policies | Over 1.2 million in 2021 |
| Types of risks covered | Non-standard risks, unique risks, and capacity risks |
| Licensing requirements for surplus lines agents | Must write or print their name, address, and identification number on the outside of the policy and any related documents |
| Disclosure requirements | Insured or a designee of the insured must sign a disclosure form |
| Non-resident agent licensing | Florida allows for the issuance of a non-resident surplus lines agent license to a non-resident individual licensed in their home state |
| Eligibility requirements for insurers | Must have three years of business history (requirement may be waived if certain conditions are met) |
| Penalties for non-compliance | Fines of up to $500 per day for failure to file a report, suspension or revocation of the agent's license for failure to provide requested information |
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What You'll Learn
- Surplus lines insurance covers exotic and day-to-day risks that the standard market does not
- Surplus lines insurers are often called the safety valve of the industry
- Surplus lines insurance is not approved by any Florida regulatory agency
- Surplus lines insurers are not subject to Florida Insurance Guaranty Act protections
- Surplus lines agents have specific requirements for policy and certificate documentation
Surplus lines insurance covers exotic and day-to-day risks that the standard market does not
Surplus lines insurance is a type of coverage for specific risks that the standard or admitted market is unable or unwilling to cover. It is often referred to as the "safety valve" of the insurance industry, providing a vital supplement to the admitted market. Surplus lines insurance covers exotic and day-to-day risks that fall outside the underwriting guidelines of the standard market, making it imperative for customers who cannot secure coverage from an admitted insurer.
The surplus lines market is known for its ability to accommodate a diverse range of risks, including non-standard, unique, and capacity risks. Non-standard risks refer to those with unusual underwriting characteristics, while unique risks are those for which admitted carriers do not offer a filed policy form or rate. Capacity risks involve insured individuals or entities seeking a higher level of coverage than most insurers are willing to provide. This market is particularly important for introducing new and innovative products, services, and procedures for which there may be no loss history, making it challenging to price or rate for traditional insurance purposes.
Surplus lines insurers have developed expertise over decades, enabling them to effectively cover emerging risks. They can react swiftly to market changes and accommodate a wide array of risks. In Florida, the 2021 surplus lines premium volume exceeded $9.5 billion, demonstrating the significant demand for this type of coverage.
It's important to note that persons insured by surplus lines carriers in Florida do not have the protection of the Florida Insurance Guaranty Act regarding the recovery obligation of an insolvent unlicensed insurer. This exclusion applies to surplus lines insurers in general, as well as specific categories such as Aviation/Wet Marine insurers. However, this requirement does not extend to wet marine, transportation, or aviation risks subject to F.S. 626.917.
Overall, surplus lines insurance plays a crucial role in the insurance industry by providing coverage for exotic and day-to-day risks that fall outside the scope of standard insurance policies. It ensures that individuals and businesses can obtain the protection they need, even when traditional insurers are unable or unwilling to offer coverage.
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Surplus lines insurers are often called the safety valve of the industry
Surplus lines insurance is a form of coverage for specific risks that the standard or admitted market is either unable or unwilling to cover. It is often used for financial risks that are too large or too uncommon for a regular insurance company to take on. Surplus lines insurance is typically more expensive than regular insurance due to the higher risks involved. It is important to note that persons insured by surplus lines carriers are not protected under the Florida Insurance Guaranty Act in the event of an insolvent unlicensed insurer.
The surplus lines market is sometimes referred to as the "safety valve" of the insurance industry. This is because it provides a vital supplement to the admitted market by accommodating a wide range of risks. The surplus lines market is regulated differently from the admitted market, allowing it to respond quickly to the needs of those who cannot obtain coverage through standard channels.
The surplus lines market is essential in providing coverage for distressed risks that cannot be insured at any price in the standard market. It offers flexibility and freedom from rate and form regulations, which is crucial for its role as a safety valve. Without the surplus lines market, many individuals and businesses would struggle to obtain the necessary insurance coverage.
The surplus lines market is dominated by insurers affiliated with Lloyd's of London, who are known for insuring exotic risks, such as Bruce Springsteen's voice and David Beckham's legs. Surplus lines insurance can also cover day-to-day risks that fall outside the underwriting guidelines of the standard market, making it a crucial safety net for those who cannot secure coverage elsewhere.
In summary, the surplus lines market serves as a safety valve by providing coverage for risks that the standard market cannot or will not insure. It is regulated differently to allow for quick responses to the changing needs of consumers and businesses, ensuring that those who need insurance can obtain it through this alternative market.
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Surplus lines insurance is not approved by any Florida regulatory agency
Surplus lines insurance is a type of coverage for specific risks that the standard or admitted market is unable or unwilling to cover. It is often referred to as the "safety valve" of the insurance industry, filling the need for coverage in the marketplace by insuring risks that are declined by standard underwriting and pricing processes. Surplus lines insurance includes exotic risks, such as insuring Bruce Springsteen's voice or David Beckham's legs, as well as day-to-day risks that fall outside the underwriting guidelines of the standard market.
In Florida, surplus lines insurance is regulated by the Florida Surplus Lines Service Office (FSLSO), and it is explicitly stated that:
> Surplus lines insurers' policy rates and forms are not approved by any Florida regulatory agency.
This is codified in Florida law under Fla. Stat. § 626.924(2), which requires that surplus lines policies issued on or after October 1, 2009, have the above statement stamped or printed on the face of the policy in at least 14-point, boldface type.
The lack of approval by Florida regulatory agencies has implications for consumers. Persons insured by surplus lines carriers are not protected under the Florida Insurance Guaranty Act with respect to any right of recovery for the obligation of an insolvent unlicensed insurer. This means that if a surplus lines insurer becomes insolvent, the insured may not have the same recourse or protections as they would with a standard insurance company.
