Briefing Documents Surplus Lines Committee PCI Chicago, IL Headquarters/Teleconference November 14, 2013
Agenda Surplus Lines Committee November 14, 2013 10:00 AM CDT – 4:00 PM CDT/ 11:00 AM EDT – 5:00 PM EDT PCI Headquarters, Chicago, IL – 12th Floor, Boardroom Conference Room Teleconference: Dial-In 866.601.3136; Conference ID 5497708130 I.
Call to Order
II.
Antitrust Discussion Guidelines
III.
Approval of Minutes - September 19, 2013 Conference Call
IV.
Surplus Lines Market – 2013 A.M. Best Segment Review a. 2014 Market Outlook
V.
New York Excess Line Market Report
VI.
Federal Legislative & Regulatory Update
VII.
NAIC Surplus Lines Task Force Update
VIII.
NIMA Update
IX.
NRRA State Implementation - Legislation
X.
NRRA State Implementation - Regulation
XI.
Industry Panel Discussion a. b. c. d.
Construction Defect; Definition of Occurrence Duty of the Surplus Lines Broker; Agent E&O Exposure NRRA Insurer Impact; State Insurer Requirements NAIC IID Financial Review of Alien Insurers
XII.
State Insurer Eligibility & Reporting Requirements
XIII.
Legislative State Issues
XIV.
Regulatory State Issues
XV.
Legal/Litigation Report
XVI.
Recognition & Open Discussion
XVII.
Adjournment
Timed Agenda TIME (Central Time)
MIN
10:00 – 10:05
5
I.
Call to Order
10:05 – 10:10
5
II.
Antitrust Discussion Guidelines
10:10 – 10:15
5
III.
Approval of Minutes
10:15 – 10:35
20
IV.
Surplus Lines Segment Review
10:35 – 11:50
15
V.
New York Excess Line Market Report
11:50 – 12:10
20
VI.
Federal Legislative & Regulatory Update
12:10 – 12:20
10
VII. NAIC Surplus Lines Task Force Update
12:20 – 12:30
10
VIII. NIMA Update
12:30 – 1:05
35
LUNCH
1:05 – 1:25
20
IX.
NRRA State Implementation – Legislation
1:25 – 1:45
20
X.
NRRA State Implementation – Regulation
1:45 – 2:45
60
XI.
Industry Panel Discussion
2:45 – 3:15
30
XII. State Insurer Eligibility & Reporting Requirements
3:15 – 3:25
10
XIII. Legislative State Issues
3:25 – 3:35
10
XIV. Regulatory State Issues
3:35 – 3:45
10
XV. Legal/Litigation Report
3:45 – 4:00
15
XVI. Recognition & Open Discussion
4:00
Agenda
AGENDA ITEM
XVII. Adjournment
2
Agenda Item Call to Order Agenda Item I.
Action required: The Chair will welcome members to the meeting and PCI staff will conduct the roll call.
Background information: None.
Supporting documents: A. Registered Attendee List
Committee Meeting Attendees Meeting/Committee Name:
Annual Meeting/Surplus Lines Committee
Meeting Date(s):
Thursday, November 14, 2013
Name (Please Print)
Company
In person/call
Rick Pitts
AAMGA
In‐Person
Robert Noack
Ally Insurance
By Phone
Kurt Kiessling
American Modern Insurance
By Phone
Gail Kimpfler
Argo Group/Colony
By Phone
Kelly Smith
Argo Group
In‐Person
Christopher Greene
Canal Group
By Phone
Ernie Taylor ‐ CHAIR
Century Surety Company
In‐Person
Cincinnati Insurance
By Phone
Maria Abate
Colodny, Fass, Talenfeld, Karlinsky, Abate & Webb
In‐Person
Rochelle Kaplan
Conifer Insurance Company
By Phone
Michael Byrne
Drinker Biddle & Reath LLP
In‐Person
Dan Maher
Excess Line Association of New York
In‐Person
Wendy Drum
First Mercury Financial
In‐Person
Patricia Villegas
General Star Management
By Phone
Linda Hohn
Global Indemnity
In‐Person
GuideOne Insurance
In‐Person
Name (Please Print)
Company
In person/call
Jocelyn Ray
HCC Insurance Holdings
By Phone
Michael Baker
Hiscox USA
In‐Person
Lynn Crisci
Housing Authority Insurance
In‐Person
Joan Liska
IFG Companies
By Phone
Lauren O’Day
Ironshore
By Phone
James River Insurance
In‐Person
Laurie Ford
Markel Corporation Group
By Phone
Roger Smith
Consultant
In‐Person
Steve Daugherty
Mid‐Continent Group
In‐Person
Brady Kelley
NAPSLO
In‐Person
Keri Kish
NAPSLO
In‐Person
National Indemnity Group
By Phone
John Dickson
QBE North America
In‐Person
Michael Frederick
RLI Insurance
In‐Person
Jared Eber
Selective Insurance Company of America In‐Person
Fernando Gonzalez
Sompo Japan Insurance
In‐Person
Torus Specialty
By Phone
Edie Gardner
U.S. Specialty Insurance
In‐Person
Thomas Mulligan
Western World Ins Group
By Phone
David Kodama
PCI
In‐Person
Colleen Shiel
PCI
In‐Person
Robert Woody
PCI
In‐Person
Agenda Item Antitrust Discussion Guidelines Agenda Item II.
Action required: PCI Antitrust Counsel will present the attached PCI Antitrust Discussion Guidelines.
Background information: None.
Supporting documents: A. PCI Antitrust Discussion Guidelines
ANTITRUST COMPLIANCE GUIDELINES for MEETINGS As a trade association, PCI serves an important role to promote and protect the viability of a competitive private insurance market for the benefit of consumers and insurers. PCI members are first and foremost competitors in the marketplace and association meetings shall not be used as a forum to obtain unlawful individual company advantages or to achieve anti-competitive objectives for the industry. PCI may be held responsible for unlawful conduct by its members, agents and staff. Accordingly, PCI encourages members, agents and staff to avoid any conduct that might create any question of a violation of the antitrust laws. Generally, the federal antitrust laws prevent unreasonable restraints of trade, such as conspiracies and agreements between competitors to engage in price-fixing, bid-rigging and customer or market allocation, and group boycotts or concerted refusals to deal with competitors, suppliers or customers. In particular, the discussion of competitively- sensitive information at PCI meetings, such as comments about current or future rates, “fair” profit levels, or whether to write certain lines of business, may be improperly interpreted as evidence of an unlawful objective, even if the intent of the parties is entirely legitimate. Further, PCI and its members should avoid any conduct that arguably could be construed as a group boycott, including discussions regarding particular vendors, or a particular company’s intended response to a governmental or regulatory agency. Accordingly, meeting participants should take care to avoid inadvertent discussion and recording in meeting notes, e-mails and related correspondence of competitively-sensitive topics and potentially ambiguous statements. PCI serves the legitimate goal of being a collective advocate for its members. The First Amendment constitutional right of free speech, along with the Noerr-Pennington Doctrine protection to petition the government, allows PCI members and others to discuss general economic and regulatory developments in insurance, individual and joint plans to support or oppose legislation, regulatory action or judicial proceedings through direct lobbying, campaign contributions, media campaigns, grassroots activities and litigation. Further, providing or gathering specific nonlegislative information to or from members must also adhere to compliance guidelines. The agenda and materials for this meeting have been reviewed by counsel and any discussion that departs from the formal agenda must be considered by counsel before proceeding. PCI will draft and distribute minutes or meeting notes. Antitrust compliance is everyone’s responsibility; however, PCI staff will monitor the meeting and address any questions or concerns as they arise.
January 2013
Agenda Item Approval of Minutes Agenda Item III.
Action required: Members will be asked to review the minutes from the committee’s conference call held on September 19. Following this review and any necessary amendments, a motion will be requested, along with a second, to officially adopt the meeting minutes into the record.
Background information: None.
Supporting documents: A. Minutes from the September 19, 2013, Surplus Lines Committee Conference Call
Minutes Surplus Lines Insurance Committee – Teleconference Call September 19, 2013 I.
Call to Order Committee chair, Ernie Taylor called the meeting to order at 1:00 p.m. CT on Thursday, September 19. PCI staff conducted a roll call of the attendees. (attendee list appended)
II.
Antitrust Discussion Guidelines PCI legal counsel, Colleen Shiel administered the antitrust admonition.
III.
Approval of Minutes
IV.
Members reviewed and adopted the minutes for the August 1, 2013 conference call. Committee Annual Fall Meeting – November 14, 2013 PCI staff David Kodama updated the members on the planning for the Fall meeting, including confirmed guest industry speakers.
V.
NRRA Legislative/Regulatory Update Members received a staff report on advocacy efforts to address NRRA compliance issues in New Mexico, and South Carolina. PCI is seeking conforming amendment to the New Mexico Administrative Code to delete insurer filing requirement of an annual premium report. Mr. Kodama also reported that PCI will be meeting with the SC DOI at the end of the month to address legislative changes to further conform SC statutes to the NRRA.
VI.
New York Proposed Regulation 41 Amendments Mr. Kodama highlighted key amended sections of proposed Regulation 41 drafted by the NY DFS, and reviewed additional changes sought in a filed PCI comment letter regarding Section 27.13, duty to inquire about unauthorized insurers, and Section 27.14, duty of unauthorized insurers.
VII.
California Legislation and Regulation Update
VIII.
Members were updated on recent PCI advocacy efforts on California legislation and regulation related to surplus lines. Staff reported that PCI successfully lobbied for amendments to SB 256, AB 1236, and drafted DMV regulations to ensure that insurance requirements for trampoline operators, construction contractor LLCs, and autonomous vehicle manufacturers, respectively, could be met with procurement of surplus lines insurance. New Jersey Seaside Boardwalk Fire
IX.
Mr. Kodama reported on the NJ boardwalk fires and communications with the NJ insurance commissioner regarding expectations that many affected businesses are insured by surplus lines insurers. The Commissioner has requested that all insurers assist the Department with timely reports on recovery efforts. NAIC Surplus Lines Task Force; NIMA Update
X.
Members received a recap of developments at the August 26, meeting of the NAIC Surplus Lines Task Force, including adoption of a document, Suggestions for Improving Information Access for Regulators, Brokers and Insureds, that will be distributed to all state insurance departments. Federal Update: NARAB II, FIO
XI.
PCI staff Bob Woody reported on the latest developments related to NARAB II legislation, including passage in the House, and the yet-to-be-released FIO report on how to modernize and improve the system of insurance regulation in the United States. Other Business Mr. Kodama provided a brief update on final publication of Pennsylvania Regulation #11-251: Surplus Lines Insurance; member reports of business tax notices on surplus lines business from Glen Ridge, FL; release of the annual A.M. Best Surplus Lines Market Segment report; and, climate risk disclosure insurer surveys mandated by the insurance departments of CA, CT, MN, NY, and the state of WA.
