December 20, 2018

Compliance Review Scores Are In

Scores are high yet again, so give yourself a round of applause!

The overall average stayed at 96%. Well done.

Categorical averages are:

Keep up the good work.

Remember to familiarize yourself with the Agent Procedures Manual, which provides everything you need to know about surplus lines rules, compliance, and much more. 

You can also take advantage of our Lunch and Learn program, which provides hands on customized training to your staff. Our analysts will come to your office and train, teach, or discuss anything you wish to know more about. 

If you have any questions, feel free to call us at 800.562.4496 or send an email to outreach@fslso.com.

30-Day Filing Requirement

As a reminder, all premium bearing transactions must be filed electronically with FSLSO within 30 days of the effective date of coverage. This includes new business, renewals, and endorsements. Transaction filings may be made via SLIP or XML Batch.

If you are interested in seeing the number and types of transactions filed outside of the 30-day filing window for a specific period, you can generate a Late Transaction Report in SLIP by completing the following steps:

1. Log in to SLIP
2. Hover over the Reports tab and select Generate Reports
3. Select Late Transaction from the drop-down menu
4. Select the Date Period
5. Select the Transaction Type(s)
6. Select the Report Type
7. Click Print

Unreported premium bearing transactions verified through the Production Ledger or Premium Reconciliation programs will be assessed interest penalties at the prescribed rates, compounded annually, in accordance with F.S. 626.932(2)(b) and 626.9325(2)(b).

For additional compliance information, a great reference tool is the Agent Procedures Manual. 

Definition of Premium and Non-Taxable Insureds/Coverages

For the purpose of calculating the premium receipts tax due pursuant to F.S. 626.932, the term “premium” means the consideration for insurance by whatever name called and includes any assessment, or any membership, policy, survey, inspection, service, or similar fee or charge in consideration for an insurance contract, which items are deemed to be a part of the premium.

The per-policy fee authorized by F.S. 626.916(4) is specifically included within the meaning of the term “premium.” However, the service fee imposed pursuant to F.S. 626.9325 is excluded from the meaning of the term “premium.”

Policies for insureds and coverages that are not subject to the Florida surplus lines tax (governmental entities, transportation risks, etc.) shall still be reported to FSLSO through SLIP for informational, fee, and assessment purposes.

Are You Making a Diligent Effort?

Before a risk can be exported to the surplus lines market a diligent effort must be performed for certain types of coverage.

A diligent effort is a process by which the producing agent seeks coverage for a risk in the admitted market through insurers that are authorized and actually writing that type, kind, or class of coverage in Florida. If three admitted market insurers decline to cover the risk then it is eligible for exportation to the surplus lines market (for residential coverages with a replacement cost value of $1 million or more, only one declination is required). 

It is very important that the surplus lines agent verifies the diligent effort has been conducted by requiring a properly documented Statement of Diligent Effort from the retail or producing agent.

Additionally, to maintain compliance with the diligent effort requirement, the surplus lines agent must take reasonable steps to ensure the diligent effort was conducted properly. Reasonableness shall be assessed by taking into account factors which include, but are not limited to, a regularly conducted program of verification of the information provided by the retail or producing agent.

Fraudulently completing the Statement of Diligent Effort form is a violation of Florida law and the agent can be prosecuted by the Department of Financial Services.

However, not every coverage requires a diligent effort. In fact, a number of types of commercial nonresidential coverages require a disclosure form in lieu of the diligent effort.

View the Diligent Effort / Disclosure Matrix to find out more.

One of the most common regulatory compliance issues we see is a missing or incomplete policy face or front page.

Here are some pointers on the policy face page for your review.

Florida requires agents to include specific information on the outside, front, or first page of all surplus lines policies.  

Per Florida Statute 626.924:

(1) Each surplus lines agent through whom a surplus lines coverage is procured shall write or print on the outside of the policy and on any certificate, cover note, or other confirmation of the insurance his or her name, address, and identification number and the name and address of the producing agent through whom the business originated and shall have stamped or written upon the first page of the policy or the certificate, cover note, or confirmation of insurance the words:

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.

