83R6861 AJA-F
By: Carona S.B. No. 951
A BILL TO BE ENTITLED
AN ACT
relating to surplus lines insurance.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 981.001(c), Insurance Code, is amended
to read as follows:
(c) To regulate and tax surplus lines insurance placed in
accordance with this chapter within the meaning and intent of 15
U.S.C. Section 1011 and 15 U.S.C. Chapter 108, this chapter
provides an orderly method for the residents of this state and
nonresidents whose home state is this state for a particular
transaction to effect insurance with eligible surplus lines
insurers through qualified, licensed, and supervised surplus lines
agents in this state, if coverage is not available from authorized
and regulated insurers engaged in business in this state, under
reasonable and practical safeguards.
SECTION 2. Section 981.002, Insurance Code, is amended to
read as follows:
Sec. 981.002. DEFINITIONS. In this chapter:
(1) "Affiliate" means, with respect to determining the
home state of an insured, and solely for the purpose of determining
whether an entity is another entity's affiliate, a person or entity
that controls, is controlled by, or is under common control with the
insured.
(2) "Affiliated group" means a group of entities whose
members are all affiliated.
(3) "Control" means, with respect to determining the
home state of an insured, and solely for the purpose of determining
whether an entity is another entity's affiliate:
(A) to directly or indirectly, acting through one
or more persons, own, control, or hold the power to vote at least 25
percent of any class of voting security of the other entity; or
(B) to control in any manner the election of the
majority of directors or trustees of the other entity.
(4) "Eligible surplus lines insurer" means an insurer
that is not an authorized insurer, but that is eligible under
Subchapter B, in which surplus lines insurance is placed or may be
placed under this chapter.
(5) "Home state" means, with respect to an insured:
(A) the state in which the insured maintains the
insured's principal residence, if the insured is an individual;
(B) the state in which the insured maintains the
insured's principal place of business, if the insured is not an
individual;
(C) if 100 percent of the insured risk is located
outside of the state in which the insured resides or maintains the
insured's principal place of business, as applicable, the state to
which the greatest percentage of the insured's taxable premium for
the insurance contract that covers the risk is allocated; or
(D) for an affiliated group, the home state of
the member, as determined under Paragraphs (A)-(C), that has the
largest percentage of premium attributed to it under the insurance
contract.
(6) [(1-a)] "Managing underwriter" means a surplus
lines agent or agency that exercises, pursuant to a written
agreement with an eligible surplus lines insurer, underwriting
authority for the eligible surplus lines insurer and that derives
the agent or agency's business from a surplus lines agent.
(7) "Nonadmitted insurer" means an insurer not
licensed to engage in the business of insurance in this state. The
term does not include a risk retention group as that term is defined
by Section 2(a)(4), Liability Risk Retention Act of 1986 (15 U.S.C.
Section 3901(a)(4)).
(8) [(2)] "Stamping office" means the Surplus Lines
Stamping Office of Texas.
(9) [(3)] "Surplus lines agent" means an agent
licensed under Subchapter E to procure an insurance contract from a
surplus lines insurer.
(10) [(4)] "Surplus lines insurance" means insurance
coverage:
(A) for a subject that is resident, located, or
to be performed in this state; and
(B) that may be placed, in accordance with this
chapter, with an eligible surplus lines insurer or the insurer's
managing underwriter.
SECTION 3. Section 981.003, Insurance Code, is amended to
read as follows:
Sec. 981.003. APPLICABILITY OF CHAPTER. This chapter
applies to surplus lines insurance if the home state of the insured
is this state[:
[(1) of a subject that is resident, located, or to be
performed in this state; and
[(2) that is obtained, continued, or renewed through:
[(A) negotiations or an application wholly or
partly occurring or made within or from within this state; or
[(B) premiums wholly or partly remitted directly
or indirectly from within this state].
SECTION 4. Subchapter A, Chapter 981, Insurance Code, is
amended by adding Sections 981.0031 and 981.0032 to read as
follows:
Sec. 981.0031. EXEMPT COMMERCIAL PURCHASER DEFINED. (a)
For purposes of this chapter, "exempt commercial purchaser" means a
person who purchases commercial insurance and, at the time of
placement:
(1) employs or retains a qualified risk manager to
negotiate insurance coverage;
(2) has paid aggregate nationwide commercial property
and casualty insurance premiums of more than $100,000 in the
immediately preceding 12 months; and
(3) meets at least one of the following criteria:
(A) has a net worth of more than $20 million;
(B) generates annual revenue of more than $50
million;
(C) employs more than 500 full-time or full-time
equivalent employees per individual insured, or is a member of an
affiliated group that employs more than 1,000 employees in
aggregate;
(D) is a nonprofit organization or public entity
generating annual budgeted expenditures of at least $30 million; or
(E) is a municipality with a population of more
than 50,000.
