Texas 2013 - 83rd Regular

Texas Senate Bill SB951 Compare Versions

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1	1	By: Carona S.B. No. 951
2	2	(Eiland)
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to surplus lines insurance.
8	8	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
9	9	SECTION 1. Subsection (c), Section 981.001, Insurance Code,
10	10	is amended to read as follows:
11	11	(c) To regulate and tax surplus lines insurance placed in
12	12	accordance with this chapter within the meaning and intent of 15
13	13	U.S.C. Section 1011 and 15 U.S.C. Chapter 108, this chapter
14	14	provides an orderly method for each person whose home state is this
15	15	state for a particular transaction [the residents of this state] to
16	16	effect insurance with eligible surplus lines insurers through
17	17	qualified, licensed, and supervised surplus lines agents in this
18	18	state, if coverage is not available from authorized and regulated
19	19	insurers engaged in business in this state, under reasonable and
20	20	practical safeguards.
21	21	SECTION 2. Section 981.002, Insurance Code, is amended to
22	22	read as follows:
23	23	Sec. 981.002. DEFINITIONS. In this chapter:
24	24	(1) "Affiliate" means, with respect to determining the
25	25	home state of an insured, and solely for the purpose of determining
26	26	whether an entity is another entity's affiliate, a person or entity
27	27	that controls, is controlled by, or is under common control with the
28	28	insured.
29	29	(2) "Affiliated group" means a group of entities whose
30	30	members are all affiliated.
31	31	(3) "Control" means, with respect to determining the
32	32	home state of an insured, and solely for the purpose of determining
33	33	whether an entity is another entity's affiliate:
34	34	(A) to directly or indirectly, acting through one
35	35	or more persons, own, control, or hold the power to vote at least 25
36	36	percent of any class of voting security of the other entity; or
37	37	(B) to control in any manner the election of the
38	38	majority of directors or trustees of the other entity.
39	39	(4) "Eligible surplus lines insurer" means an insurer
40	40	that is not an authorized insurer, but that is eligible under
41	41	Subchapter B, in which surplus lines insurance is placed or may be
42	42	placed under this chapter.
43	43	(5) "Home state" means, with respect to an insured:
44	44	(A) the state in which the insured maintains the
45	45	insured's principal residence, if the insured is an individual;
46	46	(B) the state in which the insured maintains the
47	47	insured's principal place of business, if the insured is not an
48	48	individual;
49	49	(C) if 100 percent of the insured risk is located
50	50	outside of the state in which the insured maintains the insured's
51	51	principal residence or principal place of business, as applicable,
52	52	the state to which the greatest percentage of the insured's taxable
53	53	premium for the insurance contract that covers the risk is
54	54	allocated; or
55	55	(D) for an affiliated group, the home state of
56	56	the member, as determined under Paragraphs (A)-(C), that has the
57	57	largest percentage of premium attributed to it under the insurance
58	58	contract.
59	59	(6) [(1-a)] "Managing underwriter" means a surplus
60	60	lines agent or agency that exercises, pursuant to a written
61	61	agreement with an eligible surplus lines insurer, underwriting
62	62	authority for the eligible surplus lines insurer and that derives
63	63	the agent or agency's business from a surplus lines agent.
64	64	(7) [(2)] "Stamping office" means the Surplus Lines
65	65	Stamping Office of Texas.
66	66	(8) [(3)] "Surplus lines agent" means an agent
67	67	licensed under Subchapter E to procure an insurance contract from a
68	68	surplus lines insurer.
69	69	(9) [(4)] "Surplus lines insurance" means insurance
70	70	coverage[:
71	71	[(A) for a subject that is resident, located, or
72	72	to be performed in this state; and
73	73	[(B)] that may be placed, in accordance with this
74	74	chapter, with an eligible surplus lines insurer or the insurer's
75	75	managing underwriter.
76	76	SECTION 3. Section 981.003, Insurance Code, is amended to
77	77	read as follows:
78	78	Sec. 981.003. APPLICABILITY OF CHAPTER. This chapter
79	79	applies to surplus lines insurance if the home state of the insured
80	80	is this state[:
81	81	[(1) of a subject that is resident, located, or to be
82	82	performed in this state; and
83	83	[(2) that is obtained, continued, or renewed through:
84	84	[(A) negotiations or an application wholly or
85	85	partly occurring or made within or from within this state; or
86	86	[(B) premiums wholly or partly remitted directly
87	87	or indirectly from within this state].
88	88	SECTION 4. Subchapter A, Chapter 981, Insurance Code, is
89	89	amended by adding Sections 981.0031 and 981.0032 to read as
90	90	follows:
91	91	Sec. 981.0031. EXEMPT COMMERCIAL PURCHASER DEFINED.