(2) Surplus lines policies issued on or after October 1, 2009, shall have stamped or printed on the face of the policy in at least 14-point, boldface type, the following statement:

SURPLUS LINES INSURERS’ POLICY RATES AND FORMS ARE NOT APPROVED BY ANY FLORIDA REGULATORY AGENCY.

Per Florida Statute 626.922 and the FSLSO Agent Procedures Manual, the following information must also be included on the face page of the policy:

• Policy Premium,
• Policy Fee,
• Inspection Fee,
• Florida Tax,
• FSLSO Service Fee,
• Citizens Assessment (only applies to policies effective prior to 7/1/15),
• EMPA Surcharge ($2.00 for residential or $4.00 for commercial),
• Florida Hurricane Catastrophe Fund Assessment​ (for applicable policies - more information below), and
• Surplus Lines Agent’s Countersignature.

Lastly, residential policies must also include the following language pertaining to out-of-pocket expenses, if applicable to that policy.

We created a downloadable Sample Face Page to use as guidance to ensure statutory compliance. This page contains all the information required to appear on each surplus lines policy. 

Florida Hurricane Catastrophe Fund Assessment Discontinued

Pursuant to a Supplementary Order issued on December 3, 2018 by Florida’s Office of Insurance Regulation, effective April 1, 2019, surplus lines policies issued or renewed prior to January 1, 2015 and all related transactions reported to FSLSO will not have the FHCF emergency assessment charged or credited.

As a result of this subsequent resolution and Order, the last day to report surplus lines policy data through the FSLSO system (SLIP or XML Batch) where the FHCF assessment will be charged or credited is March 31, 2019.

Read the full bulletin for more information and accounting instructions. 

Credit Verification (CV) TIQ

If you receive a Credit Verification (CV) questioned transaction (TIQ) when filing a return premium or cancellation transaction it means FSLSO needs documentation to support the transaction.

SLIP has an optional feature that allows you to upload documents when filing a return premium or cancellation transaction. You can upload documents when submitting the transaction or upload documents after the transaction has been submitted if it is questioned.

If you choose to do neither you will be contacted by an FSLSO staff member requesting documentation in order to manually accept the questioned transaction.

Please note, the questioned transaction will not be manually accepted by an FSLSO staff member until documentation is provided.

Do not file a return or cancellation transaction to avoid filing a backout, this will only double the work and you may find yourself without documentation.

Vessels & Taxes

There are certain requirements and laws vessel owners are required to follow in Florida. One of those laws is registering your vessel if it’s stored or operated in Florida waters for more than 90 days.

With this in mind, in 2010 FSLSO made the decision to require surplus lines premium on vessels only be filed with us if the vessel is registered in Florida, as it should be.

Through the years and currently, we receive phone calls and emails with scenarios such as:

“We have an insured that lives in Montana, has a vessel registered in Florida and moored in the Bahamas, should we file this with FSLSO?”

In this scenario, the answer would be yes, but chances are, if the vessel is always moored in the Bahamas, it should not be registered in Florida.

The reverse also applies, if the vessel is always moored in Florida and registered elsewhere, should the premium be filed with FSLSO? No, the premium would not be filed with us due to the fact the vessel is not registered in this state (even though it should be since it is moored in Florida for more than 90 days).

‘Tis the Season to be Compliant

In case you missed it, SLICE, our new course will be online very soon.

This course is designed for agents and filers who would like to become more knowledgeable about compliance with surplus lines rules, procedures, filings, etc.

If you would like to be one of the first to try it, send an email to publicinfo@fslso.com.

Thank you for your unmatched commitment and hard work. 

Happy retirement, buddy! You will be missed.

Facilitating Compliance Through Innovative Solutions

www.fslso.com