Texas Department of Insurance Seeking Input On Surplus Lines Rulemaking; Stakeholder Meeting Tomorrow at 9:30 a.m. (CT)

 

The Texas Department of Insurance (“TDI”), which is considering rules to implement new surplus lines insurance-related laws and amendments, will convene a stakeholder meeting tomorrow, March 26, 2014 at 9:30 a.m. (Central Time) to address SB 697, SB 951 and HB 1405 (enacted in 2013); SB 1806 and HB 3410 (enacted in 2011); and updates to existing Rules. 

The TDI is informally soliciting input on development and implementation strategy for these laws and regulations until 5:00 p.m. (Central Time) on March 30, 2014.

To view tomorrow’s meeting notice and TDI contact information, click here.

The TDI is especially interested in input relating to:

1.  Whether any rules are needed to further clarify requirements related to exempt commercial purchasers.
2.  Whether agents planning to use a third-party provider to perform stamping office filing requirements should be required to provide notice to the TDI.
3.  Whether there are any standards the TDI should consider for surplus lines filings to enhance uniformity.

 

About the bills . . .

SB 1806–Effective since May 28, 2011, SB 1806 revises disciplinary actions taken by the State of Texas when a surplus lines policy is reported late to the Surplus Lines Stamping Office of Texas.  It also provides that the Texas Insurance Commissioner may assess a fee against an agent who files a policy late.  The fee amount can vary, depending upon the lateness of the filing and the percent of policies filed late in the preceding calendar year.  However, formal enforcement actions can be levied if an agent fails to pay an assessed fee in a timely manner; files a policy on, or after 365 days after the effective or issued date; or files a policy after the 180th day, but before the 365th day of the effective or issue date, and in the preceding calendar year that more than two percent of the filings were late.

HB 3410–Effective since January 1, 2012, HB 3410 added a definition of “managing underwriter” to Texas’ surplus lines law.  It also amended the law to require a surplus lines agent that places an insurance policy with a managing underwriter to collect, report and pay the surplus lines insurance premium tax.  Managing underwriters with whom an insurance policy is placed by a surplus lines agent and who acts as a surplus lines agent for a policy issued by an eligible surplus lines insurer is required to maintain appropriate records and make them available for inspection.  The bill authorizes a managing underwriter to hold both a surplus lines agent license and a managing general agent license.

SB 697–Effective since January 1, 2014, SB 697 amends the Texas Insurance Code to establish that a nonresident individual is not required to obtain a general property and casualty agent license to hold a surplus lines agent license if the individual satisfies conditions imposed by the bill.

SB 951–Effective since June 14, 2013, SB 951 amends the Texas Insurance Code to change the applicability of statutory provisions regulating surplus lines insurance to make such provisions applicable to surplus lines insurance if the home state of the insured (as the bill defines the term) is Texas.

State law conditions an eligible surplus lines insurer’s authority to provide surplus lines insurance on whether the full amount of required insurance cannot be obtained, after a diligent effort, from an insurer authorized to write and actually writing that kind and class of insurance in Texas.  SB 951 specifies that such law is inapplicable to insurance procured for an exempt commercial purchaser if the agent procuring or placing the insurance discloses to the exempt commercial purchaser certain information regarding comparable insurance that may be available from the admitted market and if, after receiving such notice, the exempt commercial purchaser requests in writing that the agent procure the insurance from or place the insurance with an eligible surplus lines insurer. 

The bill requires the surplus lines agent to include evidence establishing that the insured qualified as an exempt commercial purchaser and that the agent complied with the exemption criteria in the record maintained by the agent for the surplus lines contract.  SB 951 defines “exempt commercial purchaser” and requires the Texas Insurance Commisioner to periodically make certain adjustments to that definition.

SB 951 requires an alien surplus lines insurer to be listed on the Quarterly Listing of Alien Insurers maintained by the International Insurers Department of the National Association of Insurance Commissioners.  It also exempts such insurer from a requirement for an eligible surplus lines insurer to maintain capital and surplus in an amount of at least $15 million and removes provisions prescribing minimum capital and surplus requirements for an eligible surplus lines insurer that is an insurance exchange created by the laws of another state.  The bill removes provisions requiring an alien surplus lines insurer to satisfy certain trust fund requirements. 

Further, SB 951 requires an insurer to comply with all applicable nationwide uniform standards for surplus lines eligibility adopted by Texas in accordance with federal law in order to issue surplus lines insurance in Texas.  The new law also repeals certain eligibility requirements for surplus lines insurers relating to good reputation and prompt service; competence, trustworthiness, and experience; statutory penalty payment; and premium tax payment.  It also repeals provisions authorizing an insurer group that includes unincorporated individual insurers to maintain a trust fund that meets certain criteria as an alternative to complying with the prescribed minimum capital and surplus requirements for surplus lines insurers.  Further, it repeals provisions that establish certain conditions under which the Texas Insurance Commissioner is authorized or required, as applicable, to exempt an eligible surplus lines insurer from the prescribed minimum capital and surplus requirements.

 

 

Should you have any questions or comments, please contact Colodny Fass& Webb.

 

 

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