Bill Text: TX SB951 | 2013-2014 | 83rd Legislature | Enrolled


Bill Title: Relating to surplus lines insurance.

Spectrum: Bipartisan Bill

Status: (Passed) 2013-06-14 - Effective immediately [SB951 Detail]

Download: Texas-2013-SB951-Enrolled.html
 
 
  S.B. No. 951
 
 
 
 
AN ACT
  relating to surplus lines insurance.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subsection (c), Section 981.001, 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 each person whose home state is this
  state for a particular transaction [the residents of this state] 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 maintains the insured's
  principal residence or 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) [(2)]  "Stamping office" means the Surplus Lines
  Stamping Office of Texas.
               (8) [(3)]  "Surplus lines agent" means an agent
  licensed under Subchapter E to procure an insurance contract from a
  surplus lines insurer.
               (9) [(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)  Effective on January 1, 2015, and on every fifth January
  1 thereafter, the commissioner shall by order 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 the adjustment.
         Sec. 981.0032.  QUALIFIED RISK MANAGER DEFINED. 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 one of the following
  paragraphs:
                     (A)  has:
                           (i)  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
  or entity to demonstrate competence in risk management; and
                           (ii)  either:
                                 (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, certification, or
  license:
                                       (1)  as a chartered property
  casualty underwriter (CPCU), issued by the American Institute for
  CPCU/Insurance Institute of America;
                                       (2)  as an associate in risk
  management (ARM) issued by the American Institute for
  CPCU/Insurance Institute of America;
                                       (3)  as a Certified Risk Manager
  (CRM) issued by the National Alliance for Insurance Education and
  Research;
                                       (4)  as a RIMS Fellow (RF) issued
  by the Global Risk Management Institute; or
                                       (5)  that is determined by a state
  insurance commissioner or other state insurance regulatory
  official or entity to demonstrate minimum competence in risk
  management;
                     (B)  has 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, certifications, or licenses
  described by Paragraph (A)(ii)(b);
                     (C)  has 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
                     (D)  has a graduate 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 or entity
  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 procured
  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 surplus lines 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 an eligible surplus lines insurer.
         SECTION 6.  Subsection (b), Section 981.057, Insurance Code,
  is amended to read as follows:
         (b)  Subsection (a) does not apply to alien surplus lines
  insurers listed on the Quarterly Listing of Alien Insurers
  maintained by the International Insurers Department, National
  Association of Insurance Commissioners.  [If an eligible surplus
  lines insurer is an insurance exchange created by the laws of
  another state:
               [(1)     the syndicates of the exchange must maintain
  under terms acceptable to the commissioner capital and surplus, or
  the equivalent under the laws of the exchange's domiciliary
  jurisdiction, in an amount of at least $75 million in the aggregate;
               [(2)     the exchange must maintain under terms acceptable
  to the commissioner at least 50 percent of the policyholder surplus
  of each individual syndicate in a custodial account accessible to
  the exchange or the exchange's domiciliary commissioner in the
  event of insolvency or impairment of the individual syndicate; and
               [(3)     an individual syndicate, to be eligible to accept
  surplus lines insurance placements from this state as an exchange
  member, must maintain under terms acceptable to the commissioner
  capital and surplus, or the equivalent under the laws of the
  exchange's domiciliary jurisdiction, in the amount of at least:
                     [(A)     $5 million, if the syndicate is a member of
  an insurance exchange that maintains at least $15 million for the
  protection of all exchange policyholders; or
                     [(B)  the greater of:
                           [(i)     the minimum capital and surplus of the
  exchange's domiciliary jurisdiction; or
                           [(ii)  $15 million.]
         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.  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
  nationwide uniform standards adopted by this state in accordance
  with 15 U.S.C. Section 8204.
         SECTION 9.  Subsection (a), Section 981.215, Insurance Code,
  is amended to read as follows:
         (a)  A surplus lines agent shall maintain a complete record
  of each surplus lines contract obtained by the agent, including any
  of the following, if applicable:
               (1)  a copy of the daily report;
               (2)  the amount of the insurance and risks insured
  against;
               (3)  a brief general description of the property
  insured and the location of that property;
               (4)  the gross premium charged;
               (5)  the return premium paid;
               (6)  the rate of premium charged on the different items
  of property;
               (7)  the contract terms, including the effective date;
               (8)  the insured's name and post office address;
               (9)  the insurer's name and home office address;
               (10)  the amount collected from the insured; [and]
               (11)  evidence establishing that the insured qualified
  as an exempt commercial purchaser and that the surplus lines agent
  complied with the requirements of Section 981.004(c) if a diligent
  effort to obtain insurance in the admitted market was not made
  pursuant to Section 981.004(a)(1); and
               (12)  any other information required by the department.
         SECTION 10.  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 981.059;
               (6)  Section 981.060;
               (7)  Section 981.061; and
               (8)  Section 981.062.
         SECTION 11.  (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.
         (b)  An alien insurer described by Subsection (a) of this
  section must comply with the trust fund requirements of Section
  981.058, Insurance Code, as that section existed immediately before
  the effective date of this Act, in addition to the minimum capital
  and surplus requirements prescribed by Section 981.057, Insurance
  Code.
         SECTION 12.  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.
 
 
 
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
         I hereby certify that S.B. No. 951 passed the Senate on
  April 11, 2013, by the following vote:  Yeas 31, Nays 0.
 
 
  ______________________________
  Secretary of the Senate    
 
         I hereby certify that S.B. No. 951 passed the House on
  May 17, 2013, by the following vote:  Yeas 134, Nays 0, two
  present not voting.
 
 
  ______________________________
  Chief Clerk of the House   
 
 
 
  Approved:
 
  ______________________________ 
              Date
 
 
  ______________________________ 
            Governor
feedback