XII.
Adjournment At 1:49 p.m. CT, the meeting was adjourned.
XIII.
Meeting/Committee Name:
Teleconference Call/Surplus Lines Insurance Committee
Meeting Date(s):
September 19, 2013
Name
Company
In person/call
Stephanie Antonopoulus
AIG Private Client Group
By Phone
Robert Noack
Ally Insurance
By Phone
Kelly Smith
Argo Group
By Phone
Ernie Taylor – CHAIR
Century Surety Company
By Phone
Rochelle Kaplan
Conifer Insurance
By Phone
Linda Hohn
Global Indemnity Group
By Phone
Lauren O’Day
Ironshore
By Phone
Raissa Miller
James River Insurance
By Phone
John Svoboda
QBE North America
By Phone
Michael Frederick
RLI
By Phone
Jared Eber
Selective Insurance
By Phone
Tom Mulligan
Western World
By Phone
David Kodama
PCI
By Phone
Colleen Shiel
PCI
Robert Woody
PCI
Minutes
By Phone By Phone
2
Agenda Item Surplus Lines Segment Review Agenda Item IV.
Action required: The committee will receive a report on the state of the surplus lines market. Members will hear commentary on the general market outlook for 2014.
Background information: In September, PCI announced the release of the A.M. Best annual report, “Best’s Special Report: U.S. Surplus Lines-Segment Review.” Commissioned by the Derek Hughes/NAPSLO Educational Foundation, the review takes an objective look at the surplus lines industry. The A.M. Best report covers the competitive state of the market, financial condition, ratings and solvency trend, the regulatory and legislative landscape and developments related to distribution. For 2012, A.M. Best reported that the overall $34.8 billion surplus lines market reversed a 5-year premium decline, up 11.8% from last year, with core domestic professional surplus lines insurers reporting a 12.9% increase in direct premiums written. Surplus lines premiums accounted for 13.4% of the commercial lines market in the U.S., a slight decline from 14.6% last year. These statistics include domestic professional surplus lines companies, Lloyd’s, regulated alien insurers, and domestic specialty writers. The report reviewed insolvency trends comparing admitted companies with surplus lines insurers on several issues, including failure frequencies (no surplus lines financial impairment since 2004), causes of insurer insolvencies, and financial strength ratings (100% of surplus lines insurers remained in the “Secure” category) . The report also includes comparisons for significant financial benchmarks for admitted and surplus lines insurers, including premium growth, combined ratios, loss ratios and return on surplus. It also provides a broad overview of the surplus lines regulatory and legislative landscape, with an update on state implementation of the federal Nonadmitted and Reinsurance Reform Act of 2010. Members can access the report by clicking here. Supporting documents: A. Surplus Lines Segment Review Exhibits
A.M. Best 2013 Special Report Recap – Surplus Lines Segment Review PCI Surplus Lines Committee Annual Meeting November 14, 2013
1 © 2012 Property Casualty Insurers Association of America
2012 Surplus Lines Premium Volume ($B) 12% Increase over 2011
2006: $38.7B DPW (5 year decline)
$40 $35 $30 $25 $20 $15
$31.7
$31.1
2010
2011
$34.8
$25.6
$10 $5
$7.5
$0 1992
2002
2012 2
Source: A.M. Best. © 2012 Property Casualty Insurers Association of America
U.S. Surplus Lines Growth as a % of Commercial Lines DWP ($B), Decrease From 2011 Commercial Lines
Surplus Lines
$34.80
$300 $31.72 $25.60
$250
(13.4%)
$31.14 (14.7%)
(13.6%)
(11.1%)
$200 $150
$7.55 (5.7%)
$100 $50
$261.10
$230.10
$233.70
$212.50
2002
2010
2011
$132.60
$0 1992
2012 3
Source: A.M. Best. © 2012 Property Casualty Insurers Association of America
U.S. Surplus Lines –Domestic Professional Surplus Lines Carriers* Regain Market Share
80% 78% 76% 74% 72% 70% 68% 66% 64% 62% 60%
2003: 78.2% (7 year decline)
76.0% 74.1%
72.5%
71.6%
73.2%
69.3% 69.0%
'06
'07
'08
'09
'10
'11
'12 4
Source: A.M. Best; *DPSL – US-domiciled insurers that primarily write (>50%) surplus lines. © 2012 Property Casualty Insurers Association of America
Surplus Lines* vs. Overall P/C Industry Combined Ratio, 2012 vs. 2011
Surplus Lines 103.9 100
110.5
P/C Industry 108.2
103.1
2011
2012
4th Quarter – Hurr. Sandy
80 60 40
Superior COR 1999 - 2011
20 0
2011
2012
5
Source: A.M. Best; *DPSL – US-domiciled insurers that primarily write surplus lines. © 2012 Property Casualty Insurers Association of America
Surplus Lines* vs. Overall P/C Industry 2012 Best’s Rating Distribution (%)
Surplus Lines
All P/C Industry
*2011
*100%
100% 90% 80% 70% 60% 50% 40% *31% 25.5% 30% 20% 10% 0%
A+/A++
100.0% *91%
*9%
Secure
94.4%
10.5% A+/A++
Secure6
Source: A.M. Best; *DPSL – US-domiciled insurers that primarily write surplus lines. © 2012 Property Casualty Insurers Association of America
U.S. Surplus Lines – Share of Premium by Distributor Type Based on responses to A.M. Best distribution survey.
Program Manager
Wholesale w/o Binding Authority
Retail
Wholesale w/Binding Authority
7 © 2012 Property Casualty Insurers Association of America
A.M. Best 2013 Surplus Lines Market Review Conclusions & Expectations
According to A.M. Best, overall uptick in rates and favorable catastrophe experience, surplus lines market expected to produce UW profit in 2013 (COR < 100%) Challenges include lingering effects of Hurricane Sandy and low interest rate environment Believes successful performance of market lies in SL insurers’ freedom of rate & form, customization, innovation, & ability to adapt quickly to insureds’ needs Forecasts increasing % of all commercial business as more business shifts to SL amid improving market conditions, changing risk appetites of standard market insurers 8 © 2012 Property Casualty Insurers Association of America
A.M. Best 2013 Surplus Lines Market Review Conclusions & Expectations
A.M. Best reports, improving economic environment will expand exposure bases with firming rates will push premiums upward Believes significant market capacity, however, will prevent full hard market in near term. Expects low interest rate environment to foster improved pricing and focus on UW fundamentals (discipline). Forecasts an economic recovery to expand exposure coverage need in industries such as construction, transportation, health care.
9 © 2012 Property Casualty Insurers Association of America
A.M. Best 2013 Surplus Lines Market Review Conclusions & Expectations
A.M. Best believes that the surplus lines market leaders will be those characterized as: • Dominant in certain segments w robust market profiles; • Disciplined in pricing & underwriting; • Diverse, strong, well-established distribution platforms. A.M. Best concludes: • Improved underwriting results will require focus on judicious underwriting and prudent risk management; • Insurers must take measured, careful rate increases, balanced with need to satisfy UW requirements to stay competitive; • “This likely would lead to results for the surplus lines market that again outpace those generated by the total P/C industry.” 10 © 2012 Property Casualty Insurers Association of America
Agenda Item New York Excess Line Market Report Agenda Item V.
Action required: Members will hear a report on the state of the New York excess line market.
Background information: Dan Maher, Executive Director of the Excess Line Association of New York, will present an overview of the state of the New York excess line market, observations on the effects of Hurricane Sandy, and highlights of post-NRRA and other issues impacting excess line insurers and brokers.
Supporting documents: A. The E&S Empire Express September 2013
Agenda Item Federal Legislative & Regulatory Update Agenda Item VI.
Action required: PCI staff will update members and discuss federal activity on legislation, regulation/rulemaking, and related issues that could affect surplus lines insurers.
Background information: o
Terrorism Risk Insurance Act (TRIA) o
Senate Banking Committee Hearing on TRIA - 09/25/2013
o
House Committee Hearing on TRIA – 09/19/2013
o
PCI Research Shows Broad Support For Terrorism Risk Insurance Among American Public
o o
NARAB II o
o
Surplus Lines Restrictions to Terrorism Exclusion in SFP States House Passes H.R. 1155, NARAB II – 09/10/2013
NFIP/ H.R. 4348 - Moving Ahead for Progress in the 21st Century Act o
Implementation of The 2012 Biggert-Waters Flood Insurance Act
o
FDIC Joint Notice of Proposed Rulemaking
Private flood insurance. The Agencies are proposing to add a new definition for “private flood insurance” consistent with section 100239 of the Act, which added a new section 102(b)(7) to the FDPA. Under section 102(b)(7) of the FDPA, “private flood insurance” means an insurance policy that: (i) is issued by an insurance company that is licensed, admitted or otherwise approved to engage in the business of insurance in the State or jurisdiction in which the insured building is located by the insurance regulator of the State or jurisdiction or, in the case of a policy of difference in condition, multiple peril, all risk, or other blanket coverage insuring nonresidential commercial property, is recognized, or not disapproved, as a surplus lines insurer by the insurance regulator of the State or jurisdiction;24 (ii) provides flood coverage at least as broad as the coverage provided by a standard flood insurance policy (SFIP) under the NFIP, including when considering
deductibles, exclusions, and conditions offered by the insurer; (iii) includes a requirement for the insurer to give 45 days’ written notice of cancellation or non-renewal of flood insurance coverage to the insured and the regulated lending institution; (iv) includes information about the availability of flood insurance coverage under the NFIP; (v) includes a mortgage interest clause similar to the clause contained in an SFIP; (vi) includes a provision requiring an insured to file suit not later than one year after the date of a written denial for all or part of a claim under a policy; and (vii) contains cancellation provisions that are as restrictive as the provisions contained in an SFIP. 24 The
Agencies note that with respect to alien (non-U.S.) surplus lines insurers, States may not prohibit a surplus lines broker from placing non-admitted insurance with, or procuring non-admitted insurance from, a non-U.S., non-admitted insurer that is listed on the Quarterly Listing of Alien Insurers maintained by the National Association of Insurance Commissioners’ (NAIC) International Insurer’s Department (IID List). See The Nonadmitted and Reinsurance Reform Act of (NRRA), Title V of the Dodd-Frank Act, Pub. L. 111-203 (July 21, 2011).
