12 April 2023Analysis

NRRA warns of ‘devastating impact’ on RRGs from Florida bill

The National Risk Retention Association (NRRA) has warned that the recently introduced Florida Bill 516 could have a ‘devastating impact’ on risk retention groups (RRGs) in the state, if the bill is passed.

The bill proposes revising the definition of the term “motor vehicle liability policy” and defining the term “risk retention group”.

The Florida House Commerce and Senate Appropriations Committee is to have a hearing on the bill on Wednesday April 12th.

According to the NRRA, if passed, Florida Bill 516 will have a devastating impact on not only trucking and transportation risk retention groups registered in Florida, but actually every RRG writing commercial liability, including auto.

“Hundreds, if not thousands of RRG owner-insureds could lose their coverage,” the NRRA said in a statement. “The Bill’s passing may also open the door to other significant potential threats to risk retention groups in other states and for other types of risk retention group entities.”

The NRRA added that Bill 516 also potentially threatens to regulate the business of 96% of the risk retention groups registered in Florida.

“If passed, starting July 1, 2023, Bill 516 will potentially impact 96% of the 140 risk retention groups registered in Florida from continuing their business,” said the NRRA. “If history is any example, regulatory intervention calculated in response to the bill could actually disqualify or interfere in a number of ways with RRG commercial liability insurance.

“We need to stop this bill before it passes because, if it passes, suing the state will take years and will be too late to help these impacted RRGs.”

The NRRA also claimed that Bill 516 is in violation of Federal Law.

It said that: “By imposing the requirement of an AM Best “A” rating and a minimum financial size status of $100M in capital surplus) in order for an RRG to write commercial auto liability in Florida, the Bill unlawfully A) seeks to regulate risk retention groups, and B) unlawfully discriminates against risk retention groups that do not have to or cannot obtain such ratings. Both are categorically preempted by the Federal Liability Risk Retention Act, as NRRA has helped established in numerous legal decisions in recent years.

“If Florida can get away with violating the federal law by making any financial rating a requirement to do business in their state, it may set a precedent to make other states bolder to do the same thing.”

On March 31, NRRA sent a letter and enclosures to the Senate Appropriations Committee, explaining in detail its opposition to S0516 and how the Bill will, if adopted, potentially eliminate the presently available commercial liability insurance provided to hundreds and probably thousands of Florida businesses.

The association said that it is asking all interested or potentially impacted members to make immediate arrangements to assist it in its continued opposition effort to this bill by contacting it.