(b) Beginning January 1, 2017, the commission may by order
not more than once every five years adjust the amounts provided by
Subsections (a)(3)(A), (B), and (D) to reflect the percentage
change in the Consumer Price Index for All Urban Consumers
published by the Bureau of Labor Statistics of the United States
Department of Labor for the five-year period immediately preceding
January 1 of the year of adjustment.
Sec. 981.0032. QUALIFIED RISK MANAGER DEFINED. (a) For
purposes of this chapter, "qualified risk manager" means, with
respect to a policyholder of commercial insurance, a person who:
(1) is an employee of, or third-party consultant
retained by, a commercial policyholder;
(2) provides skilled services in loss prevention, loss
reduction, or risk and insurance coverage analysis and the purchase
of insurance; and
(3) satisfies the requirements of this section.
(b) A qualified risk manager must have:
(1) a bachelor's or higher degree from an accredited
college or university in risk management, business administration,
finance, economics, or another field determined by a state
insurance commissioner or other state regulatory official to
demonstrate competence in risk management and:
(A) at least three years of experience in risk
financing, claims administration, loss prevention, risk and
insurance analysis, or purchasing of commercial lines of insurance;
or
(B) a designation:
(i) as a Chartered Property and Casualty
Underwriter (CPCU), issued by the American Institute for
CPCU/Insurance Institute of America;
(ii) as an Associate in Risk Management
(ARM) issued by the American Institute for CPCU/Insurance Institute
of America;
(iii) as a Certified Risk Manager (CRM)
issued by the National Alliance for Insurance Education and
Research;
(iv) as a RIMS Fellow (RF) issued by the
Global Risk Management Institute; or
(v) that is determined by the commissioner
or the state insurance regulatory official or agency of another
state to demonstrate minimum competence in risk management;
(2) at least seven years of experience in risk
financing, claims administration, loss prevention, risk and
insurance coverage analysis, or purchasing of commercial lines of
insurance and one of the designations described by Subdivision
(1)(B);
(3) at least 10 years of experience in risk financing,
claims administration, loss prevention, risk and insurance
coverage analysis, or purchasing commercial lines of insurance; or
(4) a graduate degree from an accredited college or
university in risk management, business administration, finance,
economics, or another field determined by the commissioner or the
state insurance regulatory official or agency of another state to
demonstrate competence in risk management.
SECTION 5. Section 981.004, Insurance Code, is amended by
adding Subsection (c) to read as follows:
(c) Subsection (a)(1) does not apply to insurance for an
exempt commercial purchaser if:
(1) the agent procuring or placing the insurance
discloses to the exempt commercial purchaser that:
(A) comparable insurance may be available from
the admitted market that is subject to more regulatory oversight
than the nonadmitted market; and
(B) a policy purchased in the admitted market may
provide greater protection than the surplus lines insurance policy;
and
(2) after receiving the notice described by
Subdivision (1), the exempt commercial purchaser requests in
writing that the agent procure the insurance from or place the
insurance with a nonadmitted insurer.
SECTION 6. Subchapter A, Chapter 981, Insurance Code, is
amended by adding Sections 981.010 and 981.011 to read as follows:
Sec. 981.010. FAILURE TO PAY PENALTY. A person engages in
the unauthorized business of insurance if the person issues a
policy of surplus lines insurance and, at the time the policy is
issued, the person or the person's surplus lines agent has failed to
pay a statutory penalty imposed for a violation of this code on the
person or the person's surplus lines agent.
Sec. 981.011. FAILURE TO PAY PREMIUM TAX. A person engages
in the unauthorized business of insurance if the person issues a
policy of surplus lines insurance and, at the time the policy is
issued, the person has not paid premium tax the person is obligated
to pay.