o
Dodd-Frank Act - Financial Services Regulatory Reform o
Federal Insurance Office (FIO) – January 21, 2012 Study TITLE V—INSURANCE - Subtitle A—Federal Insurance Office SEC. 313. FEDERAL INSURANCE OFFICE. ‘‘(o) REPORTS ON U.S. AND GLOBAL REINSURANCE MARKET.— The Director shall submit to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate— ‘‘(1) a report received not later than September 30, 2012, describing the breadth and scope of the global reinsurance market and the critical role such market plays in supporting insurance in the United States; and ‘‘(2) a report received not later than January 1, 2013, and updated not later than January 1, 2015, describing the impact of part II of the Nonadmitted and Reinsurance Reform Act of 2010 on the ability of State regulators to access reinsurance information for regulated companies in their jurisdictions. ‘‘(p) STUDY AND REPORT ON REGULATION OF INSURANCE.— ‘‘(1) IN GENERAL.—Not later than 18 months after the date of enactment of this section, the Director shall conduct a study and submit a report to Congress on how to modernize and improve the system of insurance regulation in the United States. ‘‘(2) CONSIDERATIONS — The study and report required under paragraph (1) shall be based on and guided by the following considerations: ‘‘(A) Systemic risk regulation with respect to insurance. ‘‘(B) Capital standards and the relationship between capital allocation and liabilities, including standards relating to liquidity and duration risk. ‘‘(C) Consumer protection for insurance products and practices, including gaps in State regulation. ‘‘(D) The degree of national uniformity of State insurance regulation. ‘‘(E) The regulation of insurance companies and affiliates on a consolidated basis. ‘‘(F) International coordination of insurance regulation. ‘‘(3) ADDITIONAL FACTORS — The study and report required under paragraph (1) shall also examine the following factors:
Agenda Item VI
2
‘‘(A) The costs and benefits of potential Federal regulation of insurance across various lines of insurance (except health insurance). ‘‘(B) The feasibility of regulating only certain lines of insurance at the Federal level, while leaving other lines of insurance to be regulated at the State level. ‘‘(C) The ability of any potential Federal regulation or Federal regulators to eliminate or minimize regulatory arbitrage. ‘‘(D) The impact that developments in the regulation of insurance in foreign jurisdictions might have on the potential Federal regulation of insurance. ‘‘(E) The ability of any potential Federal regulation or Federal regulator to provide robust consumer protection for policyholders. ‘‘(F) The potential consequences of subjecting insurance companies to a Federal resolution authority, including the effects of any Federal resolution authority— ‘‘(i) on the operation of State insurance guaranty fund systems, including the loss of guaranty fund coverage if an insurance company is subject to a Federal resolution authority; ‘‘(ii) on policyholder protection, including the loss of the priority status of policyholder claims over other unsecured general creditor claims; ‘‘(iii) in the case of life insurance companies, on the loss of the special status of separate account assets and separate account liabilities; and ‘‘(iv) on the international competitiveness of insurance companies. ‘‘(G) Such other factors as the Director determines necessary or appropriate, consistent with the principles set forth in paragraph (2). ‘‘(4) REQUIRED RECOMMENDATIONS.—The study and report required under paragraph (1) shall also contain any legislative, administrative, or regulatory recommendations, as the Director determines appropriate, to carry out or effectuate the findings set forth in such report. ‘‘(5) CONSULTATION.—With respect to the study and report required under paragraph (1), the Director shall consult with the State insurance regulators, consumer organizations, representatives of the insurance industry and policyholders, and other organizations and experts, as appropriate. o
Government Accountability Office (GAO) study – January 21, 2014 SEC. 526. GAO STUDY OF NONADMITTED INSURANCE MARKET. (a) IN GENERAL.—The Comptroller General of the United States shall conduct a study of the nonadmitted insurance market to determine the effect of the enactment of this part on the size and market share of the nonadmitted insurance market for providing coverage typically provided by the admitted insurance market. (b) CONTENTS.—The study shall determine and analyze— (1) the change in the size and market share of the nonadmitted insurance market and in the number of insurance companies and insurance holding companies providing such business in the 18-month period that begins upon the effective date of this subtitle; (2) the extent to which insurance coverage typically provided by the admitted insurance market has shifted to the nonadmitted insurance market; (3) the consequences of any change in the size and market share of the nonadmitted insurance market, including differences in the price and availability of coverage available in both the admitted and nonadmitted insurance markets; (4) the extent to which insurance companies and insurance holding companies that provide both admitted and nonadmitted insurance have experienced shifts in the volume of business between admitted and nonadmitted insurance; and
Agenda Item VI
3
(5) the extent to which there has been a change in the number of individuals who have nonadmitted insurance policies, the type of coverage provided under such policies, and whether such coverage is available in the admitted insurance market. (c) CONSULTATION WITH NAIC.—In conducting the study under this section, the Comptroller General shall consult with the NAIC. (d) REPORT.—The Comptroller General shall complete the study under this section and submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives regarding the findings of the study not later than 30 months after the effective date of this subtitle. o
HUD Rule on Disparate Impact The Department of Housing and Urban Development released a final rule on “Implementation of the Fair Housing Act’s Discriminatory Effects Standard” that could put in jeopardy the use of longstanding, sound, state-approved actuarial factors that are the foundation of responsible homeowners’ insurance underwriting. In November of 2011, HUD proposed a rule to clarify what they asserted was their long-standing practice of prohibiting discrimination in housing practices on the basis of race, color, religion, sex, disability, familial status, or national origin. Under the rule, any housing practice with an unjustified discriminatory effect is prohibited, regardless of whether there was an intent to discriminate. The preamble to both the proposed and final rules specifically cites homeowners insurance as a housing practice subject to HUD’s Fair Housing Act disparate impact analysis.Department of Housing and Urban Development (HUD). This could expose every company that writes homeowners insurance to the threat of duplicative and unauthorized regulation at the federal level, and it sets a dangerous precedent for other federal agencies to expand their authority. o
Supreme Court to address Disparate Impact liability theory On June 17, 2013, the US Supreme Court granted, in part, the petition for certiorari in Township of Mount Holly v. Mt. Holly Gardens Citizens in Action, Inc. The Supreme Court will address whether disparate impact claims are cognizable under the Fair Housing Act.
o
Mount Holly Amicus Brief Filed Challenging Disparate Impact Under FHA On September 3, 2013, PCI, together with AIA, NAMIC and the Independent Insurance Agents & Brokers of America filed a brief as amici curiae in the United States Supreme Court in Township of Mount Holly v Mt. Holly Gardens Citizens in Action, Inc., case no. 111507. The case is before the Supreme Court on a Petition for Writ of Certiorari filed by the Township of Mount Holly and the brief supports petitioners in arguing that disparate-impact claims are not cognizable under the Fair Housing Act (FHA). The brief also highlights the disruption that imposition of disparate impact liability would cause to the business of homeowners insurance.
Agenda Item VI
4
Agenda Item NAIC Surplus Lines Task Force Agenda Item VII.
Action required: David Kodama and NAPSLO Director of Government Relations, Keri Kish, will report on the activities of the NAIC Surplus Lines Task Force and activity related to the NAIC Surplus Lines Financial Analysis Working Group regarding placement of insurers on the International Insurers Department Listing of Alien Nonadmitted Insurers.
Background information: The Surplus Lines Task Force met on Monday, August 26 during the 2013 NAIC Summer National Meeting. A status report was given on the work by the Surplus Lines Requirements (C) Subgroup. Subgroup Chair, Cindy Donovan (IN) provided a recap of their discussions and identification of areas of inconsistencies in state regulations and rules regarding surplus lines and relevant to the implementation of the NRRA. NAIC staff presented an educational document, “Suggestions for Improving Information Access”, that addresses the need for insurer financial information by regulators and brokers to determine eligibility status. The document recommends that with such information readily available via the NAIC I-SITE in the Personalized Information Capture System and the Consumer Information Source tool that this should eliminate the need for insurers to file copies of their financial statements with the state. The Task Force accepted the report and adopted a motion to distribute the document to all states, along with a recommendation that insurance departments utilize and post a web link to the NAIC Quarterly Listing of Alien Insurers for verification of the surplus lines eligibility status of alien insurers. With the completion of this work it was recommended and adopted that the Subgroup be disbanded. PCI expressed its gratitude for the work accomplished but stated that the Subgroup’s purpose is still needed due to continued inconsistencies in other state regulations and requirements specifically related to insurer eligibility. Pursuant to the Task Force 2013 charges, NAIC staff stated they will proceed to conduct a survey of the states to determine what each has done or plans to do with regard to Dodd-Frank in terms of multistate non-admitted premium and what, if any, data states collect regarding premium paid to nonadmitted insurers on multistate risks. The Task Force members adopted 2014 proposed charges including on-going charges to maintain the IID plan of operation and its requirements; perform financial analysis of the surplus lines market; and, develop and oversee state implementation of the surplus lines provisions of the NRRA.
Separately, PCI learned that members of NIMA continue to promote the value of their surplus lines tax sharing Clearinghouse system. Discussions have been held with current SLIMPACT states and other states to consider, at least, an associate membership. At the same time, OPTins, the NAIC’s online system for electronic filing and payment of premium tax, continues to develop their capabilities to compete with the Clearinghouse, and proponents within the broker community are advocating for a 100% home state tax system (no tax sharing). The NAIC Surplus Lines Task Force is NOT scheduled to meet during the NAIC 2013 Fall National Meeting in Washington D.C.
Agenda Item VII
2
Agenda Item Non-Admitted Insurance Multi-State Agreement/Association Agenda Item VIII.
Action required: Members will receive an update on the activities related to NIMA and the Florida Surplus Lines Service Office operation of the Clearinghouse.
Background information:
According to a November 5, 2013, press release from the Non-Admitted Insurance Multi-State Association, Inc. (NIMA), member state representatives met for their Annual Meeting via conference call on Tuesday, October 22, 2013. The representatives elected a slate of officers for the 2014 Governing Committee. Each officer will serve one year term and includes: Chair: Vice Chair: Secretary:
Merle Scheiber, South Dakota Todd Kiser, Utah Kevin McCarty, Florida
A Wednesday, October 02, 2013, SNL Financial article reports that California is considering the NIMA surplus lines tax sharing agreement. California is stated to be exploring the option of joining the Nonadmitted Insurance Multi-State Agreement as an associate member, a status that would allow them to make use of taxation services and data tracking for one year without formally joining the pact. The news report indicated that California Insurance Commissioner Dave Jones previously endorsed NIMA, but that the state's insurance laws complicate its participation in interstate tax agreements. According to the article The state might have to make legal changes to allow it to charge another state's tax rate, Surplus Line Association of California Executive Director Ben McKay told SNL. The association is officially neutral on the issue. While the decision is up to the commissioner, NIMA has yet to present sufficient data to the industry to make it clear if a membership arrangement would be beneficial, McKay said.
NIMA, Inc. Responds to Home State Advocates with Viable Statistical Analysis – September 27, 2013
Agenda Item NRRA State Implementation - Legislation Agenda Item IX.
Action required: PCI staff David Kodama will recap NRRA-related legislative activity in 2013 and lead discussion on priority efforts in 2014, beginning with introduction of Michigan NRRA legislation.
