HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: CS/HB 57 Motor Vehicle Liability Policies
SPONSOR(S): Commerce Committee, Truenow
TIED BILLS: IDEN./SIM. BILLS: CS/SB 516
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY
CHIEF
1) Insurance & Banking Subcommittee 15 Y, 0 N Herendeen Lloyd
2) Commerce Committee 18 Y, 0 N, As CS Fletcher Hamon
SUMMARY ANALYSIS
Owners or operators of motor vehicles must insure against losses from liability for bodily injury, death, and
property damage under Florida’s Financial Responsibility Law. They may do so by purchasing auto insurance
from an insurance carrier authorized to do business in Florida by the Office of Insurance Regulation (OIR), or
by obtaining a certificate of self-insurance from the Florida Department of Highway Safety and Motor Vehicles
(HSMV) after demonstrating the ability to cover potential losses arising out of the ownership, maintenance, or
use of a motor vehicle. HSMV does not recognize insurance issued by a risk retention group as a method of
proving financial responsibility, unless the risk retention group holds a certificate of authority issued by OIR.
The bill amends the Financial Responsibility Law to permit risk retention groups, which are authorized by
federal law, to provide the required motor vehicle coverage to group members. Unlike state-authorized
insurers, risk retention groups only 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.
Specifically, the bill permits risk retention groups that have strong ratings from A.M. Best Company (an “A” or
higher rating for financial strength and “VIII” or higher for financial size) to provide financial responsibility
coverage for commercial motor vehicles to their members and shareholders. The bill also authorizes an eligible
surplus lines insurer that is rated “A” or higher by A.M. Best Company to provide such coverage.
The bill has an unknown but likely insignificant negative fiscal impact on s tate government and no impact on
local governments. The bill has positive and negative impacts on the private sector.
The bill has an effective date of July 1, 2023.
This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives .
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 FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Current Situation
Florida’s Financial Responsibility Law
Chapter 324, F.S., sets forth the financial responsibility laws for owners or operators of motor vehicles,
whether they be used for personal or commercial purposes.
In general, the owner or operator of a motor vehicle must insure against losses from liability for bodily injury,
death, and property damage by 1) purchasing auto insurance from an insurance carrier authorized by OIR
to do business in Florida;1 or 2) obtaining a certificate of self-insurance from HSMV after demonstrating the
ability to cover potential losses arising out of the ownership, maintenance, or use of a motor vehicle. 2
OIR licenses insurance carriers and reviews policy contracts and premium rates of its licensees. 3 An
insurance carrier may not deliver an auto insurance policy in Florida unless the policy includes coverages for
both personal injury and property damage.4
HSMV administers the Financial Responsibility Law by requiring all licensed insurance companies to provide
electronic notification of all policies that are issued or cancelled.5 Vehicle owners must show proof of personal
injury protection and property damage liability coverage to register a vehicle, 6 and must provide proof of
bodily injury liability coverage if they are involved in an accident and charged with a moving violation. 7 A
vehicle owner who fails to maintain continuous coverage may have his or her driver’s license and registration
suspended for up to three years.8
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.9 However, if a driver of a private passenger vehicle has caused an accident involving bodily injury
or death, the required minimum bodily injury liability coverage is $10,000 per person and $20,000 per
accident.10 Additionally, if a driver has been convicted of driving under the influence of alcohol, the motorist
must maintain minimum bodily injury liability coverage of $10,000 per person and $20,000 per accident for
three years after the license is reinstated.11
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.12
1 S. 324.021(8), F.S.
2 Ss. 324.161 and 324.171, F.S. Also see Florida Department of Highway Safety and Motor Vehicles, Self-Insuranc e,
https://www.flhsmv.gov/ins urance/self-insurance/firm/ (last visited Feb. 10, 2023).
3 Ss. 624.404, 627.062, 627.410, and 627.4102.
4 S. 627.7275, F.S.
5 Ss. 324.0221, 324.252, and Rules 15A-3.007, and 15A-3.012, F.A.C.
6 Ss. 324.022, 324.023, and Rule 15A-3.006, F.A.C.
7 S. 324.021, F.S. Also see, Florida Highway Safety and Motor Vehicles, Florida Insurance Requirements ,
https://www.flhsmv.gov/ins urance/ (last visited Feb. 10, 2023).