SECTION 7. Section 981.058, Insurance Code, is amended to
read as follows:
Sec. 981.058. ALIEN INSURERS[: TRUST FUND REQUIREMENT]. An
[In addition to meeting the minimum capital and surplus
requirements prescribed by Section 981.057, an] alien surplus lines
insurer must be listed on the Quarterly Listing of Alien Insurers
maintained by the International Insurers Department, National
Association of Insurance Commissioners [provide evidence that:
[(1) the insurer maintains in the United States an
irrevocable trust fund in a Federal Reserve System member bank in an
amount of at least $5.4 million for the protection of all its
policyholders in the United States; and
[(2) the trust fund consists of:
[(A) cash;
[(B) securities;
[(C) letters of credit; or
[(D) investments of substantially the same
character and quality as those that are eligible investments for
the capital and statutory reserves of an insurer authorized to
write similar kinds and classes of insurance in this state].
SECTION 8. Sections 981.059(b) and (c), Insurance Code, are
amended to read as follows:
(b) Instead of the minimum capital and surplus requirements
prescribed by Section 981.057, an insurer group may maintain an
irrevocable [a] trust fund in a Federal Reserve System member bank
in an amount of at least $50 million as security to the full amount
of the trust fund for all policyholders and creditors in the United
States of each group member.
(c) The [Except as provided by this section, the] trust fund
must consist of:
(1) cash;
(2) securities;
(3) letters of credit; or
(4) investments of substantially the same character
and quality as those that are eligible investments for the capital
and statutory reserves of an insurer authorized to write similar
kinds and classes of insurance in this state [comply with the terms
specified by Section 981.058 for the trust fund required by that
section].
SECTION 9. Subchapter B, Chapter 981, Insurance Code, is
amended by adding Section 981.066 to read as follows:
Sec. 981.066. UNIFORM STANDARDS. To issue surplus lines
insurance in this state, an insurer must comply with all applicable
uniform standards adopted under an agreement between this state and
another state.
SECTION 10. Section 981.105, Insurance Code, is amended by
adding Subsections (j) and (k) to read as follows:
(j) If a diligent effort to obtain insurance for an exempt
commercial purchaser in the admitted market was not made, a surplus
lines agent shall file with the stamping office, together with the
information filed under Subsection (a), in a form prescribed by the
commissioner by rule:
(1) proof that the surplus lines agent procuring or
placing the surplus lines insurance has complied with Section
981.004(c)(1);
(2) a copy of the exempt commercial purchaser's
written request, submitted in accordance with Section
981.004(c)(2);
(3) a written disclosure of the identity of the
insured's qualified risk manager; and
(4) an attestation by the insured that:
(A) the insured has paid aggregate nationwide
commercial property and casualty insurance premiums of at least
$100,000 in the immediately preceding 12 months; and
(B) the purchaser is an exempt commercial
purchaser as defined by Section 981.0031, and that includes a
description of the criteria specified by Section 981.0031(a)(3)
under which the purchaser qualifies as an exempt commercial
purchaser.
(k) The commissioner by rule shall establish procedures and
promulgate a form to be used to meet the requirements of Subsection
(j). The rules must include provisions that address record
retention, electronic filing, and audit requirements.
SECTION 11. The following sections of the Insurance Code
are repealed:
(1) Section 981.052;
(2) Section 981.053;
(3) Section 981.055;
(4) Section 981.056;
(5) Section 981.060;
(6) Section 981.061; and
(7) Section 981.062.
SECTION 12. (a) Notwithstanding Section 981.058, Insurance
Code, as amended by this Act, an alien surplus lines insurer that
was an eligible surplus lines insurer under Section 981.058,
Insurance Code, as it existed immediately before the effective date
of this Act, continues to be an eligible surplus lines insurer until
January 1, 2015.
(b) An alien insurer described by Subsection (a) of this
section may apply for an extension of eligibility. The
commissioner may extend eligibility under this section until
January 1, 2017, if the commissioner determines that the insurer is
making a good faith effort to be listed on the Quarterly Listing of
Alien Insurers maintained by the International Insurers
Department, National Association of Insurance Commissioners, as
required by Section 981.058, Insurance Code, as amended by this
Act, and that the interests of the insurer's policyholders are
otherwise adequately protected.
SECTION 13. This Act takes effect immediately if it
receives a vote of two-thirds of all the members elected to each
house, as provided by Section 39, Article III, Texas Constitution.
If this Act does not receive the vote necessary for immediate
effect, this Act takes effect September 1, 2013.