Background information: NRRA State Implementation Legislation Chart | June 21, 2013
NRRA State Implementation Legislation Map | August 17, 2012
Supporting documents: A. MI SL Act 500 1901 et seq NRRA DRAFT
Michigan Surplus Lines Act NRRA modified
Formatted: Left: 1", Right: 1"
THE INSURANCE CODE OF 1956 (EXCERPT) Act 218 of 1956 CHAPTER 19 500.1901 Short title. Sec. 1901. This chapter shall be known and may be cited as the “surplus lines insurance act”. 500.1902 Liberal construction and application. Sec. 1902. This chapter and Act 218 of 1956 shall be liberally construed and applied to surplus lines policies where the home state of the insured is this state to and to promote its underlying purposes which include: (a) Protecting persons seeking insurance in this state. (b) Permitting stable and reputable insurers to write surplus lines insurance in this state. (c) Establishing a system of regulation which will permit an orderly access to surplus lines insurance in this state. 500.1903 Definitions; conflicting provisions. Sec. 1903. (1) As used in this chapter: (a) ‘‘admitted insurer’’ means an insurer licensed to engage in the business of insurance in this State. (b) ‘‘affiliate’’ means, with respect to an insured, any entity that controls, is controlled by, or is under common control with the insured. (c) ;‘affiliated group’’ means any group of entities that are all affiliated. (db) “Association” means an association registered under section 1930. (e) “control” means (A) the entity directly or indirectly or acting through 1 or more other persons owns, controls, or has the power to vote 25 percent or more of any class of voting securities of the other entity; or (B) the entity controls in any manner the election of a majority of the directors or trustees of the other entity. (fa) “Eligible unauthorized insurer” means an insurer not authorized to transact insurance in this state but eligible to write insurance business under this chapter. (g) ‘‘exempt commercial purchaser’’ means any person purchasing commercial insurance that, at the time of placement, meets the following requirements: (A) The person employs or retains a qualified risk manager to negotiate insurance coverage. (B) The person has paid aggregate nationwide commercial property and casualty insurance premiums in excess of $100,000 in the immediately preceding 12 months. (C)(i) The person meets at least 1 of the following criteria: (I) The person possesses a net worth in excess of $20,000,000, as such amount is adjusted pursuant to clause (ii).
Formatted: Left, Widow/Orphan control
(II) The person generates annual revenues in excess of $50,000,000, as such amount is adjusted pursuant to clause (ii). (III) The person employs more than 500 full-time or full-time equivalent employees per individual insured or is a member of an affiliated group employing more than 1,000 employees in the aggregate. (IV) The person is a not-for-profit organization or public entity generating annual budgeted expenditures of at least $30,000,000, as such amount is adjusted pursuant to clause (ii). (V) The person is a municipality with a population in excess of 50,000 persons. (ii) Effective on the fifth January 1 occurring after the date of the enactment of this subtitle and each fifth January 1 occurring thereafter, the amounts in subclauses (I), (II), and (IV) of clause (i) shall be adjusted to reflect the percentage change for such 5-year period in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the Department of Labor. (h) “home state”: (A) Except as provided in subparagraph (B), the term ‘‘home State’’ means, with respect to an insured— (i) the State in which an insured maintains its principal place of business or, in the case of an individual, the individual’s principal residence; or (ii) if 100 percent of the insured risk is located out of the State referred to in clause (i), the State to which the greatest percentage of the insured’s taxable premium for that insurance contract is allocated. (B) If more than 1 insured from an affiliated group are named insureds on a single nonadmitted insurance contract, the term ‘‘home State’’ means the home State, as determined pursuant to subparagraph (A), of the member of the affiliated group that has the largest percentage of premium attributed to it under such insurance contract. (i) ‘‘independently procured insurance’’ means insurance procured directly by an insured from a nonadmitted insurer. (jc) “Licensee” means a person licensed under this chapter. (k) ‘‘premium tax’’ means, with respect to surplus lines or independently procured insurance coverage, any tax, fee, assessment, or other charge imposed by a government entity directly or indirectly based on any payment made as consideration for an insurance contract for such insurance, including premium deposits, assessments, registration fees, and any other compensation given in consideration for a contract of insurance. (l) ‘‘qualified risk manager’’ means, with respect to a policyholder of commercial insurance, a person who meets all of the following requirements: (A) The person is an employee of, or third-party consultant retained by, the commercial policyholder. (B) The person provides skilled services in loss prevention, loss reduction, or risk and insurance coverage analysis, and purchase of insurance. (C) The person—
(i)(I) has a bachelor’s degree or higher from an accredited college or university in risk management, business administration, finance, economics, or any other field determined by the commissioner or other State regulatory official or entity to demonstrate minimum competence in risk management; and (II)(aa) has 3 years of experience in risk financing, claims administration, loss prevention, risk and insurance analysis, or purchasing commercial lines of insurance; or (bb) has— (AA) a designation as a Chartered Property and Casualty Underwriter (in this subparagraph referred to as ‘‘CPCU’’) issued by the American Institute for CPCU/Insurance Institute of America; (BB) a designation as an Associate in Risk Management (ARM) issued by the American Institute for CPCU/Insurance Institute of America; (CC) a designation as Certified Risk Manager (CRM) issued by the National Alliance for Insurance Education & Research; (DD) a designation as a RIMS Fellow (RF) issued by the Global Risk Management Institute; or (EE) any other designation, certification, or license determined by the commissioner or other State insurance regulatory official or entity to demonstrate minimum competency in risk management; (ii)(I) has at least 7 years of experience in risk financing, claims administration, loss prevention, risk and insurance coverage analysis, or purchasing commercial lines of insurance; and (II) has any 1 of the designations specified in subitems (AA) through (EE) of clause (i)(II)(bb); (iii) 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 (iv) has a graduate degree from an accredited college or university in risk management, business administration, finance, economics, or any other field determined by the commissioner or other State regulatory official or entity to demonstrate minimum competence in risk management. (md) “Surplus lines insurance” means insurance for an insured whose home state is in this state procured from or continued or renewed with an eligible unauthorized insurer. and includes all of the following, whether effected by mail or otherwise: (i) Insurance for which applications are solicited from persons resident or located in this state. (ii) Insurance for which contracts of insurance are issued or delivered to persons resident or located in this state. (iii) Insurance that is procured through negotiations or by an application occurring in whole or in part in this state or made within or from within this state. (iv) Insurance for which premiums, in whole or in part, are remitted directly or indirectly within or from within this state. (n) ‘‘State’’ includes any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, Guam, the Northern Mariana Islands, the Virgin Islands, and American Samoa. (o) ‘‘unauthorized insurer’’— (A) means an insurer not licensed to engage in the business of insurance in this State; but (B) does not include a risk retention group, as that term is defined in section 2(a)(4) of the Liability Risk Retention Act of 1986 (15 U.S.C. 3901(a)(4)).
2) The definitions contained in subsection (1), unless the context otherwise requires, shall apply to the use of the defined terms in this chapter and shall control in the interpretation of this chapter. (3) The definitions contained in other chapters of this act shall apply to the terms used in this chapter unless otherwise specifically provided in this chapter. (4) Nothing contained in this section shall supersede the provisions of section 402b and in the event of conflict between the provision herein and section 402b, the latter shall govern. 500.1903a Contract of insurance. Sec. 1903a. For purposes of this chapter, a written contract or similar device which offers benefits substantially similar to benefits offered under policies of insurance, whether or not the benefits are identified or described as insurance, shall constitute a contract of insurance. 500.1904 Rates and forms used by unauthorized insurers. Sec. 1904. (1) Rates used by unauthorized insurers shall not be subject to this code, except that a rate shall not be unfairly discriminatory. (2) Forms used by unauthorized insurers pursuant to this chapter shall not be subject to this code, except that a policy shall not contain language which misrepresents the true nature of the policy or class of policies. 500.1905 License required to act as agent or broker in transaction of surplus lines insurance; compliance; requirements for obtaining surplus lines license; permissible acts of surplus lines licensee; conditions to placement of insurance with eligible unauthorized insurer. Sec. 1905. (1) A person shall not solicit insurance, bind coverage, or in any other manner act as an agent or broker in the transaction of surplus lines insurance unless licensed under this chapter and section 1206a. (2) A person shall not offer, solicit, make a quotation on, sell, or issue a policy of insurance, binder, or any other evidence of insurance with an unauthorized insurer except in compliance with this chapter. (3) To obtain a surplus lines license under subsection (1), a person shall do all of the following: (a) File an application in the form and with the information as the commissioner may reasonably require to determine the ability of the applicant to satisfactorily act in accordance with this chapter. (b) An application for a resident surplus lines license shall Ccomplete an examination testing the applicant's understanding of this chapter, the surplus lines insurance business, and other chapters of this act, if required by the commissioner. The commissioner may waive the examination requirements for a person who has been licensed as a surplus lines licensee within the preceding 12 months. (c) Comply with sections 1204 to 1206. (d) Agree to file with the commissioner, not later than February 15 and August 15 annually, a sworn statement of the charges for insurance procured or placed, and the amounts returned on the insurance canceled, under the license, for the preceding 6-month period ending December 31 and June 30, respectively; and at the time of filing the statement, paying to the commissioner the 2% tax on gross premiums written and, instead of the costs and expenses that may be imposed by the
commissioner pursuant to this chapter, a 0.5% regulatory fee on gross premiums written as required by section 451. (4) A surplus lines licensee may do any or all of the following: (a) Place insurance on risksin with eligible unauthorized insurers for insureds with a home state in this state.where the home state of the insured is this state. (b) Act in the capacity of an agent or broker, as determined by the contractual relationship with the eligible unauthorized insurer or that insurer's legal representative. (c) Place insurance on risksinsurance for insureds whose home state is in this state, with unauthorized insurers that are not eligible unauthorized insurers, in strict compliance with section 1950. If the insurance is provided through the participation of several insurers and the licensee has reason to believe that a substantial portion of the insurance would be assumed by authorized or eligible unauthorized insurers, then, with respect to the unauthorized insurers not eligible, the insured or the insured's representative shall be informed as provided in section 1950(a). (d) Engage in any other acts expressly and implicitly authorized by this chapter and this act. (5) Before placement of insurance with an eligible unauthorized insurer, a licensee shall inform an insured or the insured's representative that coverage is being placed with an insurer not licensed in this state and that payment of loss may not be guaranteed in the event of insolvency of the eligible unauthorized insurer. 500.1906 Books and records of surplus lines licensee; examination; access. Sec. 1906. If the commissioner considers it necessary, he or she may examine the books and records of a surplus lines licensee to determine whether the licensee is conducting its business in accordance with this chapter. For the purpose of facilitating the examination, the licensee shall allow the commissioner free access, at reasonable times, to all of the licensee's books and records relating to transactions to which this chapter applies. 500.1910 Prohibited placement of insurance with unauthorized insurer; rebuttable presumption as to availability of coverages; list of unavailable lines of insurance; additions to or deletions from list; publication, revision, and availability of list. Sec. 1910. (1) Insurance shall not be placed by a licensee with an unauthorized insurer when coverage is available from an authorized insurer. (2) There shall be a rebuttable presumption that the following coverages are available from an authorized insurer: (a) No-fault automobile insurance, as required by section 3101, which is not written for a person who is self-insuring motor vehicles pursuant to section 531 of Act No. 300 of the Public Acts of 1949, being section 257.531 of the Michigan Compiled Laws. (b) Private passenger automobile physical damage coverage. (c) Homeowners and property insurance on owner-occupied dwellings the value of which is less than the maximum limits of coverage which are available for the property under the general rules of the Michigan basic property insurance association. (d) Any coverage readily available from 3 or more authorized insurers, unless the authorized insurers quote a premium and terms not competitive with the premium and terms quoted by an unauthorized insurer.
