1-1 By: Duncan (Senate Sponsor - Lucio) H.B. No. 1987
1-2 (In the Senate - Received from the House May 12, 1995;
1-3 May 15, 1995, read first time and referred to Committee on Economic
1-4 Development; May 22, 1995, reported favorably by the following
1-5 vote: Yeas 8, Nays 0; May 22, 1995, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to surplus lines insurance.
1-9 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-10 SECTION 1. Section 6, Article 1.14-2, Insurance Code, is
1-11 amended to read as follows:
1-12 Sec. 6. PROCEDURE FOR EFFECTING SURPLUS LINES CONTRACTS.
1-13 (a) <Before any new or renewal insurance shall be procured in an
1-14 unlicensed insurer the agent shall make an affidavit, which shall
1-15 be promptly filed with the State Board of Insurance, that he is
1-16 after diligent effort unable to procure from any licensed insurer
1-17 or insurers the full amount of insurance required to protect the
1-18 interest of the insured. If the annual premiums paid by the
1-19 insured for such surplus lines coverage exceed $25,000, the insured
1-20 may execute the affidavit in lieu of the surplus lines agent.>
1-21 <(b)> Upon placing a new or renewal surplus line coverage,
1-22 the surplus lines agent shall promptly issue and deliver to the
1-23 insured or his agent, as the case may be, evidence of the insurance
1-24 consisting either of the policy as issued by the insurer or, if
1-25 such policy is not then available, a certificate, cover note or
1-26 other confirmation of insurance.
1-27 (b) <(c)> Within 60 days after the effective date or issue
1-28 date, whichever is later, of any new or renewal surplus lines
1-29 insurance contract, the surplus lines agent shall file with the
1-30 Surplus Lines Stamping Office of Texas <evidence that a diligent
1-31 effort as defined in Section 5 of this Article has been performed
1-32 and> a true and correct copy of the contract issued. If a contract
1-33 has not been issued, the surplus lines agent shall so file a true
1-34 and correct copy of his certificate, cover note or other
1-35 confirmation of insurance as delivered to the insured. The surplus
1-36 lines agent shall likewise promptly file with the Surplus Lines
1-37 Stamping Office of Texas a true and correct copy of any substitute
1-38 certificate, cover note or other confirmation of insurance, and of
1-39 every endorsement of an original policy, certificate, cover note or
1-40 other confirmation of insurance, delivered to an insured, together
1-41 with such surplus lines agent's memorandum informing the Surplus
1-42 Lines Stamping Office of Texas as to the substance of any change
1-43 represented by such substitute certificate, cover note or other
1-44 confirmation, or of any such endorsement, as compared with the
1-45 coverage as originally placed or issued. <Except, however, as
1-46 respects this Subsection (c), equivalent information may be filed
1-47 as required by the Board.>
1-48 (c) <(d)> No surplus lines agent shall deliver any such
1-49 document, or purport to insure or represent that insurance will be
1-50 or has been granted by any eligible surplus lines insurer unless he
1-51 has prior written authority from the insurer for the insurance, or
1-52 has received information from the insurer in the regular course of
1-53 business that such insurance has been granted, or an insurance
1-54 policy providing the insurance actually has been issued by the
1-55 insurer and delivered to the insured.
1-56 (d) <(e)> If after the delivery of any such document there
1-57 is any change as to the identity of the insurers, or the proportion
1-58 of the direct risk assumed by the insurer as stated in the original
1-59 certificate, cover note or confirmation, or in any other material
1-60 respect as to the insurance coverage evidenced by such a document,
1-61 the surplus lines agent shall promptly deliver to the insured a
1-62 substitute certificate, cover note, confirmation or endorsement for
1-63 the original such document, accurately showing the current status
1-64 of the coverage and the insurers responsible thereunder. No such
1-65 change shall result in a coverage or insurance contract which would
1-66 be in violation of this Article if originally issued on such basis.