92	92	(a) For purposes of this chapter, "exempt commercial purchaser"
93	93	means a person who purchases commercial insurance and, at the time
94	94	of placement:
95	95	(1) employs or retains a qualified risk manager to
96	96	negotiate insurance coverage;
97	97	(2) has paid aggregate nationwide commercial property
98	98	and casualty insurance premiums of more than $100,000 in the
99	99	immediately preceding 12 months; and
100	100	(3) meets at least one of the following criteria:
101	101	(A) has a net worth of more than $20 million;
102	102	(B) generates annual revenue of more than $50
103	103	million;
104	104	(C) employs more than 500 full-time or full-time
105	105	equivalent employees per individual insured, or is a member of an
106	106	affiliated group that employs more than 1,000 employees in
107	107	aggregate;
108	108	(D) is a nonprofit organization or public entity
109	109	generating annual budgeted expenditures of at least $30 million; or
110	110	(E) is a municipality with a population of more
111	111	than 50,000.
112	112	(b) Effective on January 1, 2015, and on every fifth January
113	113	1 thereafter, the commissioner shall by order adjust the amounts
114	114	provided by Subsections (a)(3)(A), (B), and (D) to reflect the
115	115	percentage change in the Consumer Price Index for All Urban
116	116	Consumers published by the Bureau of Labor Statistics of the United
117	117	States Department of Labor for the five-year period immediately
118	118	preceding January 1 of the year of the adjustment.
119	119	Sec. 981.0032. QUALIFIED RISK MANAGER DEFINED. For
120	120	purposes of this chapter, "qualified risk manager" means, with
121	121	respect to a policyholder of commercial insurance, a person who:
122	122	(1) is an employee of, or third-party consultant
123	123	retained by, a commercial policyholder;
124	124	(2) provides skilled services in loss prevention, loss
125	125	reduction, or risk and insurance coverage analysis and the purchase
126	126	of insurance; and
127	127	(3) satisfies the requirements of one of the following
128	128	paragraphs:
129	129	(A) has:
130	130	(i) a bachelor's or higher degree from an
131	131	accredited college or university in risk management, business
132	132	administration, finance, economics, or another field determined by
133	133	a state insurance commissioner or other state regulatory official
134	134	or entity to demonstrate competence in risk management; and
135	135	(ii) either:
136	136	(a) at least three years of experience
137	137	in risk financing, claims administration, loss prevention, risk and
138	138	insurance analysis, or purchasing of commercial lines of insurance;
139	139	or
140	140	(b) a designation, certification, or
141	141	license:
142	142	(1) as a chartered property
143	143	casualty underwriter (CPCU), issued by the American Institute for
144	144	CPCU/Insurance Institute of America;
145	145	(2) as an associate in risk
146	146	management (ARM) issued by the American Institute for
147	147	CPCU/Insurance Institute of America;
148	148	(3) as a Certified Risk Manager
149	149	(CRM) issued by the National Alliance for Insurance Education and
150	150	Research;
151	151	(4) as a RIMS Fellow (RF) issued
152	152	by the Global Risk Management Institute; or
153	153	(5) that is determined by a state
154	154	insurance commissioner or other state insurance regulatory
155	155	official or entity to demonstrate minimum competence in risk
156	156	management;
157	157	(B) has at least seven years of experience in
158	158	risk financing, claims administration, loss prevention, risk and
159	159	insurance coverage analysis, or purchasing of commercial lines of
160	160	insurance and one of the designations, certifications, or licenses
161	161	described by Paragraph (A)(ii)(b);
162	162	(C) has at least 10 years of experience in risk
163	163	financing, claims administration, loss prevention, risk and
164	164	insurance coverage analysis, or purchasing commercial lines of
165	165	insurance; or
166	166	(D) has a graduate degree from an accredited
167	167	college or university in risk management, business administration,
168	168	finance, economics, or another field determined by a state
169	169	insurance commissioner or other state regulatory official or entity
170	170	to demonstrate competence in risk management.
171	171	SECTION 5. Section 981.004, Insurance Code, is amended by
172	172	adding Subsection (c) to read as follows:
173	173	(c) Subsection (a)(1) does not apply to insurance procured
174	174	for an exempt commercial purchaser if:
175	175	(1) the agent procuring or placing the insurance
176	176	discloses to the exempt commercial purchaser that:
177	177	(A) comparable insurance may be available from
178	178	the admitted market that is subject to more regulatory oversight
179	179	than the surplus lines market; and
180	180	(B) a policy purchased in the admitted market may
181	181	provide greater protection than the surplus lines insurance policy;
182	182	and
183	183	(2) after receiving the notice described by
184	184	Subdivision (1), the exempt commercial purchaser requests in
185	185	writing that the agent procure the insurance from or place the
186	186	insurance with an eligible surplus lines insurer.