(e) Worker's compensation insurance which is not written for an employer which is partially selfinsured pursuant to section 611 of Act No. 317 of the Public Acts of 1969, as amended, being section 418.611 of the Michigan Compiled Laws. (3) There shall be a rebuttable presumption that the following coverages are unavailable from an authorized insurer: (a) Coverages where 1 portion of the risk is acceptable to authorized insurers, but another portion of the same risk is not acceptable. The entire coverage may be placed with eligible unauthorized insurers if it can be shown that eligible unauthorized insurers will accept the entire coverage but not the rejected portion alone. (b) Any coverage that the licensee is unable to procure after diligent search among authorized insurers. The licensee may rely upon the diligent search conducted by the producing agent or broker. However, aA broker seeking to procure or place nonadmitted insurance in this state for an exempt commercial purchaser shall not be required to confirm satisfyconduct the diligent search to determine whether the full amount or type of insurance sought by such exempt commercial purchaser can be obtained from admitted insurers if— (a) the broker procuring or placing the surplus lines insurance has disclosed to the exempt commercial purchaser that such insurance may or may not be available from the admitted market that may provide greater protection with more regulatory oversight; and (b) the exempt commercial purchaser has subsequently requested in writing the broker to procure or place such insurance from a nonadmitted insurer. (4) The commissioner shall maintain, on a current basis, a list of those lines of insurance for which coverages are determined by the commissioner to be generally unavailable in the authorized insurance market. Any person may request in writing that the commissioner add or remove a coverage from the current list. The commissioner shall grant or deny a request within 30 days after receiving the written request. The commissioner shall encourage dissemination of information regarding the availability of coverages, for which the public interest necessitates additions to or deletions from the list. The list shall be published at least quarterly and shall be revised as required. The commissioner shall make the list available to all licensees and other members of the public, upon request. 500.1911 Issuing evidence of placement of insurance with eligible unauthorized insurer; conditions; identification of entities directly assuming risk of loss; specifying obligation as joint or several; specifying proportion of obligation assumed. Sec. 1911. (1) Only a licensee shall issue evidence of placement of insurance with an eligible unauthorized insurer. A licensee shall not issue that evidence, cause or purport to cause any risk to be insured by an eligible unauthorized insurer, or advise any insured or applicant for insurance or the representative of the insured or applicant that insurance has been or will be obtained from an eligible unauthorized insurer unless at least 1 of the following conditions is met: (a) The licensee has prior written authority from the eligible unauthorized insurer to cause the risk to be insured. (b) The licensee has received a written or oral communication in the ordinary course of business that the coverage has been obtained. (c) A policy of insurance covering the insured for the risk has actually been issued by the eligible unauthorized insurer and has been delivered to the insured or the insured's representative.
(2) A prior written authority, a communication showing that insurance has been obtained, or a policy of insurance prescribed in subsection (1) shall identify entities directly assuming any risk of loss. If there is more than 1 insurer, any document issued or certified by the licensee pursuant to section 1912 shall specify whether the obligation is joint or several, and if the obligation is several, the proportion of the obligation assumed by those insurers, if known. 500.1912 Delivery of written evidence of insurance to insured or insured's representative; time; conditions. Sec. 1912. If the surplus lines licensee acts in reliance on prior written authority from an eligible unauthorized insurer in accordance with section 1911(1)(a), or on a written or oral communication received in accordance with section 1911(1)(b), the licensee, within 30 days after the date on which the risk was bound or the insured or applicant was advised that coverage has been or will be obtained, shall deliver a policy, a written binder, a certificate, or other written evidence of the insurance, to the insured or the insured's representative. 500.1913 Separate account of each transaction; filing certified evidence of transactions. Sec. 1913. Each surplus lines licensee shall keep a separate account of each transaction entered into pursuant to section 1905. Certified evidence of these transactions in the form and manner prescribed by the commissioner shall be filed periodically with the commissioner, or if designated by the commissioner, with an association. 500.1915 Charging fee in excess of $50.00; conditions; excessive or discriminatory fee prohibited; documentation of fees; exclusion of fees in computation of premium taxes; adjustment; "consumer price index" defined. Sec. 1915. (1) A licensee may not charge, in addition to the premium charged by an unauthorized insurer, a fee to cover the costs incurred in the placement of the indemnity which exceeds $50.00, unless all of the following conditions are met: (a) The fee in excess of $50.00 is filed with the commissioner and not disapproved by the commissioner within 30 days of the date it is filed with the commissioner. (b) The fee exceeds $50.00 only to the extent that the actual additional costs incurred for services performed by persons or entities unrelated to the licensee exceed that amount. (2) A fee charged pursuant to subsection (1) shall not be excessive or discriminatory. The licensee shall maintain complete documentation of all fees charged pursuant to subsection (1)(b). Those fees shall not be included as a part of the policy premium in the computation of premium taxes. (3) The $50.00 fee prescribed in subsection (1) shall be adjusted June 1, 2008 and annually thereafter to reflect the percentage of change in the consumer price index. (4) As used in this section, "consumer price index" means the consumer price index for all urban consumers in the United States city average for all items, as most recently reported by the United States department of labor, bureau of labor statistics, and as certified by the commissioner in an administrative bulletin. 500.1916 Compensation of licensee and licensed resident agent; collection of premiums; effect of premium payment made to agent. Sec. 1916. A licensee may be compensated by an unauthorized insurer and the licensee may compensate a licensed resident agent in this state for obtaining surplus lines insurance business.
The licensed resident agent authorized by the licensee may collect a premium on behalf of a surplus lines licensee and, as between the insured and the licensee, the licensee shall be considered to have received the premium if the premium payment has been made to the agent. 500.1917 Liability if risk assumed and premium received by licensee. Sec. 1917. If an unauthorized insurer has assumed a risk and if the premium for that risk has been received by the licensee who placed the insurance, then as between the insurer and the insured, the insurer shall be considered to have received the premium due to it for the coverage, and shall be liable to the insured for any loss covered by the insurance and for the unearned premium, upon cancellation of the insurance, regardless of whether the licensee is indebted to the insurer. 500.1920 Recognition as eligible surplus lines insurer; application; recommendations; conditions; information; examination; removal of insurer from list. Sec. 1920. (1) A licensee shall offer surplus lines insurance only to insurers that are eligible surplus lines insurers pursuant to this sectionin a stable and unimpaired financial condition. An insurer recognized by the commissioner as an eligible surplus lines insurer pursuant to subsection (2) shall be considered to meet the requirements of this subsection. Recognition as an eligible surplus lines insurer shall be conditioned upon the insurer's continued compliance with this chapter and rules promulgated under this chapter. (2) An unauthorized insurer may apply for recognition as an eligible surplus lines insurer by filing an application in the form and with the information as reasonably required by the commissioner regarding the insurer's financial stability, reputation, and integrity. The commissioner may delegate to an association the power to process and to make recommendations on applications for recognition as an eligible surplus lines insurer. Notwithstanding a delegation by the commissioner, an applicant may file an application for recognition directly with the commissioner. (3) The commissioner shall recognize an insurer making an application in accordance with subsection (2) as an eligible surplus lines insurer if he or she is satisfied that the insurer is in a stable and unimpaired financial condition and that the insurer is qualified to provide coverage in compliance with this chapter. If filed with full supporting documentation before July 1 of any year, an application submitted under subsection (2) shall be acted upon by the commissioner before December 31 of the year of submission. (24) The commissioner shall not recognize an insurer as an eligible A foreign surplus lines insurer shall be considered eligible if it is licensed it its domicile for the relevant lines of business andunless (a)the insurer continuously maintains capital and surplus of at least $1,500,000.00, and is safe, reliable, and entitled to public confidence, or (b) has $15,000,000 in capital and surplus. In the case of an alien insurer, the insurer maintains status on the current national association of insurance commissioners' international insurers department listing; This subsection shall not be construed to require an alien insurer to file financial statements in the form required of authorized insurers under section 438. However, each alien applicant shall have current financial data filed with the national association of insurance commissioners.
(35) If the commissioner considers it necessary, he or she may request information about or examine the affairs of any eligible unauthorized insurer, at the expense of the insurer except as provided in sections 1905 and 1951, to determine whether the insurer should continue to remain on the list of eligible surplus lines insurers. If the commissioner finds that it is in the public interest to remove an insurer from the list because the insurer no longer meets the requirements of this chapter or is no longer qualified to provide coverage under this chapter, the commissioner shall do so upon notice andwithout the necessity of a hearing. 500.1921 Recognition as eligible unauthorized insurer; deposit; trust fund, marketable securities, or equivalent instruments; provisions inapplicable to certain unincorporated, alien insurers; Ccommissioner as resident agent for service of process. Sec. 1921. (1) In addition to other requirements of this chapter, to gain recognition as an eligible unauthorized insurer in this state, an unauthorized insurer shall deposit with this state in cash, marketable securities, or other comparable instruments, at least $75,000.00 solely for the benefit of policyholders and beneficiaries in this state, or shall maintain a trust fund in the United States in cash, marketable securities, or other substantially equivalent instruments of at least $1,000,000.00 with a United States bank which is a member of the federal reserve system or which is regulated by the financial institutions bureau, or which is on deposit with regulatory authorities in the state of domicile of the insurer for the benefit of all United States policyholders and beneficiaries. A trust fund required under this subsection shall not have an expiration date which is at any time less than 5 years in the future, on a continuing basis. If the commissioner considers it necessary to protect the interests of policyholders and beneficiaries in this state, he or she may require an additional deposit or a larger trust fund from an insurer. (2) Subsection (1) and section 1920(4) shall not apply to unincorporated, individual alien insurers which, in place of the requirements prescribed in subsection (1) and section 1920(4), hold in trust for all policyholders and beneficiaries in the United States not less than $50,000,000.00, in the aggregate. (3) Each eligible unauthorized insurer shall appoint the commissioner as its resident agent, for purposes of service of process. 500.1922 Notice on face of instrument evidencing surplus lines insurance. Sec. 1922. Each policy, cover note, or other instrument evidencing surplus lines insurance which is to be delivered to an insured or a representative of an insured shall have printed, typed, or stamped in red ink upon its face, in not less than 10-point type, the following notice: “This insurance has been placed with an insurer that is not licensed by the state of Michigan. In case of insolvency, payment of claims may not be guaranteed.” This notice shall not be covered over or concealed in any manner. 500.1930 Association of licensees; registration; purposes; required filings by association; reasons for refusal to register association; reasons for suspension or revocation of registration; denial of membership. Sec. 1930. (1) Licensees may associate and the commissioner may register an association for 1 or more of the following purposes: (a) Advising the commissioner as to the availability of surplus lines coverage and market practices and standards for surplus lines insurers and licensees. (b) Collecting and furnishing records, statistics, and accounts.
