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A BILL TO BE ENTITLED
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AN ACT
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relating to surplus lines insurance. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subsection (c), Section 981.001, Insurance Code, |
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is amended to read as follows: |
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(c) To regulate and tax surplus lines insurance placed in |
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accordance with this chapter within the meaning and intent of 15 |
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U.S.C. Section 1011 and 15 U.S.C. Chapter 108, this chapter |
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provides an orderly method for each person whose home state is this |
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state for a particular transaction [the residents of this state] to |
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effect insurance with eligible surplus lines insurers through |
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qualified, licensed, and supervised surplus lines agents in this |
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state, if coverage is not available from authorized and regulated |
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insurers engaged in business in this state, under reasonable and |
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practical safeguards. |
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SECTION 2. Section 981.002, Insurance Code, is amended to |
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read as follows: |
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Sec. 981.002. DEFINITIONS. In this chapter: |
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(1) "Affiliate" means, with respect to determining the |
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home state of an insured, and solely for the purpose of determining |
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whether an entity is another entity's affiliate, a person or entity |
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that controls, is controlled by, or is under common control with the |
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insured. |
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(2) "Affiliated group" means a group of entities whose |
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members are all affiliated. |
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(3) "Control" means, with respect to determining the |
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home state of an insured, and solely for the purpose of determining |
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whether an entity is another entity's affiliate: |
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(A) to directly or indirectly, acting through one |
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or more persons, own, control, or hold the power to vote at least 25 |
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percent of any class of voting security of the other entity; or |
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(B) to control in any manner the election of the |
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majority of directors or trustees of the other entity. |
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(4) "Eligible surplus lines insurer" means an insurer |
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that is not an authorized insurer, but that is eligible under |
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Subchapter B, in which surplus lines insurance is placed or may be |
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placed under this chapter. |
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(5) "Home state" means, with respect to an insured: |
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(A) the state in which the insured maintains the |
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insured's principal residence, if the insured is an individual; |
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(B) the state in which the insured maintains the |
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insured's principal place of business, if the insured is not an |
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individual; |
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(C) if 100 percent of the insured risk is located |
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outside of the state in which the insured maintains the insured's |
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principal residence or principal place of business, as applicable, |
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the state to which the greatest percentage of the insured's taxable |
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premium for the insurance contract that covers the risk is |
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allocated; or |
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(D) for an affiliated group, the home state of |
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the member, as determined under Paragraphs (A)-(C), that has the |
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largest percentage of premium attributed to it under the insurance |
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contract. |
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(6) [(1-a)] "Managing underwriter" means a surplus |
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lines agent or agency that exercises, pursuant to a written |
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agreement with an eligible surplus lines insurer, underwriting |
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authority for the eligible surplus lines insurer and that derives |
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the agent or agency's business from a surplus lines agent. |
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(7) [(2)] "Stamping office" means the Surplus Lines |
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Stamping Office of Texas. |
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(8) [(3)] "Surplus lines agent" means an agent |
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licensed under Subchapter E to procure an insurance contract from a |
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surplus lines insurer. |
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(9) [(4)] "Surplus lines insurance" means insurance |
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coverage[:
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[(A)
for a subject that is resident, located, or
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to be performed in this state; and
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[(B)] that may be placed, in accordance with this |
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chapter, with an eligible surplus lines insurer or the insurer's |
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managing underwriter. |
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SECTION 3. Section 981.003, Insurance Code, is amended to |
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read as follows: |
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Sec. 981.003. APPLICABILITY OF CHAPTER. This chapter |
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applies to surplus lines insurance if the home state of the insured |
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is this state[:
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[(1)
of a subject that is resident, located, or to be
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performed in this state; and
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[(2) that is obtained, continued, or renewed through:
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[(A)
negotiations or an application wholly or
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partly occurring or made within or from within this state; or
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[(B)
premiums wholly or partly remitted directly
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or indirectly from within this state]. |
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SECTION 4. Subchapter A, Chapter 981, Insurance Code, is |
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amended by adding Sections 981.0031 and 981.0032 to read as |
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follows: |
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Sec. 981.0031. EXEMPT COMMERCIAL PURCHASER DEFINED. |
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(a) For purposes of this chapter, "exempt commercial purchaser" |
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means a person who purchases commercial insurance and, at the time |
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of placement: |
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(1) employs or retains a qualified risk manager to |
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negotiate insurance coverage; |
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(2) has paid aggregate nationwide commercial property |
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and casualty insurance premiums of more than $100,000 in the |
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immediately preceding 12 months; and |
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(3) meets at least one of the following criteria: |
