|
|
|
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. Section 981.001(c), 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 the residents of this state and |
|
nonresidents whose home state is this state for a particular |
|
transaction 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 resides or maintains the |
|
insured's 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) "Nonadmitted insurer" means an insurer not |
|
licensed to engage in the business of insurance in this state. The |
|
term does not include a risk retention group as that term is defined |
|
by Section 2(a)(4), Liability Risk Retention Act of 1986 (15 U.S.C. |
|
Section 3901(a)(4)). |
|
(8) [(2)] "Stamping office" means the Surplus Lines |
|
Stamping Office of Texas. |
|
(9) [(3)] "Surplus lines agent" means an agent |
|
licensed under Subchapter E to procure an insurance contract from a |
|
surplus lines insurer. |
|
(10) [(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) Beginning January 1, 2017, the commission may by order |
|
not more than once every five years 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 adjustment. |
|
Sec. 981.0032. QUALIFIED RISK MANAGER DEFINED. (a) 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 this section. |
|
(b) A qualified risk manager must have: |
|
(1) 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 to |
|
demonstrate competence in risk management and: |
|
(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: |
|
(i) as a Chartered Property and Casualty |
|
Underwriter (CPCU), issued by the American Institute for |
|
CPCU/Insurance Institute of America; |
|
(ii) as an Associate in Risk Management |
|
(ARM) issued by the American Institute for CPCU/Insurance Institute |
|
of America; |
|
(iii) as a Certified Risk Manager (CRM) |
|
issued by the National Alliance for Insurance Education and |
|
Research; |
|
(iv) as a RIMS Fellow (RF) issued by the |
|
Global Risk Management Institute; or |
|
(v) that is determined by the commissioner |
|
or the state insurance regulatory official or agency of another |
|
state to demonstrate minimum competence in risk management; |
|
(2) 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 described by Subdivision |
|
(1)(B); |
|
(3) 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 |
|
(4) a graduate degree from an accredited college or |
|
university in risk management, business administration, finance, |
|
economics, or another field determined by the commissioner or the |
|
state insurance regulatory official or agency of another state 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 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 nonadmitted 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 a nonadmitted insurer. |
|
SECTION 6. Subchapter A, Chapter 981, Insurance Code, is |
|
amended by adding Sections 981.010 and 981.011 to read as follows: |
|
Sec. 981.010. FAILURE TO PAY PENALTY. A person engages in |
|
the unauthorized business of insurance if the person issues a |
|
policy of surplus lines insurance and, at the time the policy is |
|
issued, the person or the person's surplus lines agent has failed to |
|
pay a statutory penalty imposed for a violation of this code on the |
|
person or the person's surplus lines agent. |
|
Sec. 981.011. FAILURE TO PAY PREMIUM TAX. A person engages |
|
in the unauthorized business of insurance if the person issues a |
|
policy of surplus lines insurance and, at the time the policy is |
|
issued, the person has not paid premium tax the person is obligated |
|
to pay. |
|
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. Sections 981.059(b) and (c), Insurance Code, are |
|
amended to read as follows: |
|
(b) Instead of the minimum capital and surplus requirements |
|
prescribed by Section 981.057, an insurer group may maintain an |
|
irrevocable [a] trust fund in a Federal Reserve System member bank |
|
in an amount of at least $50 million as security to the full amount |
|
of the trust fund for all policyholders and creditors in the United |
|
States of each group member. |
|
(c) The [Except as provided by this section, the] trust fund |
|
must consist of: |
|
(1) cash; |
|
(2) securities; |
|
(3) letters of credit; or |
|
(4) 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 [comply with the terms
|
|
specified by Section 981.058 for the trust fund required by that
|
|
section]. |
|
SECTION 9. 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 |
|
uniform standards adopted under an agreement between this state and |
|
another state. |
|
SECTION 10. Section 981.105, Insurance Code, is amended by |
|
adding Subsections (j) and (k) to read as follows: |
|
(j) If a diligent effort to obtain insurance for an exempt |
|
commercial purchaser in the admitted market was not made, a surplus |
|
lines agent shall file with the stamping office, together with the |
|
information filed under Subsection (a), in a form prescribed by the |
|
commissioner by rule: |
|
(1) proof that the surplus lines agent procuring or |
|
placing the surplus lines insurance has complied with Section |
|
981.004(c)(1); |
|
(2) a copy of the exempt commercial purchaser's |
|
written request, submitted in accordance with Section |
|
981.004(c)(2); |
|
(3) a written disclosure of the identity of the |
|
insured's qualified risk manager; and |
|
(4) an attestation by the insured that: |
|
(A) the insured has paid aggregate nationwide |
|
commercial property and casualty insurance premiums of at least |
|
$100,000 in the immediately preceding 12 months; and |
|
(B) the purchaser is an exempt commercial |
|
purchaser as defined by Section 981.0031, and that includes a |
|
description of the criteria specified by Section 981.0031(a)(3) |
|
under which the purchaser qualifies as an exempt commercial |
|
purchaser. |
|
(k) The commissioner by rule shall establish procedures and |
|
promulgate a form to be used to meet the requirements of Subsection |
|
(j). The rules must include provisions that address record |
|
retention, electronic filing, and audit requirements. |
|
SECTION 11. 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 981.060; |
|
(6) Section 981.061; and |
|
(7) Section 981.062. |
|
SECTION 12. (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 until |
|
January 1, 2015. |
|
(b) An alien insurer described by Subsection (a) of this |
|
section may apply for an extension of eligibility. The |
|
commissioner may extend eligibility under this section until |
|
January 1, 2017, if the commissioner determines that the insurer is |
|
making a good faith effort to be listed on the Quarterly Listing of |
|
Alien Insurers maintained by the International Insurers |
|
Department, National Association of Insurance Commissioners, as |
|
required by Section 981.058, Insurance Code, as amended by this |
|
Act, and that the interests of the insurer's policyholders are |
|
otherwise adequately protected. |
|
SECTION 13. 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. |