(c) Submitting recommendations regarding administration of this chapter. (2) Each association shall file with the commissioner, for approval, all of the following: (a) A copy of the association's constitution and articles of agreement or association, or the association's certificate of incorporation and bylaws, and any rules or regulations governing the association's activities. (b) An agreement that, as a condition of continued registration under subsection (1), the commissioner may examine the association. (3) Each association shall file with the commissioner and keep current all of the following: (a) A list of members. (b) The name and address of a resident of this state upon whom notices or orders of the commissioner or process issued by the commissioner may be served. (4) The commissioner may refuse to register, or may suspend or revoke the registration of, an association for any of the following reasons: (a) It reasonably appears that the association will not be able to carry out the purposes of this chapter. (b) The association fails to maintain and enforce rules which can reasonably be anticipated to assure that members of the association and persons associated with those members comply with this chapter, other applicable chapters of this code, and rules promulgated under either. (c) The rules of the association do not assure a fair representation of its members in the selection of directors and in the administration of its affairs. (d) The rules of the association do not provide for an equitable allocation of reasonable dues, fees, and other charges among members. (e) The rules of the association impose a burden on competition not necessary or appropriate to the purposes of this chapter. (f) The association fails to meet other applicable requirements prescribed in this chapter. (5) An association shall deny membership to any person who is not a licensee. 500.1932 Servicing facility; establishment; reimbursement for expenses and payments; functions; approval; member licensee as servicing facility. Sec. 1932. (1) In accordance with its bylaws, an association may establish an independent office as a servicing facility. Each servicing facility shall be reimbursed by the association for expenses incurred and for any payments made on behalf of the association. Each servicing facility may perform any of the functions of the association that officers of the association may lawfully delegate to it. In performing functions delegated to it, the facility shall act on behalf of, and in the name of, the association. (2) Designation of servicing facilities shall be subject to the approval of a commissioner. A member licensee may serve as the servicing facility. 500.1933 Suits by or against association; assertion or defense of rights. Sec. 1933. An association, in its own name or through servicing facilities, may sue or be sued and may use the courts to assert or defend any rights the association may have by virtue of this chapter which are reasonably necessary to fully implement this chapter. 500.1934 Filing certified audit of books, records, and trust funds. Sec. 1934. Each association shall file annually with the commissioner a certified audit of the books and records of the association and its trust funds.
500.1940 Reports and recommendations regarding financial condition of eligible unauthorized insurer; reports and recommendations not considered public documents; liability for statements. Sec. 1940. The association may submit reports and make recommendations to the commissioner regarding the financial condition of any eligible unauthorized insurer. These reports and recommendations shall not be considered to be public documents. There shall not be liability on the part of, and a cause of action of any nature shall not arise against, eligible unauthorized insurers, the association or its agents or employees, the directors, or the commissioner or authorized representatives of the commissioner, for statements made by them in any reports or recommendations made under this section. 500.1946 Repealed. 2000, Act 486, Imd. Eff. Jan. 11, 2001. Compiler's note: The repealed section pertained to promulgation of rules regulating conduct of licensees. 500.1950 Placement of insurance with insurer which is neither an authorized insurer nor an eligible unauthorized insurer; duties of licensee. Sec. 1950. Notwithstanding section 1920(1), a resident of this state may obtain insurance from an unauthorized insurer in this state through a licensee under this chapter. Unless the resident insists that the insurance be placed with an unauthorized insurer which is not recognized by the commissioner as eligible, the licensee shall first attempt to place the insurance with authorized insurers or, if that is not possible, with eligible unauthorized insurers before placing the insurance with an unauthorized insurer not recognized as eligible, and shall certify to the commissioner on a form prescribed by the commissioner that these attempts were made. If the insurance is placed with an insurer which is neither an authorized insurer nor an eligible unauthorized insurer, upon obtaining coverage, the licensee shall do all of the following: (a) Mail or deliver to the resident the following notice: “This insurance has been placed with an insurer not licensed by the state of Michigan nor recognized by the insurance commissioner as an eligible unauthorized insurer. In case of any dispute relative to the terms or conditions of the policy or the practices of the insurer, the insurance commissioner may not be able to assist in the dispute. In case of insolvency, payment of claims is not guaranteed.” A copy of the notice shall be filed with the commissioner. (b) Collect from the resident insured appropriate premium taxes and report the transaction to the commissioner on a form prescribed by the commissioner. If the resident insured fails to pay the taxes when due, the insured shall be subject to a civil fine of not more than $1,000.00, plus accrued interest from the inception of the insurance. 500.1951 Procuring, continuing, or renewing insurance with unauthorized insurer; report; tax on premiums; regulatory fee. Sec. 1951. An insured in this state who, on behalf of himself or herself, or an employee in this state who, on behalf of his or her employer, procures, causes to be procured, or continues or renews insurance with an unauthorized insurer, or a self-insurer in this state who procures or continues excess loss, catastrophe, or other insurance with an unauthorized insurer, upon a subject of insurance resident, located, or to be performed within this state, other than insurance
procured pursuant to section 1905 or 1950, within 30 days after the date the insurance was procured, continued, or renewed, shall file a written report regarding the insurance with the commissioner on forms prescribed by the commissioner and furnished to the insured upon request. The report shall be accompanied by a 2% tax on gross premiums written and, instead of the costs and expenses that may be imposed by the commissioner pursuant to this chapter, a 0.5% regulatory fee on gross premiums written. The report shall show all of the following: (a) The name and address of the insured or insureds. (b) The name and address of the insurer. (c) The subject of the insurance. (d) A general description of the coverage. (e) The amount of premium currently charged for the insurance. 500.1952 Violation as misdemeanor; penalty. Sec. 1952. A person who knowingly and wilfully violates or aids or abets directly or indirectly in aviolationviolation of this chapter is guilty of a misdemeanor, punishable by imprisonment for not more than 1 year, or a fine of not more than $1,000.00, or both. 500.1955 Rules implementing chapter; declaratory rulings. Sec. 1955. The commissioner may promulgate rules to implement this chapter pursuant to Act No. 306 of the Public Acts of 1969, as amended. The commissioner may issue declaratory rulings regarding implementation of this chapter.
Agenda Item NRRA State Implementation - Regulation Agenda Item X.
Action required: PCI staff David Kodama will recap NRRA-related regulatory activity in 2013 and lead discussion on priority efforts in 2014.
Background information: NRRA State Implementation Bulletins, A-M: AK, AZ, AR, CA, CO, CT, DE, FL, GA, HI, ID, IL, KY, LA, ME, MD, MN, MS, MO, MT NRRA State Implementation Bulletins, N-W: NE, NV, NH, NJ, NY, NC, ND, OH, OK, OR, PA, RI, SC, TX, UT, VT, VA, WA, WV, WI, WY
Supporting documents: A. Proposed Fourteenth Amendment to Regulation 41 (11 NYCRR 27) B. NY DFS Regulation 41 Proposed Amendment – PCI Comment Letter
VIA E-MAIL
August 30, 2013
Joana Lucashuk Senior Attorney Office of General Counsel New York State Department of Financial Services One State Street New York, NY 10004-1511 Re:
Proposed Amendments to Regulation 41
Dear Ms. Lucashuk: The Property Casualty Insurers Association of America appreciates the opportunity to provide comments on the proposed Fourteenth Amendment to Part 27 of Title 11 NYCRR Regulation No. 41: Excess Line Placements Governing Standards. PCI is composed of more than 1,000 member companies, representing the broadest cross section of insurers of any national trade association. PCI members write more than $195 billion in annual premium, 39 percent of the nation's property casualty insurance. In 2012 PCI members wrote over $13.1 billion in premium in New York, representing nearly 35% percent of the state’s P/C market. PCI supports the efforts of the New York Department of Financial Services (DFS) to amend Regulation No. 41 in accordance with federal law pursuant to the Nonadmitted and Reinsurance Act of 2010. To that end, we seek the following considerations to address provisions that we believe still leave Regulation 41 inconsistent with the NRRA.
Section 27.11 Prohibited activities. PCI believes the proposed inclusion of a prohibition directed to the insurer (not to provide the prohibited coverage) to be unnecessary, given the direction to the brokers, and without authority. The NRRA neither empowers nor urges the state to evoke this direction, and this state has long recognized in its authorities the regulation of the brokers when addressing surplus lines transactions. PCI therefore requests that the proposed direction to insurers be removed. Section 27.13 Duty to inquire about unauthorized insurers. PCI is pleased that the DFS has narrowed the information that the excess line broker must obtain and review from the excess line insurer. However, we believe the duty to “obtain, review and retain” the stipulated list of documents and reports prior to the placement of coverage still extends beyond the verification of permitted eligibility criteria set forth in the NRRA. Items (a) (3), (5) through (8) should be specifically removed. PCI suggests that the excess line licensee be educated and permitted to obtain, review and retain such documents to verify the conditions for eligibility set forth by the NRRA via the NAIC’s Consumer Information Source – see appended NAIC document. Further, PCI believes Section 27.13 requires an independent assessment to demonstrate an insurer’s financial solvency (“stability and capacity”), claims practices and management. We expect that this alone can impose significant challenges for the excess line broker and create a heightened standard of care and liability exposure as well. In relation to the NRRA, it again imposes additional conditions on the eligibility of the insurer for placement of insurance prohibited by the NRRA. Accordingly, PCI requests that the section be removed and the proposed draft be modified to clarify that the excess line licensee may place business with any U.S. foreign excess line insurer that is authorized in its domiciliary state and maintains the minimum capital and surplus required by Regulation 41 or otherwise under New York law. Section 27.14 Duty of Unauthorized Insurers. PCI is pleased by the determination that a filing of individual policy details (EL-1 report) cannot be set forth as an insurer’s eligibility requirement or condition for placement by an excess line broker. However, the EL-1 report essentially remains an additional condition for eligibility in terms of an annual filing requirement. As stipulated in the
policyholder disclosure notice, the excess line insurer is an insurer “not licensed in the state of New York and is not subject to its supervision.” PCI therefore urges the DFS to remove this requirement as excess line insurer does not fall within this regulatory authority of the state nor is it permitted by federal law under the NRRA Notwithstanding, PCI considers (a) (5) too arbitrary and potentially damaging to the excess line market place given the requirements for this unknown information. We therefore believe (a) (5) should be specifically removed.