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(A) has a net worth of more than $20 million; |
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(B) generates annual revenue of more than $50 |
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million; |
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(C) employs more than 500 full-time or full-time |
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equivalent employees per individual insured, or is a member of an |
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affiliated group that employs more than 1,000 employees in |
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aggregate; |
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(D) is a nonprofit organization or public entity |
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generating annual budgeted expenditures of at least $30 million; or |
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(E) is a municipality with a population of more |
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than 50,000. |
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(b) Effective on January 1, 2015, and on every fifth January |
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1 thereafter, the commissioner shall by order adjust the amounts |
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provided by Subsections (a)(3)(A), (B), and (D) to reflect the |
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percentage change in the Consumer Price Index for All Urban |
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Consumers published by the Bureau of Labor Statistics of the United |
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States Department of Labor for the five-year period immediately |
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preceding January 1 of the year of the adjustment. |
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Sec. 981.0032. QUALIFIED RISK MANAGER DEFINED. For |
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purposes of this chapter, "qualified risk manager" means, with |
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respect to a policyholder of commercial insurance, a person who: |
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(1) is an employee of, or third-party consultant |
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retained by, a commercial policyholder; |
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(2) provides skilled services in loss prevention, loss |
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reduction, or risk and insurance coverage analysis and the purchase |
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of insurance; and |
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(3) satisfies the requirements of one of the following |
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paragraphs: |
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(A) has: |
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(i) a bachelor's or higher degree from an |
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accredited college or university in risk management, business |
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administration, finance, economics, or another field determined by |
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a state insurance commissioner or other state regulatory official |
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or entity to demonstrate competence in risk management; and |
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(ii) either: |
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(a) at least three years of experience |
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in risk financing, claims administration, loss prevention, risk and |
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insurance analysis, or purchasing of commercial lines of insurance; |
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or |
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(b) a designation, certification, or |
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license: |
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(1) as a chartered property |
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casualty underwriter (CPCU), issued by the American Institute for |
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CPCU/Insurance Institute of America; |
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(2) as an associate in risk |
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management (ARM) issued by the American Institute for |
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CPCU/Insurance Institute of America; |
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(3) as a Certified Risk Manager |
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(CRM) issued by the National Alliance for Insurance Education and |
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Research; |
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(4) as a RIMS Fellow (RF) issued |
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by the Global Risk Management Institute; or |
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(5) that is determined by a state |
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insurance commissioner or other state insurance regulatory |
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official or entity to demonstrate minimum competence in risk |
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management; |
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(B) has at least seven years of experience in |
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risk financing, claims administration, loss prevention, risk and |
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insurance coverage analysis, or purchasing of commercial lines of |
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insurance and one of the designations, certifications, or licenses |
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described by Paragraph (A)(ii)(b); |
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(C) has at least 10 years of experience in risk |
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financing, claims administration, loss prevention, risk and |
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insurance coverage analysis, or purchasing commercial lines of |
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insurance; or |
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(D) has a graduate degree from an accredited |
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college or university in risk management, business administration, |
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finance, economics, or another field determined by a state |
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insurance commissioner or other state regulatory official or entity |
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to demonstrate competence in risk management. |
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SECTION 5. Section 981.004, Insurance Code, is amended by |
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adding Subsection (c) to read as follows: |
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(c) Subsection (a)(1) does not apply to insurance procured |
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for an exempt commercial purchaser if: |
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(1) the agent procuring or placing the insurance |
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discloses to the exempt commercial purchaser that: |
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(A) comparable insurance may be available from |
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the admitted market that is subject to more regulatory oversight |
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than the surplus lines market; and |
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(B) a policy purchased in the admitted market may |
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provide greater protection than the surplus lines insurance policy; |
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and |
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(2) after receiving the notice described by |
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Subdivision (1), the exempt commercial purchaser requests in |
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writing that the agent procure the insurance from or place the |
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insurance with an eligible surplus lines insurer. |
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SECTION 6. Subsection (b), Section 981.057, Insurance Code, |
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is amended to read as follows: |
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(b) Subsection (a) does not apply to alien surplus lines |
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insurers listed on the Quarterly Listing of Alien Insurers |
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maintained by the International Insurers Department, National |
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Association of Insurance Commissioners. [If an eligible surplus
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lines insurer is an insurance exchange created by the laws of
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another state:
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[(1)
the syndicates of the exchange must maintain
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under terms acceptable to the commissioner capital and surplus, or
