By: Eltife S.B. No. 2136

A BILL TO BE ENTITLED

AN ACT

relating to provision of surplus lines insurance.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 981.004, Insurance Code, is amended by amending Subsection (a) and adding Subsections (c), (d), (e), (f), (g), and (h) to read as follows:

(a) An eligible surplus lines insurer may provide surplus lines insurance only if:

(1) the full amount of required insurance cannot be obtained, after a diligent effort, from an insurer authorized to write and actually writing that kind and class of insurance in this state;

(2) the insurance is placed through a surplus lines agent in accordance with this chapter; and

(3) the insurer meets the eligibility requirements of Subchapter B as of the inception date and annual anniversary date of each insurance contract, cover note, or other confirmation of insurance.

(c) The commissioner may by order declare eligible for placement with a surplus lines insurer and exempt from the requirements of Subsections (a)(1) and (b) any kind of commercial insurance coverage or any commercial insurance risk for which the commissioner finds, after a public hearing, that there is an inadequate market among authorized insurers. In making a finding under this subsection, the commissioner has the discretion to determine what constitutes a "kind of commercial insurance coverage," a "commercial insurance risk," or an "inadequate market among authorized insurers" for the purposes of this subsection.

(d) The commissioner or the commissioner's designee shall maintain an export list showing the coverages and risks that are subject to a declaration under Subsection (c). The commissioner's determination under Subsection (c) that there is an inadequate market for a kind of commercial insurance coverage or a commercial insurance risk and the placement of the kind of commercial insurance coverage or commercial insurance risk on the export list continues in effect until the commissioner by order, after a public hearing, removes the kind of commercial insurance coverage or the commercial insurance risk from the list.

(e) A public hearing on the issuance of an order under this section shall be held only at the commissioner's discretion. Any interested party may petition the commissioner to consider the exercise of the commissioner's discretion to hold a hearing under this section. Reasonable notice of a hearing under this section shall be provided to all interested parties by publication in the Texas Register at least 30 days before the hearing. The notice must include the kind of commercial insurance coverage or the commercial insurance risk to be considered by the commissioner for inclusion on or removal from the export list. No kind of commercial insurance coverage or commercial insurance risk may be considered by the commissioner that is not specified in the published hearing notice. The notice may include a deadline by which interested parties are required to submit any written comments before the hearing. If the commissioner declines to hold a hearing in response to a petition under this subsection, the commissioner shall publish notice in the Texas Register of the commissioner's declination to hold the hearing not later than the 45th day after the date the commissioner receives the petition.

(f) As an alternative to a public hearing regarding the removal of a kind of commercial insurance coverage or a commercial insurance risk from the export list, the commissioner may, at the commissioner's discretion, issue an order removing the kind of coverage or the risk from the export list without a hearing. If the commissioner issues an order under this subsection, the order may not take effect before the 90th day after the date the order is issued.

(g) The commissioner or the commissioner's designee shall notify all interested parties of any removal of a line of insurance from the list by publication in the Texas Register not later than the 30th day after the date of the entry of the order.

(h) The export list:

(1) is not designed to generate competition between the surplus lines market and the admitted market;

(2) may only consist of commercial lines of insurance;

(3) is not intended to enable circumvention of state law, including the requirement that insurance procured through a surplus lines insurer may only be placed through a surplus lines agent; and

(4) is intended to express the commissioner's acknowledgment that the lines of insurance included on the export list may not be readily available in the admitted market.

SECTION 2. Subsection (b), Section 981.101, Insurance Code, is amended to read as follows:

(b) A surplus lines document must state, in 11-point type, the following: This insurance contract is with an insurer not licensed to transact insurance in this state and is issued and delivered as surplus line coverage under the Texas insurance statutes. The Texas Department of Insurance does not review or approve policy forms or rates used by the insurer providing this coverage, nor does it audit the finances or review the solvency of the surplus lines insurer providing this coverage, and the insurer is not a member of the property and casualty insurance guaranty association created under Chapter 462, Insurance Code. Chapter 225, Insurance Code, requires payment of a __________ (insert appropriate tax rate) percent tax on gross premium.

SECTION 3. The change in law made by this Act applies only to surplus lines insurance coverage delivered, issued for delivery, or renewed on or after January 1, 2010. Surplus lines insurance coverage delivered, issued for delivery, or renewed before January 1, 2010, is governed by the law in effect immediately before the effective date of this Act, and that law is continued in effect for that purpose.

SECTION 4. This Act takes effect September 1, 2009.