H.B. No. 1987
1-1 AN ACT
1-2 relating to surplus lines insurance.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 6, Article 1.14-2, Insurance Code, is
1-5 amended to read as follows:
1-6 Sec. 6. PROCEDURE FOR EFFECTING SURPLUS LINES CONTRACTS.
1-7 (a) <Before any new or renewal insurance shall be procured in an
1-8 unlicensed insurer the agent shall make an affidavit, which shall
1-9 be promptly filed with the State Board of Insurance, that he is
1-10 after diligent effort unable to procure from any licensed insurer
1-11 or insurers the full amount of insurance required to protect the
1-12 interest of the insured. If the annual premiums paid by the
1-13 insured for such surplus lines coverage exceed $25,000, the insured
1-14 may execute the affidavit in lieu of the surplus lines agent.>
1-15 <(b)> Upon placing a new or renewal surplus line coverage,
1-16 the surplus lines agent shall promptly issue and deliver to the
1-17 insured or his agent, as the case may be, evidence of the insurance
1-18 consisting either of the policy as issued by the insurer or, if
1-19 such policy is not then available, a certificate, cover note or
1-20 other confirmation of insurance.
1-21 (b) <(c)> Within 60 days after the effective date or issue
1-22 date, whichever is later, of any new or renewal surplus lines
1-23 insurance contract, the surplus lines agent shall file with the
1-24 Surplus Lines Stamping Office of Texas <evidence that a diligent
2-1 effort as defined in Section 5 of this Article has been performed
2-2 and> a true and correct copy of the contract issued. If a contract
2-3 has not been issued, the surplus lines agent shall so file a true
2-4 and correct copy of his certificate, cover note or other
2-5 confirmation of insurance as delivered to the insured. The surplus
2-6 lines agent shall likewise promptly file with the Surplus Lines
2-7 Stamping Office of Texas a true and correct copy of any substitute
2-8 certificate, cover note or other confirmation of insurance, and of
2-9 every endorsement of an original policy, certificate, cover note or
2-10 other confirmation of insurance, delivered to an insured, together
2-11 with such surplus lines agent's memorandum informing the Surplus
2-12 Lines Stamping Office of Texas as to the substance of any change
2-13 represented by such substitute certificate, cover note or other
2-14 confirmation, or of any such endorsement, as compared with the
2-15 coverage as originally placed or issued. <Except, however, as
2-16 respects this Subsection (c), equivalent information may be filed
2-17 as required by the Board.>
2-18 (c) <(d)> No surplus lines agent shall deliver any such
2-19 document, or purport to insure or represent that insurance will be
2-20 or has been granted by any eligible surplus lines insurer unless he
2-21 has prior written authority from the insurer for the insurance, or
2-22 has received information from the insurer in the regular course of
2-23 business that such insurance has been granted, or an insurance
2-24 policy providing the insurance actually has been issued by the
2-25 insurer and delivered to the insured.
2-26 (d) <(e)> If after the delivery of any such document there
2-27 is any change as to the identity of the insurers, or the proportion
3-1 of the direct risk assumed by the insurer as stated in the original
3-2 certificate, cover note or confirmation, or in any other material
3-3 respect as to the insurance coverage evidenced by such a document,
3-4 the surplus lines agent shall promptly deliver to the insured a
3-5 substitute certificate, cover note, confirmation or endorsement for
3-6 the original such document, accurately showing the current status
3-7 of the coverage and the insurers responsible thereunder. No such
3-8 change shall result in a coverage or insurance contract which would
3-9 be in violation of this Article if originally issued on such basis.
3-10 (e) <(f)> If a policy issued by the insurer is not available
3-11 upon placement of the insurance and the surplus lines agent has
3-12 delivered a certificate, cover note or confirmation, as hereinabove
3-13 provided, upon request therefor by the insured the surplus lines
3-14 agent shall as soon as reasonably possible procure from the insurer
3-15 its policy evidencing the insurance and deliver the policy to the
3-16 insured in replacement of the certificate, cover note or
3-17 confirmation theretofore issued.
3-18 SECTION 2. Section 6A, Article 1.14-2, Insurance Code, is
3-19 amended by adding Subsections (g) and (h) to read as follows:
3-20 (g) The stamping office and the records of the stamping
3-21 office are not subject to Chapter 441, Government Code.
3-22 (h) An individual surplus lines insurance contract filed
3-23 with the stamping office is confidential and is not a public record
3-24 under Chapter 552, Government Code. Nothing in this subsection
3-25 shall prevent access by a state agency to an individual surplus
3-26 lines insurance contract filed with the stamping office.
3-27 SECTION 3. Section 8(b), Article 1.14-2, Insurance Code, is
4-1 amended to read as follows:
4-2 (b) No surplus lines agent shall place any coverage with an
4-3 insurer unless the insurer has met the eligibility requirements of
4-4 this section and the stamping office provides evidence that the
4-5 insurer has met the requirements to the State Board of Insurance.
4-6 An insurer shall not be an eligible surplus lines insurer unless:
4-7 (1) the insurer has a minimum capital and surplus of
4-8 $15 million; or
4-9 (2) in the case of an insurance exchange created by
4-10 the laws of another state:
4-11 (A) the syndicates of the exchange must maintain
4-12 under terms acceptable to the commissioner capital and surplus, or
4-13 its equivalent under the laws of its domiciliary jurisdiction, of
4-14 not less than $75 million in the aggregate;
4-15 (B) the exchange must maintain under terms
4-16 acceptable to the commissioner at least 50 percent of the
4-17 policyholder surplus of each syndicate in a custodial account
4-18 accessible to the exchange or its domiciliary commissioner in the
4-19 event of insolvency or impairment of the individual syndicate; and
4-20 (C) each individual syndicate, to be eligible to
4-21 accept surplus lines insurance placements from this state as a
4-22 member of the exchange must meet either of the following
4-23 requirements:
4-24 (i) in the case of an insurance exchange
4-25 that maintains funds in an amount of at least $15 million for the
4-26 protection of all exchange policyholders, the syndicate must
4-27 maintain under terms acceptable to the commissioner minimum capital
5-1 and surplus, or its equivalent under the laws of its domiciliary
5-2 jurisdiction, of at least $5 million; or
5-3 (ii) in the case of an insurance exchange
5-4 that does not maintain funds in an amount of at least $15 million
5-5 for the protection of all exchange policyholders, the syndicate
5-6 must maintain under terms acceptable to the commissioner minimum
5-7 capital and surplus, or its equivalent under the laws of its
5-8 domiciliary jurisdiction, of at least the greater of:
5-9 (a) the minimum capital and surplus
5-10 of its domiciliary jurisdiction; or
5-11 (b) $15 million.
5-12 SECTION 4. This Act takes effect September 1, 1995, and
5-13 applies only to the placement of coverage with an eligible surplus
5-14 lines insurer on or after September 1, 1995. Placement of coverage
5-15 with an eligible surplus lines insurer before September 1, 1995, is
5-16 governed by the law as it existed immediately before the effective
5-17 date of this Act, and that law is continued in effect for that
5-18 purpose.
5-19 SECTION 5. The importance of this legislation and the
5-20 crowded condition of the calendars in both houses create an
5-21 emergency and an imperative public necessity that the
5-22 constitutional rule requiring bills to be read on three several
5-23 days in each house be suspended, and this rule is hereby suspended.