PCI supports the primary objective of the DFS to ensure that all excess line policies and premiums for New York home state risks are properly reported, administered and subjected to the required excess line premium tax. We believe that the DFS should be able to achieve this goal by imposing transaction and policy reporting requirements on excess line licensees alone without the need for imposing increased eligibility criteria or reporting requirements (e.g. EL-1 report) on excess line insurers. PCI believes that the Department should incorporate these recommendations into the current proposal to achieve conformance with the letter and intent of the federal law under the Nonadmitted and Reinsurance Reform Act of 2010 (Pub. L. 111–203, title V, § 524,July 21, 2010, 124 Stat. 1590). Thank you for the opportunity to comment on the proposed regulation. Please do not hesitate to contact us with any questions. We would welcome the opportunity to visit with you at your offices to discuss further. Very truly yours,
David Kodama senior director, research & policy analysis Property Casualty Insurers Association of America (PCI) 847-553-3611
[email protected]
cc:
Kristina Baldwin, vice president, PCI
2
Information Access for Regulators and Brokers/Insureds
Minimum Capital and Surplus State insurance regulators remain mostly resolved to continue some degree of administrative oversight of surplus lines insurers. Generally, this oversight has involved regulators requiring insurers to submit periodic financial filings (annual and/or quarterly) to aid regulators in assessing insurer financial health and to verify that minimum capital and surplus is maintained. In an effort to aid regulators in the verification of minimum capital and surplus, the NAIC will provide a year-to-date summary of domestic insurers’ surplus lines total direct premiums written and policyholders’ surplus at the end of the each quarter and annual period. The summary will enable regulators to quickly identify any domestic insurer that has fallen below the minimum capital and surplus level of $15,000,000 as referenced in the Non-Admitted Insurance Model Act or another amount as prescribed by state law. With this resource now available, states are encouraged to eliminate requests for quarterly filings and trust that the state of domicile is providing the necessary solvency monitoring. The summary for the first quarter of 2013 is attached. Company Filing Notifications Regulators who review the financial filings of unauthorized domestic insurers have expressed some reluctance to ending the requirement of insurer submitted quarterly and annual financial filings. Regulators believed it to be much easier to review filing documents when hard copy filings arrived rather than continually check whether filings were electronically available for viewing in the NAIC Internet - State Interface Technology Enhancement (I-SITE) system. An easy remedy for regulators lies within I-SITE in the Personalized Information Capture System or PICS. PICS allows I-SITE users to list NAIC company codes representing insurers in which users are interested and to be notified when certain programmed triggers occur. Among the numerous triggers, email notifications can be programmed for when filings are received and available for viewing, when company demographics change, or when key financial data changes. Attached is a screenshot guide for locating an I-SITE tutorial that provides instructions for users on how to set up PICS to their benefit. Financial Information for Brokers/Insureds Basic insurer financial information is needed by most surplus lines brokers in fulfilling their due diligence responsibilities with regard to placing business with financially sound insurers. Commercial purchasers and consumers also benefit from a review of insurer’s financial results in assessing whether business will be obtained from a particular insurer.
On its website, the NAIC has provided access to Consumer Information Source (CIS) that provides access to a financial profile for insurers that include those domestic insurers writing surplus lines business. Several states have recognized the benefit of this access and have provided a link from their department of insurance websites. The Review Group recommends that all states establish a similar link and avail their citizens with the means to review key financial results of insurers in which they wish to place their trust. Attached is a screenshot guide that provides links to CIS and instructions for navigating to locate a financial profile.
2013Q1 Domestic Surplus Lines Writers
Surplus Lines Direct Premiums Written1 NAIC Cocode 10349 20010 24856 39381 12833 36420 19489 10690 33189 35351 16810 38652 12489 12700 25433 33103 10235 19623 35912 10316 21199 10717 23140 27189 29033 17159 42846 26620 39462 31295 23620 27790 12961 10328 15989 36951 26883 38989 22004
1
Company Name Acceptance Cas Ins Co Acceptance Ind Ins Co Admiral Ins Co Adriatic Ins Co AIX Specialty Ins Co Allianz Underwriters Ins Co Allied World Assur Co US Inc Allied World Natl Assur Co Alterra Excess & Surplus Ins Co American Empire Surplus Lines Ins Co American Mercury Ins Co American Modern Select Ins Co American Modern Surplus Lines Ins Co American Mut Share Ins Corp American Safety Ind Co American Safety Ins Co American Southern Ins Co American Summit Ins Co American Western Home Ins Co Appalachian Ins Co Arch Specialty Ins Co Aspen Specialty Ins Co Associated Industries Ins Co Inc Associated Intl Ins Co Atain Ins Co Atain Specialty Ins Co Atlantic Cas Ins Co AXIS Surplus Ins Co Berkley Assur Co Berkley Regional Specialty Ins Co Burlington Ins Co Canal Ind Co Canopius US Ins Capitol Specialty Ins Corp Catlin Specialty Ins Co Century Surety Co Chartis Specialty Ins Co Chubb Custom Ins Co CIM Ins Corp
State of Domicile NE NE DE ND DE IL DE NH DE DE OK OH OH OH OK GA KS TX OK RI NE ND FL IL TX MI NC IL IA DE NC SC DE WI DE OH IL NJ MI
*Sum of Sch. T Eligible States
Sum of surplus lines direct premiums written less than or greater than 0 (zero).
$1,595,327 $20,525,611 $91,611,992 $3,086,184 $19,000,049 $1,278,054 $38,567,735 $13,107,039 $50,154,834 $31,534,300 $4,222 $267,751 $7,221,286 $68,263 $46,186,273 $888,578 $874,676 $809,452 $9,945,913 $15,722,643 $107,130,633 $68,662,502 $13,715,693 $9,999,156 $933,339 $18,605,813 $15,182,826 $113,173,452 $10,294,349 $4,731,250 $50,674,615 $6,860,455 $16,157,732 $11,060,590 $83,891,733 $52,886,658 $173,796,115 $99,548,220 $646,095
Policyholders' Surplus *Liabilities, Line 37 $39,477,953 $109,858,071 $668,362,613 $59,068,311 $50,897,562 $64,755,358 $128,706,524 $112,928,552 $80,192,708 $110,803,497 $128,038,120 $37,626,082 $26,110,423 $182,031,563 $70,568,189 $18,645,969 $37,494,364 $26,110,623 $60,006,486 $175,158,992 $270,441,776 $96,661,926 $73,049,277 $84,867,286 $30,998,854 $122,955,121 $77,955,509 $211,859,017 $50,144,807 $51,101,311 $168,931,118 $39,085,865 $47,489,657 $53,822,068 $117,582,984 $180,336,908 $833,857,891 $164,450,027 $16,914,559
2013Q1 Domestic Surplus Lines Writers Surplus Lines Direct Premiums Written1 NAIC Cocode 39993 34118 36927 31127 13124 29734 13027 44520 12758 10863 16624 24319 10213 11702 21326 21334 41718 39020 35378 10851 22110 35181 44792 20281 39640 11177 10657 34916 14249 10833 20559 37362 10182 10814 39861 25569 37532 41858 38580 25224 14167 10956 1
Company Name Colony Ins Co Colony Natl Ins Co Colony Specialty Ins Co Columbia Cas Co Companion Specialty Ins Co Conifer Ins Co Covington Specialty Ins Co Crum & Forster Specialty Ins Co Cumis Specialty Ins Co Inc Dakota Fire Ins Co Darwin Natl Assur Co Darwin Select Ins Co Discover Specialty Ins Co Echelon Prop & Cas Ins Co Empire Fire & Marine Ins Co Empire Ind Ins Co Endurance Amer Specialty Ins Co Essex Ins Co Evanston Ins Co Everest Ind Ins Co Everest Security Ins Co Executive Risk Ind Inc Executive Risk Speciality Ins Co Federal Ins Co Firemans Fund Ins Co Of OH First Fin Ins Co First Mercury Ins Co First Specialty Ins Corp Founders Ins Co Gemini Ins Co General Security Ind Co of AZ General Star Ind Co Geovera Specialty Ins Co GNY Custom Ins Co Golden Bear Ins Co Gotham Ins Co Great Amer E&S Ins Co Great Amer Fidelity Ins Co Great Amer Protection Ins Co Great Divide Ins Co GuideOne Natl Ins Co Guilford Ins Co
State of Domicile VA VA OH IL DC MI NH AZ IA ND DE AR IL IL NE OK DE DE IL DE GA DE CT IN OH IL IL MO IL DE AZ DE CA AZ CA NY DE DE OH ND IA IL
*Sum of Sch. T Eligible States
Sum of surplus lines direct premiums written less than or greater than 0 (zero).
$105,654,834 $47,714 $811,392 $213,427,805 $23,467,554 $1,875,644 $28,590,525 $13,751,602 $3,426 $119,672 $74,722 $62,158,824 $44,239 $7,352 $20,347 $38,066,440 $44,977,679 $89,952,285 $107,001,938 $34,845,750 $161,490 $135,144 $13,748,764 $1,697 ($242,067) $6,782,635 $81,117,405 $37,012,509 $1,508,846 $77,548,989 $20,880,869 $33,100,535 $32,535,624 ($11,716) $1,603,163 $16,824,332 $67,640,780 $211,390 $5,839 $844,519 $5,287,141 $386,813
Policyholders' Surplus *Liabilities, Line 37 $352,581,946 $43,866,986 $26,387,009 $236,043,615 $62,222,862 $15,628,009 $46,486,171 $45,872,907 $60,477,581 $50,140,800 $371,317,991 $59,667,256 $39,012,982 $5,557,375 $53,211,840 $49,010,191 $82,468,650 $386,759,402 $634,710,063 $50,685,575 $18,830,223 $1,169,738,080 $131,452,682 $14,449,362,200 $47,360,680 $360,697,094 $49,229,589 $66,180,144 $70,663,270 $52,751,261 $48,682,937 $588,950,682 $20,057,975 $48,251,437 $40,841,589 $68,515,149 $46,783,855 $46,796,099 $27,804,326 $66,665,663 $15,183,505 $253,271,904
2013Q1 Domestic Surplus Lines Writers Surplus Lines Direct Premiums Written1 NAIC Cocode 26808 38288 11243 35904 18376 14231 34452 42374 12936 14438 37079 32808 27960 36940 22829 23647 25445 13685 12203 38920 33138 19437 12627 10725 37745 26743 12775 36838 13794 27669 16942 23540 26522 11066 37974 29629 20079 42137 12114 17370 36056 11165 1
Company Name Hallmark Specialty Ins Co Hartford Ins Co Of IL HCC Specialty Ins Co Health Care Ind Inc Hermitage Ins Co Homeland Ins Co of DE Homeland Ins Co of NY Houston Cas Co Houston Specialty Ins Co HSB Specialty Ins Co Hudson Specialty Ins Co Illinois Emcasco Ins Co Illinois Union Ins Co Indian Harbor Ins Co Interstate Fire & Cas Co Ironshore Ind Inc Ironshore Specialty Ins Co James River Cas Co James River Ins Co Kinsale Ins Co Landmark Amer Ins Co Lexington Ins Co Liberty First RRG Ins Co Liberty Surplus Ins Corp Maiden Specialty Ins Co Maxum Ind Co Merchants Natl Ins Co Mesa Underwriters Specialty Ins Co Mid Continent Excess and Surplus Ins Mississippi Farm Bureau Cas Ins Co MMIC Ins Inc Monterey Ins Co Mount Vernon Fire Ins Co MSA Ins Co MT Hawley Ins Co NAMIC Ins Co Inc National Fire & Marine Ins Co National Ind Co Of The South National Security Fire & Cas Co Nautilus Ins Co Navigators Specialty Ins Co Nevada Capital Ins Co
State of Domicile OK IL OK CO NY DE NY TX TX CT NY IA IL ND IL MN AZ VA OH AR OK DE UT NH NC DE NH NJ DE MS MN CA PA SC IL IN NE FL AL AZ NY NV
*Sum of Sch. T Eligible States
Sum of surplus lines direct premiums written less than or greater than 0 (zero).
