Puerto Rico lawmakers hear divided testimony on bill to withhold 5% of producers’ commissions to fund insurance regulator

A House of Representatives committee heard detailed testimony on House Bill 341 on funding for the Office of the Commissioner of Insurance (OCS), a proposal that would withhold 5 percent from the commissions paid to insurance producers when the government or a municipality procures insurance without a public auction.

The measure’s sponsor and committee members said the bill aims to raise dedicated funds for the OCS. Alexander Adams Vega, Commissioner of Insurance, told the Comisión de Banca, Seguros y Comercio that “Los fondos son necesarios ahora más que nunca para poder llevar a cabo nuestra función fiscalizadora,” describing recurring shortfalls that limit audits, actuarial reviews and the office’s Insurance Commissioner Certification (ICC) work required under federal Stafford Act rules.

Why it matters: supporters frame the retention as a targeted way to restore the regulator’s capacity after budget reductions and new federal requirements. Opponents from the insurance industry warned the levy would distort market incentives, reduce producer participation in public placements and could, in some circumstances, raise the cost of coverage for government entities and municipalities.

Industry objections and alternative proposals Iraelia Pernas, executive director of the Association of Insurance Companies (ACODES), testified that ACODES opposes the bill. “Por las razones que hemos esbozado, pues, a la Asociación de Compañías de Seguros se opone a la aprobación del proyecto de la cámara trescientos cuarenta y uno,” she said, arguing that the office’s funding shortfall should be addressed through budget prioritization and other revenue mechanisms rather than by imposing a new levy on producers. ACODES and other witnesses urged the committee not to “impose more contributions” on producers and warned the additional cost could be passed along to purchasers of public insurance if producers seek higher commissions to offset the withholding.

The Puerto Rico International Insurers Association (PRIA), represented by Hugo Córdoba and board members, acknowledged the OCS funding needs and supported measures to strengthen the regulator’s capacity, but said the 5 percent withholding targets the wrong segment of the industry and risks unintended consequences for competition and for the municipal market. PRIA noted that the OCS’s international insurance work (the Centro Internacional de Seguros) is understaffed and that transaction delays have discouraged new international insurers from establishing business here.

Commissioner’s position and proposed alternatives Commissioner Adams said he supports the objective of providing the OCS with reliable resources but outlined alternatives he believes would achieve that without a commission withholding. He proposed statutory changes to require insurers to pay audit and actuarial review costs directly to contracted examiners or actuaries (instead of the current reimbursable model), update long‑unchanged filing and service fees, and require insurers to fund consumer‑education campaigns run by the OCS. Adams gave specific operational figures: he said annual external audit expenses can be large (on the order of hundreds of thousands of dollars) and cited operational line items in the OCS budget including approximately $822,000 for audits, $207,000 for actuarial studies and $400,000 for the ICC program in the most recent fiscal year described in testimony.

Budget and revenue estimates discussed Witnesses and committee members referenced an external fiscal office estimate discussed at the hearing: an Office of the Comptroller/OPA projection cited in testimony estimated an initial fiscal effect for 2025 of about $7.4 million in additional receipts if the measure were implemented, split roughly between the central government (about $3.2 million) and municipalities (about $4.2 million) over the projection period cited in testimony. Committee members and witnesses emphasized that whether those receipts would actually remain available to the OCS depends on the Fiscal Oversight Board’s (Junta de Supervisión Fiscal) approval and the statutory routing of funds.

Operational impacts and competition concerns Producers and PRIA members warned that reducing producers’ net commissions could discourage qualified producers from competing for complex government placements — such as multi‑location or special‑risk programs — and could reduce the market of experienced intermediaries available to place large or specialized risks. Several witnesses emphasized post‑Hurricane María lessons: adequate valuation, up‑to‑date inventories and proper placement are critical for government entities to preserve federal disaster funding eligibility, and those protective functions depend on producer expertise and on a regulated, well‑resourced OCS.

Procedural notes and follow-ups No formal vote was recorded at the hearing. Committee members asked the OCS for follow‑up information, including lists of agencies and municipalities that have used waivers under the ICC process and additional budgetary detail to demonstrate how direct payment of auditor and actuarial costs would operate in practice. Commissioner Adams said the OCS would provide requested lists and clarifications.

What’s next Committee members signaled continued work on the bill and invited technical proposals from the OCS and industry groups to reconcile the funding objective with competitive and administrative concerns. The commission closed the hearing at 11:33 a.m., after roughly two hours of testimony and questions.