187	187	SECTION 6. Subsection (b), Section 981.057, Insurance Code,
188	188	is amended to read as follows:
189	189	(b) Subsection (a) does not apply to alien surplus lines
190	190	insurers listed on the Quarterly Listing of Alien Insurers
191	191	maintained by the International Insurers Department, National
192	192	Association of Insurance Commissioners. [If an eligible surplus
193	193	lines insurer is an insurance exchange created by the laws of
194	194	another state:
195	195	[(1) the syndicates of the exchange must maintain
196	196	under terms acceptable to the commissioner capital and surplus, or
197	197	the equivalent under the laws of the exchange's domiciliary
198	198	jurisdiction, in an amount of at least $75 million in the aggregate;
199	199	[(2) the exchange must maintain under terms acceptable
200	200	to the commissioner at least 50 percent of the policyholder surplus
201	201	of each individual syndicate in a custodial account accessible to
202	202	the exchange or the exchange's domiciliary commissioner in the
203	203	event of insolvency or impairment of the individual syndicate; and
204	204	[(3) an individual syndicate, to be eligible to accept
205	205	surplus lines insurance placements from this state as an exchange
206	206	member, must maintain under terms acceptable to the commissioner
207	207	capital and surplus, or the equivalent under the laws of the
208	208	exchange's domiciliary jurisdiction, in the amount of at least:
209	209	[(A) $5 million, if the syndicate is a member of
210	210	an insurance exchange that maintains at least $15 million for the
211	211	protection of all exchange policyholders; or
212	212	[(B) the greater of:
213	213	[(i) the minimum capital and surplus of the
214	214	exchange's domiciliary jurisdiction; or
215	215	[(ii) $15 million.]
216	216	SECTION 7. Section 981.058, Insurance Code, is amended to
217	217	read as follows:
218	218	Sec. 981.058. ALIEN INSURERS [: TRUST FUND REQUIREMENT].
219	219	An [In addition to meeting the minimum capital and surplus
220	220	requirements prescribed by Section 981.057, an] alien surplus lines
221	221	insurer must be listed on the Quarterly Listing of Alien Insurers
222	222	maintained by the International Insurers Department, National
223	223	Association of Insurance Commissioners [provide evidence that:
224	224	[(1) the insurer maintains in the United States an
225	225	irrevocable trust fund in a Federal Reserve System member bank in an
226	226	amount of at least $5.4 million for the protection of all its
227	227	policyholders in the United States; and
228	228	[(2) the trust fund consists of:
229	229	[(A) cash;
230	230	[(B) securities;
231	231	[(C) letters of credit; or
232	232	[(D) investments of substantially the same
233	233	character and quality as those that are eligible investments for
234	234	the capital and statutory reserves of an insurer authorized to
235	235	write similar kinds and classes of insurance in this state].
236	236	SECTION 8. Subchapter B, Chapter 981, Insurance Code, is
237	237	amended by adding Section 981.066 to read as follows:
238	238	Sec. 981.066. UNIFORM STANDARDS. To issue surplus lines
239	239	insurance in this state, an insurer must comply with all applicable
240	240	nationwide uniform standards adopted by this state in accordance
241	241	with 15 U.S.C. Section 8204.
242	242	SECTION 9. Subsection (a), Section 981.215, Insurance Code,
243	243	is amended to read as follows:
244	244	(a) A surplus lines agent shall maintain a complete record
245	245	of each surplus lines contract obtained by the agent, including any
246	246	of the following, if applicable:
247	247	(1) a copy of the daily report;
248	248	(2) the amount of the insurance and risks insured
249	249	against;
250	250	(3) a brief general description of the property
251	251	insured and the location of that property;
252	252	(4) the gross premium charged;
253	253	(5) the return premium paid;
254	254	(6) the rate of premium charged on the different items
255	255	of property;
256	256	(7) the contract terms, including the effective date;
257	257	(8) the insured's name and post office address;
258	258	(9) the insurer's name and home office address;
259	259	(10) the amount collected from the insured; [and]
260	260	(11) evidence establishing that the insured qualified
261	261	as an exempt commercial purchaser and that the surplus lines agent
262	262	complied with the requirements of Section 981.004(c) if a diligent
263	263	effort to obtain insurance in the admitted market was not made
264	264	pursuant to Section 981.004(a)(1); and
265	265	(12) any other information required by the department.
266	266	SECTION 10. The following sections of the Insurance Code
267	267	are repealed:
268	268	(1) Section 981.052;
269	269	(2) Section 981.053;
270	270	(3) Section 981.055;
271	271	(4) Section 981.056;
272	272	(5) Section 981.059;
273	273	(6) Section 981.060;
274	274	(7) Section 981.061; and
275	275	(8) Section 981.062.
276	276	SECTION 11. (a) Notwithstanding Section 981.058,
277	277	Insurance Code, as amended by this Act, an alien surplus lines
278	278	insurer that was an eligible surplus lines insurer under Section
279	279	981.058, Insurance Code, as it existed immediately before the
280	280	effective date of this Act, continues to be an eligible surplus
281	281	lines insurer.
282	282	(b) An alien insurer described by Subsection (a) of this
283	283	section must comply with the trust fund requirements of Section
284	284	981.058, Insurance Code, as that section existed immediately before
285	285	the effective date of this Act, in addition to the minimum capital
286	286	and surplus requirements prescribed by Section 981.057, Insurance
287	287	Code.
288	288	SECTION 12. This Act takes effect immediately if it
289	289	receives a vote of two-thirds of all the members elected to each
290	290	house, as provided by Section 39, Article III, Texas Constitution.
291	291	If this Act does not receive the vote necessary for immediate
292	292	effect, this Act takes effect September 1, 2013.