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. Subsection (c), Section 981.001, 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 each person whose home state is this
state for a particular transaction [the residents of this state] 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 maintains the insured's
principal residence or 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) [(2)] "Stamping office" means the Surplus Lines
Stamping Office of Texas.
(8) [(3)] "Surplus lines agent" means an agent
licensed under Subchapter E to procure an insurance contract from a
surplus lines insurer.
(9) [(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) Effective on January 1, 2015, and on every fifth January
1 thereafter, the commissioner shall by order 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 the adjustment.
Sec. 981.0032. QUALIFIED RISK MANAGER DEFINED. 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 one of the following
paragraphs:
(A) has:
(i) 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
or entity to demonstrate competence in risk management; and
(ii) either:
(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, certification, or
license:
(1) as a chartered property
casualty underwriter (CPCU), issued by the American Institute for
CPCU/Insurance Institute of America;
(2) as an associate in risk
management (ARM) issued by the American Institute for
CPCU/Insurance Institute of America;
(3) as a Certified Risk Manager
(CRM) issued by the National Alliance for Insurance Education and
Research;
(4) as a RIMS Fellow (RF) issued
by the Global Risk Management Institute; or
(5) that is determined by a state
insurance commissioner or other state insurance regulatory
official or entity to demonstrate minimum competence in risk
management;
(B) has 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, certifications, or licenses
described by Paragraph (A)(ii)(b);
(C) has 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
(D) has a graduate 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 or entity
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 procured
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 surplus lines 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 an eligible surplus lines insurer.
SECTION 6. Subsection (b), Section 981.057, Insurance Code,
is amended to read as follows:
(b) Subsection (a) does not apply to alien surplus lines
insurers listed on the Quarterly Listing of Alien Insurers
maintained by the International Insurers Department, National
Association of Insurance Commissioners. [If an eligible surplus
lines insurer is an insurance exchange created by the laws of
another state:
[(1) the syndicates of the exchange must maintain
under terms acceptable to the commissioner capital and surplus, or
the equivalent under the laws of the exchange's domiciliary
jurisdiction, in an amount of at least $75 million in the aggregate;
[(2) the exchange must maintain under terms acceptable
to the commissioner at least 50 percent of the policyholder surplus
of each individual syndicate in a custodial account accessible to
the exchange or the exchange's domiciliary commissioner in the
event of insolvency or impairment of the individual syndicate; and
[(3) an individual syndicate, to be eligible to accept
surplus lines insurance placements from this state as an exchange
member, must maintain under terms acceptable to the commissioner
capital and surplus, or the equivalent under the laws of the
exchange's domiciliary jurisdiction, in the amount of at least:
[(A) $5 million, if the syndicate is a member of
an insurance exchange that maintains at least $15 million for the
protection of all exchange policyholders; or
[(B) the greater of:
[(i) the minimum capital and surplus of the
exchange's domiciliary jurisdiction; or
[(ii) $15 million.]
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. 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
nationwide uniform standards adopted by this state in accordance
with 15 U.S.C. Section 8204.
SECTION 9. Subsection (a), Section 981.215, Insurance Code,
is amended to read as follows:
(a) A surplus lines agent shall maintain a complete record
of each surplus lines contract obtained by the agent, including any
of the following, if applicable:
(1) a copy of the daily report;
(2) the amount of the insurance and risks insured
against;
(3) a brief general description of the property
insured and the location of that property;
(4) the gross premium charged;
(5) the return premium paid;
(6) the rate of premium charged on the different items
of property;
(7) the contract terms, including the effective date;
(8) the insured's name and post office address;
(9) the insurer's name and home office address;
(10) the amount collected from the insured; [and]
(11) evidence establishing that the insured qualified
as an exempt commercial purchaser and that the surplus lines agent
complied with the requirements of Section 981.004(c) if a diligent
effort to obtain insurance in the admitted market was not made
pursuant to Section 981.004(a)(1); and
(12) any other information required by the department.
SECTION 10. 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 981.059;
(6) Section 981.060;
(7) Section 981.061; and
(8) Section 981.062.
SECTION 11. (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.
(b) An alien insurer described by Subsection (a) of this
section must comply with the trust fund requirements of Section
981.058, Insurance Code, as that section existed immediately before
the effective date of this Act, in addition to the minimum capital
and surplus requirements prescribed by Section 981.057, Insurance
Code.
SECTION 12. 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.