1-67 (e) <(f)> If a policy issued by the insurer is not available
1-68 upon placement of the insurance and the surplus lines agent has
2-1 delivered a certificate, cover note or confirmation, as hereinabove
2-2 provided, upon request therefor by the insured the surplus lines
2-3 agent shall as soon as reasonably possible procure from the insurer
2-4 its policy evidencing the insurance and deliver the policy to the
2-5 insured in replacement of the certificate, cover note or
2-6 confirmation theretofore issued.
2-7 SECTION 2. Section 6A, Article 1.14-2, Insurance Code, is
2-8 amended by adding Subsections (g) and (h) to read as follows:
2-9 (g) The stamping office and the records of the stamping
2-10 office are not subject to Chapter 441, Government Code.
2-11 (h) An individual surplus lines insurance contract filed
2-12 with the stamping office is confidential and is not a public record
2-13 under Chapter 552, Government Code. Nothing in this subsection
2-14 shall prevent access by a state agency to an individual surplus
2-15 lines insurance contract filed with the stamping office.
2-16 SECTION 3. Section 8(b), Article 1.14-2, Insurance Code, is
2-17 amended to read as follows:
2-18 (b) No surplus lines agent shall place any coverage with an
2-19 insurer unless the insurer has met the eligibility requirements of
2-20 this section and the stamping office provides evidence that the
2-21 insurer has met the requirements to the State Board of Insurance.
2-22 An insurer shall not be an eligible surplus lines insurer unless:
2-23 (1) the insurer has a minimum capital and surplus of
2-24 $15 million; or
2-25 (2) in the case of an insurance exchange created by
2-26 the laws of another state:
2-27 (A) the syndicates of the exchange must maintain
2-28 under terms acceptable to the commissioner capital and surplus, or
2-29 its equivalent under the laws of its domiciliary jurisdiction, of
2-30 not less than $75 million in the aggregate;
2-31 (B) the exchange must maintain under terms
2-32 acceptable to the commissioner at least 50 percent of the
2-33 policyholder surplus of each syndicate in a custodial account
2-34 accessible to the exchange or its domiciliary commissioner in the
2-35 event of insolvency or impairment of the individual syndicate; and
2-36 (C) each individual syndicate, to be eligible to
2-37 accept surplus lines insurance placements from this state as a
2-38 member of the exchange must meet either of the following
2-39 requirements:
2-40 (i) in the case of an insurance exchange
2-41 that maintains funds in an amount of at least $15 million for the
2-42 protection of all exchange policyholders, the syndicate must
2-43 maintain under terms acceptable to the commissioner minimum capital
2-44 and surplus, or its equivalent under the laws of its domiciliary
2-45 jurisdiction, of at least $5 million; or
2-46 (ii) in the case of an insurance exchange
2-47 that does not maintain funds in an amount of at least $15 million
2-48 for the protection of all exchange policyholders, the syndicate
2-49 must maintain under terms acceptable to the commissioner minimum
2-50 capital and surplus, or its equivalent under the laws of its
2-51 domiciliary jurisdiction, of at least the greater of:
2-52 (a) the minimum capital and surplus
2-53 of its domiciliary jurisdiction; or
2-54 (b) $15 million.
2-55 SECTION 4. This Act takes effect September 1, 1995, and
2-56 applies only to the placement of coverage with an eligible surplus
2-57 lines insurer on or after September 1, 1995. Placement of coverage
2-58 with an eligible surplus lines insurer before September 1, 1995, is
2-59 governed by the law as it existed immediately before the effective
2-60 date of this Act, and that law is continued in effect for that
2-61 purpose.
2-62 SECTION 5. The importance of this legislation and the
2-63 crowded condition of the calendars in both houses create an
2-64 emergency and an imperative public necessity that the
2-65 constitutional rule requiring bills to be read on three several
2-66 days in each house be suspended, and this rule is hereby suspended.
2-67 * * * * *