8 S. 324.0221, F.S.
9 Ss. 324.021(7), § 324.022, and 627.736, F.S.
10 Ss. 324.051, 324.031, 324.061, F.S.
11 S. 324.023, F.S.
12 S. 324.021(9), F.S.
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 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.13
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. 14 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. 15
Voluntary coverages include collision (repairs the motor vehicle), comprehensive (losses from events other
than collision, like fire or theft or wind or vandalism), uninsured motorist (losses that exceed no-fault coverage
when an at-fault driver has no liability insurance or inadequate liability insurance), medical (for losses that
exceed no-fault coverage), rental reimbursement, and accidental death or dismemberment.
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 business in Florida. 16
When an owner or operator self-insures a vehicle or fleet of vehicles, the owner or operator must provide
audited financial statements to HSMV showing an unencumbered net worth that satisfies the Financial
Responsibility Law.17
Risk Retention Groups
Federal law treats risk retention groups – which may sell insurance only to eligible members – differently
than traditional insurance companies.
Authorized insurers must be licensed in every state in which they operate and the domicile state serves as
the primary regulator. Risk retention groups 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. 18
State regulators may require risk retention groups 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 risk retention
group is chartered.19
States may not require a risk retention group to participate in any insolvency guaranty association. 20
However, states may require notice that insurance provided by a risk retention group is not protected by an
insolvency guaranty association.21 Unlike authorized insurers, risk retention groups do not submit rate and
form filings with a state regulator. Instead, risk retention groups 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.22
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.23
13 Ss. 322.032, 324.021(8), and 324.151, F.S.
14 49 CFR § 387.9 (2022).
15 Ss. 207.002(1), 320.01(25), and 627.7415, F.S.
16 S. 324.021(8), F.S.
17 S. 324.171, F.S.
18 15 U.S.C. § 3901(a)(4) and s. 627.942(9), F.S.
19 15 U.S.C. § 3902(a)(1).
20 15 U.S.C. § 3902(a)(2).
21 15 U.S.C. § 3902(a)(1).
22 National Association of Insurance Commissioners, Risk Retention Groups, Risk Retention Groups (naic.org) (last
visited Feb. 10, 2023).
23 15 U.S.C. §3901(a)(4)(F) and s. 627.942(9), F.S.
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 Risk retention groups 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. 24 Liability insurance does not include an
employer’s liability to its employees; thus, risk retention groups may not issue workers’ compensation
insurance policies to their members.25
Risk retention groups 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 OIR
and designate the Chief Financial Officer as agent for service of process. 26 According to OIR, 140 risk
retention groups are licensed in a state other than Florida and registered to do business in Florida. 27
Risk retention groups licensed in Florida pay the same premium taxes as Florida-licensed insurers.28 Risk
retention groups 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.29 All risk retention groups operating in Florida must use agents who are licensed and
appointed in Florida. 30
American Contractors Insurance Group
American Contractors Insurance Group Ltd. of Bermuda (ACIG) is a risk retention group that is owned by 41
construction companies and affiliated with American Contractors Insurance Company Risk Retention Group
(ACIG RRG) of Texas which writes general liability and auto coverages for its members and is registered to
do business in Florida. According to company representatives, ACIG provides auto liability insurance for 17
of its 41 member companies, including 7 member companies that have active operations in Florida.
ACIG is also affiliated with ACIG Insurance Company of Illinois, which writes workers’ compensation
coverages; ACIG Insurance Agency, Inc. of Texas, which coordinates customer service; and American
Contractors Risk Purchasing Group, Inc., of Texas, which acts as a purchasing group for professional,
pollution, and cyber liability coverages.31
The International Risk Management Institute describes “fronting” as the use of a licensed, admitted insurer
to issue an insurance policy on behalf of a self-insured organization or captive insurer without transferring
any risk. The risk of loss under the policy remains with the self-insured entity or captive insurer, but the
authorized insurer (and, in the event of insolvency, the guaranty association the insurer belongs to) assumes
a credit risk because it would be required to honor the policy if the insured fails to do so. This provides proof
of coverage that is needed to satisfy financial responsibility laws.