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the equivalent under the laws of the exchange's domiciliary
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jurisdiction, in an amount of at least $75 million in the aggregate;
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[(2)
the exchange must maintain under terms acceptable
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to the commissioner at least 50 percent of the policyholder surplus
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of each individual syndicate in a custodial account accessible to
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the exchange or the exchange's domiciliary commissioner in the
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event of insolvency or impairment of the individual syndicate; and
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[(3)
an individual syndicate, to be eligible to accept
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surplus lines insurance placements from this state as an exchange
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member, must maintain under terms acceptable to the commissioner
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capital and surplus, or the equivalent under the laws of the
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exchange's domiciliary jurisdiction, in the amount of at least:
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[(A)
$5 million, if the syndicate is a member of
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an insurance exchange that maintains at least $15 million for the
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protection of all exchange policyholders; or
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[(B) the greater of:
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[(i)
the minimum capital and surplus of the
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exchange's domiciliary jurisdiction; or
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[(ii) $15 million.] |
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SECTION 7. Section 981.058, Insurance Code, is amended to |
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read as follows: |
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Sec. 981.058. ALIEN INSURERS[: TRUST FUND REQUIREMENT]. |
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An [In addition to meeting the minimum capital and surplus
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requirements prescribed by Section 981.057, an] alien surplus lines |
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insurer must be listed on the Quarterly Listing of Alien Insurers |
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maintained by the International Insurers Department, National |
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Association of Insurance Commissioners [provide evidence that:
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[(1)
the insurer maintains in the United States an
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irrevocable trust fund in a Federal Reserve System member bank in an
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amount of at least $5.4 million for the protection of all its
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policyholders in the United States; and
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[(2) the trust fund consists of:
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[(A) cash;
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[(B) securities;
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[(C) letters of credit; or
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[(D)
investments of substantially the same
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character and quality as those that are eligible investments for
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the capital and statutory reserves of an insurer authorized to
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write similar kinds and classes of insurance in this state]. |
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SECTION 8. Subchapter B, Chapter 981, Insurance Code, is |
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amended by adding Section 981.066 to read as follows: |
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Sec. 981.066. UNIFORM STANDARDS. To issue surplus lines |
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insurance in this state, an insurer must comply with all applicable |
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nationwide uniform standards adopted by this state in accordance |
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with 15 U.S.C. Section 8204. |
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SECTION 9. Subsection (a), Section 981.215, Insurance Code, |
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is amended to read as follows: |
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(a) A surplus lines agent shall maintain a complete record |
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of each surplus lines contract obtained by the agent, including any |
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of the following, if applicable: |
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(1) a copy of the daily report; |
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(2) the amount of the insurance and risks insured |
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against; |
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(3) a brief general description of the property |
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insured and the location of that property; |
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(4) the gross premium charged; |
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(5) the return premium paid; |
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(6) the rate of premium charged on the different items |
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of property; |
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(7) the contract terms, including the effective date; |
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(8) the insured's name and post office address; |
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(9) the insurer's name and home office address; |
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(10) the amount collected from the insured; [and] |
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(11) evidence establishing that the insured qualified |
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as an exempt commercial purchaser and that the surplus lines agent |
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complied with the requirements of Section 981.004(c) if a diligent |
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effort to obtain insurance in the admitted market was not made |
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pursuant to Section 981.004(a)(1); and |
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(12) any other information required by the department. |
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SECTION 10. The following sections of the Insurance Code |
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are repealed: |
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(1) Section 981.052; |
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(2) Section 981.053; |
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(3) Section 981.055; |
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(4) Section 981.056; |
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(5) Section 981.059; |
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(6) Section 981.060; |
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(7) Section 981.061; and |
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(8) Section 981.062. |
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SECTION 11. (a) Notwithstanding Section 981.058, |
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Insurance Code, as amended by this Act, an alien surplus lines |
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insurer that was an eligible surplus lines insurer under Section |
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981.058, Insurance Code, as it existed immediately before the |
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effective date of this Act, continues to be an eligible surplus |
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lines insurer. |
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(b) An alien insurer described by Subsection (a) of this |
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section must comply with the trust fund requirements of Section |
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981.058, Insurance Code, as that section existed immediately before |
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the effective date of this Act, in addition to the minimum capital |
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and surplus requirements prescribed by Section 981.057, Insurance |
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Code. |
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SECTION 12. This Act takes effect immediately if it |
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receives a vote of two-thirds of all the members elected to each |
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house, as provided by Section 39, Article III, Texas Constitution. |
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If this Act does not receive the vote necessary for immediate |
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effect, this Act takes effect September 1, 2013. |
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