To become eligible to operate in Florida, surplus lines insurers must meet certain requirements. They must have three years of business history, although this requirement may be waived if the insurer provides a unique product or meets certain capital requirements. Eligible surplus lines insurers must also file reports and applications with the Office of Insurance Regulation (OIR), providing detailed background information and undergoing a financial review.
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Surplus lines insurers are not subject to Florida Insurance Guaranty Act protections
Surplus lines insurance is a form of coverage for specific risks that the standard or admitted market is either unable or unwilling to cover. It is a supplement for consumers and businesses that cannot find coverage otherwise. Surplus lines insurance includes exotic risks as well as day-to-day risks that fall outside the underwriting guidelines of the standard market.
In Florida, surplus lines insurers are not subject to Florida Insurance Guaranty Act protections. This means that persons insured by surplus lines carriers do not have the same protections as those insured by licensed insurers under the Florida Insurance Guaranty Act (FIGA). FIGA is a safety net that pays certain claims arising out of policies issued by licensed insurance companies. It is a non-profit corporation created by the Florida Legislature in 1970 to establish and maintain a service-oriented operation for processing covered claims of insolvent members. FIGA is funded by assets of insolvent insurers, member company assessments, and distributions from receivers of insolvent insurance companies.
The Florida Insurance Guaranty Act specifically states that persons insured by surplus lines carriers do not have protection under the Act with respect to any right of recovery for the obligation of an insolvent unlicensed insurer. This is further emphasised by Florida statutes, which require that surplus lines policies issued on or after October 1, 2009, have the following statement printed on the face of the policy:
> "Surplus Lines Insurers' Policy Rates and Forms Are Not Approved by Any Florida Regulatory Agency."
Additionally, surplus lines insurers are not eligible for FIGA coverage. FIGA coverage is limited to licensed insurers who are members of the guaranty associations and pay insolvency-related assessments. When a licensed insurance company becomes insolvent, FIGA steps in to pay eligible claims. However, companies that write non-admitted or unlicensed products, such as surplus lines, do not have guaranty association coverage.
The exclusion of surplus lines insurers from FIGA coverage is a significant consideration for those seeking insurance in Florida. While surplus lines insurance can provide coverage for unique or exotic risks, those insured by surplus lines carriers do not have the same safety net protections as those insured by licensed insurers under the Florida Insurance Guaranty Act.
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Surplus lines agents have specific requirements for policy and certificate documentation
In Florida, surplus lines agents have detailed requirements for policy and certificate documentation. These requirements are outlined in the Florida Surplus Lines Law and are designed to ensure compliance and provide protection for consumers.
One key requirement is the inclusion of specific wording and disclosures on policies and certificates. According to Florida Statute § 626.924(2), surplus lines policies issued on or after October 1, 2009, must have the following statement stamped or printed on the face of the policy in at least 14-point, boldface type:
> "Surplus lines insurers' policy rates and forms are not approved by any Florida regulatory agency."
Additionally, as per Florida Statute § 626.9371, surplus lines agents must disclose specific information on the first page of the policy, certificate, cover note, or confirmation of insurance. This includes the name and address of the surplus lines agent, their identification number, and the name and address of the producing agent through whom the business originated. The disclosure statement must also include the following wording:
> "This insurance is issued pursuant to the Florida Surplus Lines Law. Persons insured by surplus lines carriers do not have the protection of the Florida Insurance Guaranty Act to the extent of any right of recovery for the obligation of an insolvent unlicensed insurer."
Surplus lines agents are also required to maintain proper records and documentation. Florida law mandates that all records must be readily available for examination by the Department of Financial Services or the Florida Surplus Lines Service Office without notice and must be kept for a period of five years after the expiration or cancellation of the contract. This includes policies, applications, certificates, and other relevant documents.
Furthermore, surplus lines agents must comply with diligent effort and disclosure requirements. While the retail or producing agent is responsible for obtaining a disclosure statement signed by the named insured, surplus lines agents are advised to keep a copy of the disclosure form to resolve any potential disputes regarding the placement of surplus lines coverage. This is particularly important if the surplus lines agent is also acting as the retail or producing agent.
In terms of licensing, Florida allows for the issuance of non-resident surplus lines agent licenses to individuals who are licensed in their home state as resident general lines and resident surplus lines agents. However, it's important to note that there may be additional requirements based on the laws of the individual's home state.
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Frequently asked questions
Florida surplus line insurance is a form of coverage for specific risks that the standard or admitted market is either unable or unwilling to cover. It is often referred to as the "safety valve" of the insurance industry.
A Florida surplus line insurer is an unauthorized insurer that has been made eligible by the OIR to write certain property and casualty insurance that is not provided by an admitted/authorized insurer. To become eligible, the insurer must file an application with the OIR, providing detailed background information on its officers, directors, and certain shareholders, and undergo a financial review.
Yes, it is important to note that persons insured by Florida surplus line carriers are not protected under the Florida Insurance Guaranty Act with respect to any right of recovery for the obligation of an insolvent unlicensed insurer. Additionally, the disclosure form must be signed by the insured or their designee, and certain information, such as the insured's name and transaction effective date, must be accurately submitted.
Risks covered by Florida surplus line insurance typically fall into three categories: non-standard risks with unusual underwriting characteristics, unique risks for which admitted carriers do not offer a filed policy form or rate, and capacity risks where the insured seeks a higher level of coverage than most insurers are willing to provide.
To obtain a Florida surplus line insurance license, you must meet the requirements set forth by the Florida Surplus Lines Service Office (FSLSO). For non-residents, Florida allows for the issuance of a non-resident surplus lines agent license if the individual is licensed in their home state as a resident general lines and resident surplus lines agent. Additional requirements, such as business history, may also apply.