The Florida Insurance Code32 describes a “fronting company” as “an authorized insurer which by reinsurance
or otherwise generally transfers more than 50 percent to one unauthorized insurer which does not meet the
requirements” to be an accredited or trusteed reinsurer in Florida. 33
24 15 U.S.C. 3901(a)(2)(A) and s. 627.942(9)(g), F.S.
25 15 U.S.C. 3901(a)(2)(B) and s. 627.942(4), F.S.
26 Ss. 627.943 and 627.944, F.S.
27 Florida Office of Insurance Regulation, Active Company Search, https://companysearch.myfloridacfo.gov/ (last visited
Feb. 10, 2023).
28 S. 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.
29 S. 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/.
30 Ss. 627.943(5) and 627.944(12), F.S.
31 American Contractors Insurance Group, Organization Chart – Construction Industry Shareholders,
https://www.acig.com/assets/docs/ACIG_Organization_Chart.pdf (last visited Feb. 10, 2023).
32 Chapters 624-632, 634, 635, 636, 641, 642, 648, and 651 constitute the “Florida Insurance Code.”
33 S. 624.404(4)(b), F.S.
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 Further, s. 624.404(4)(a), F.S., states: “No authorized insurer shall act as a fronting company for any
unauthorized insurer which is not an approved reinsurer.”
Florida law explicitly prohibits:
 An authorized insurer or licensed motor vehicle service agreement company from acting as a
fronting company for any unauthorized insurer or unlicensed motor vehicle service agreement
company.34
 An authorized insurer or licensed home warranty association from acting as a fronting company
for any unauthorized insurer or unlicensed home warranty association. 35
 An authorized insurer or licensed service warranty association from acting as a fronting company
for any unauthorized insurer or unlicensed service warranty association. 36
The Insurance Code does not contemplate the situation presented by ACIG RRG, where an authorized
insurer acts as a fronting company for a risk retention group.
Representatives of ACIG stated that ACIG RRG must use a fronting policy to write auto liability insurance for
Florida members, so they can provide evidence of auto liability coverage. According to documentation
provided by company representatives, ACIG retains the entirety of its $5 million auto liability limit by
reinsuring the fronting insurer at 100 percent.
Each of the 7 ACIG members with operations in Florida pays a fronting fee of $25,000 annually. This creates
a $175,000 annual expense that would be avoided if ACIG RRG were permitted to directly issue auto liability
policies to its Florida members. Collectively, the 7 companies insure about 975 vehicles and pay annual auto
liability premiums of $1,954,944.
ACIG has an “A” rating from A.M. Best, in category VIII, which applies to companies with a policyholder
surplus of $100 million-$250 million.
Surplus Lines Insurers
Surplus lines insurance is coverage for specific risks that the standard or admitted market is either unable or
unwilling to cover.37 While the admitted market is where most consumers find coverage, the surplus lines
market is a supplement for those individuals and businesses that cannot find coverage otherwise. 38 Florida
law defines “eligible surplus lines insurer” as an unauthorized insurer which has been made eligible by the
OIR to issue insurance coverage under the Surplus Lines Law.39
Effect of the Bill
The bill permits the owner or operator of a motor vehicle to provide proof of financial responsibility by
obtaining an insurance policy from a risk retention group that: 1) has an “A” or higher rating for financial
34 S. 634.241, F.S.
35 S. 634.326, F.S.
36 S. 634.429, F.S.
37 Florida Surplus Lines Service Office, Surplus Lines Insurance, https://www.fslso.com/about/surplus-lines-
insurance#:~:text=Surplus%20lines%20insurance%20is%20coverage,that%20cannot%20find% 20coverage%20otherwis e
(last visited Apr. 10, 2023).
38 Id.
39 S. 626.914(2), F.S.
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 strength, and “VIII” or higher for financial size by the A.M. Best Company, and 2) only provides commercial
coverage to its members and shareholders.
The bill would pe