$20,049,420 ($166,704) $3,094,188 $4,305,750 $18,284,170 $6,625,961 $44,227,938 $69,234,147 $20,596,947 $160,000 $33,742,085 $636,120 $102,248,809 $144,533,420 $32,646,540 $2,660,236 $145,694,373 $451,465 $46,226,118 $26,068,952 $126,365,415 $847,021,412 $780 $111,386,591 $21,905,774 $31,817,517 $300,826 $27,714,291 $612,931 $948,797 $12,440 $126,563 $25,376,791 $4,575,984 $62,339,043 $2,397,553 $60,134,409 $179,170 $1,797,382 $113,711,992 $51,209,417 $2,887,564
Policyholders' Surplus *Liabilities, Line 37 $53,083,932 $1,347,748,333 $15,511,297 $166,873,862 $108,857,076 $50,779,191 $106,647,609 $1,877,044,195 $189,252,326 $49,818,666 $147,833,036 $81,163,353 $153,133,429 $45,649,024 $153,621,313 $96,342,865 $301,051,232 $15,384,987 $153,848,217 $60,131,797 $196,145,802 $7,725,885,308 $2,262,283 $80,235,430 $47,272,024 $98,220,583 $34,755,113 $56,268,347 $16,399,412 $188,500,031 $261,473,066 $30,520,671 $286,109,269 $17,138,072 $586,795,675 $22,866,797 $4,178,753,621 $150,391,820 $23,165,774 $127,158,295 $127,660,742 $47,885,666
2013Q1 Domestic Surplus Lines Writers Surplus Lines Direct Premiums Written1 NAIC Cocode 24848 17400 25038 24007 13167 27987 24031 24015 39608 14175 31143 10046 32859 10121 10673 11062 12588 10786 38954 10179 21903 11811 34487 13149 11515 43915 28843 40479 28053 40460 16551 15580 41297 10672 19879 10729 26557 12294 13815 40967 30481 42986 1
Company Name Newport Ins Co Noetic Specialty Ins Co North Amer Capacity Ins Co North East Ins Co North Light Specialty Ins Co Northfield Ins Co Northland Cas Co Northland Ins Co Nutmeg Ins Co Oklahoma Specialty Ins Co Old Republic Union Ins Co Pacific Ins Co Ltd Penn Amer Ins Co Penn Patriot Ins Co Penn Star Ins Co Petroleum Marketers Mgmt Ins Co Prime Ins Co Princeton Excess & Surplus Lines Ins ProAssurance Cas Co ProAssurance Specialty Ins Co Procentury Ins Co Professional Security Ins Co Professional Underwriters Liab Ins C Protective Specialty Ins Co QBE Specialty Ins Co Rainier Ins Co Reliable LLoyds Ins Co Republic Vanguard Ins Co Rockhill Ins Co Sagamore Ins Co Savers Prop & Cas Ins Co Scottsdale Ind Co Scottsdale Ins Co Scottsdale Surplus Lines Ins Co Security Natl Ins Co Seneca Specialty Ins Co Shelter Reins Co Southwest Marine & Gen Ins Co Sparta Specialty Ins Co St Paul Fire & Cas Ins Co St Paul Surplus Lines Ins Co Standard Guar Ins Co
State of Domicile AZ VT NH ME IL IA CT CT CT OK IL CT PA VA PA IA IL DE MI AL TX AZ UT IN ND AZ TX AZ AZ IN MO OH OH AZ DE AZ MO AZ CT WI DE DE
*Sum of Sch. T Eligible States
Sum of surplus lines direct premiums written less than or greater than 0 (zero).
($1,244) $2,576,458 $25,059,075 ($165,701) $8,671,113 $26,672,903 $367,518 $809,805 $304 $4,603,304 $211,677 $4,702,291 $13,541,301 $391,602 $7,798,750 $2,312 $6,389,896 $37,478,147 $3,301,035 $6,618,043 $258,985 $151,436 $3,033,410 $1,656,414 $289,300,664 $213,738 $611 $2,557,943 $47,991,157 ($4,257,825) $2,662,311 $4,597,362 $314,383,267 $2,081,881 $3,922,661 $20,620,734 $695,821 $3,805,954 $49,813 $94,482 $10,421,243 $27,116,726
Policyholders' Surplus *Liabilities, Line 37 $45,289,500 $52,849,552 $51,255,972 $30,595,333 $46,345,581 $122,947,520 $33,684,574 $539,551,929 $259,155,678 $15,903,067 $22,908,207 $227,966,943 $165,210,604 $27,644,470 $61,155,227 $23,486,530 $22,487,659 $60,082,049 $573,088,855 $28,713,833 $47,461,360 $17,031,713 $44,569,585 $59,215,488 $231,247,488 $20,262,787 $8,912,773 $24,380,520 $100,885,070 $121,022,688 $64,890,810 $36,008,071 $673,255,477 $16,134,306 $55,928,968 $46,553,621 $226,473,521 $51,543,813 $45,563,550 $16,075,170 $188,803,634 $102,685,837
2013Q1 Domestic Surplus Lines Writers Surplus Lines Direct Premiums Written1 NAIC Cocode 13604 26387 12866 13037 23850 18031 44776 44300 38857 29696 37982 21423 13064 41335 12537 25895 35416 43451 40428 10172 37150 13196 13234 19607 31267 27855
1
Company Name Starr Surplus Lines Ins Co Steadfast Ins Co T H E Ins Co The Cincinnati Specialty Underwriter Tokio Marine Specialty Ins Co Topa Ins Co Torus Specialty Ins Co Tower Ins Co Of NY Traders & Gen Ins Co Travelers Excess & Surplus Lines Co Tudor Ins Co Union Ins Co Of Providence United Natl Ins Co United Natl Specialty Ins Co United Specialty Ins Co United States Liab Ins Co Us Underwriters Ins Co Utica Specialty Risk Ins Co Voyager Ind Ins Co Westchester Surplus Lines Ins Co Western Heritage Ins Co Western World Ins Co Wilshire Ins Co XL Select York Ins Co of ME Zurich Amer Ins Co Of IL
State of Domicile IL DE LA DE DE CA DE NY TX CT NH IA PA WI DE PA ND TX GA GA AZ NH NC DE ME IL
*Sum of Sch. T Eligible States
Sum of surplus lines direct premiums written less than or greater than 0 (zero).
$61,617,538 $250,742,120 $383,011 $28,616,595 $19,603,252 $575,561 $39,608,759 $1,363,104 ($27,640) $35,442,408 $10,804,493 $22,092 $13,662,531 $375,084 $27,668,159 $2,685,413 $7,412,918 $91,934 $40,820,694 $103,402,364 $33,813,277 $39,009,921 $9,037,990 $189,562 $437,733 $112,856
Policyholders' Surplus *Liabilities, Line 37 $80,387,472 $447,814,549 $56,593,568 $206,456,027 $145,460,554 $72,363,394 $97,807,256 $267,617,100 $50,285,962 $63,332,275 $137,886,900 $50,658,588 $316,153,977 $59,900,152 $52,016,995 $445,293,071 $104,143,799 $29,978,787 $65,793,541 $147,472,841 $101,810,914 $353,970,358 $88,692,089 $53,961,917 $45,425,804 $35,230,927
Access to the Tutorial for the Personalized Information Capture System – PICS
From the I-SITE StateNet home page, select Resources: Online Tutorial.
From the Online I-SITE Training page, select “Begin the tutorial.”
The page that follows lists the tutorial categories. Select PICS and the easy-to-follow tutorial will begin. And the tutorial will begin
Access Instructions for the Consumer Information Source – CIS
From the NAIC home webpage http://www.naic.org/, select Consumer Information Source; or, go directly to the CIS Company Search webpage at https://eapps.naic.org/ cis/. Many states link to the CIS search page from a DOI website under a heading of “Company Financial Information.”.
On the CIS page, enter the Company Name or NAIC Company Code if known and select Business Type “Property/Casualty” from the drop-down box.
Choose the correct Company if more than one results from a search, and select Financial Information.
Access Instructions for the Consumer Information Source – CIS
A brief Financial Report will appear and allow the user to select “Get Financial Profile” or “Get PDF Statement Data.”
The Financial Profile provides a summary of a Company’s prior year-end financial information and includes a Capital and Surplus amount. For better printing, a full page PDF copy of the Financial Profile may be selected at the top of the page. The PDF Statement Data selection allows for a limited number (5) of individual filing statement pages at no cost. Additional pages must be purchased.
Agenda Item Industry Panel Discussion Agenda Item XI.
Action required: PCI senior director David Kodama will moderate a panel discussion on emerging issues impacting the surplus lines industry. Lead panelists will include:
Maria Abate, Shareholder, Colodny, Fass, Talenfeld, Karlinsky Abate & Webb Michael Byrne, Partner, Drinker, Biddle & Reath LLP Roger Smith, Consultant
The discussion will highlight enacted laws, and court cases and rulings related to construction defect and the definition of occurrence and the implications on liability exposure for construction contractors/professionals; court cases and rulings related to duty of the surplus lines broker and the implications on agent errors & omission liability exposure; the impact of the NRRA on compliance costs for brokers and insurers; and, the NAIC Surplus Lines Financial Analysis Working Group analysis of alien insurers for placement on the International Insurers Department Listing of Alien Nonadmitted Insurers.
Background information:
Georgia , HDI-Gerling America Ins. Co. v. Morrison Homes, Inc. On July 12, 2013, the Georgia Supreme Court published its ruling on questions certified by the Eleventh Circuit Court in HDI-Gerling America Ins. Co. v. Morrison Homes, Inc. At the center of the case was a question over the meaning of the term "occurrence" as used in a standard ISO commercial general liability ("CGL") insurance policy. Additionally, the policyholder's potential liability for alleged property damage arising from faulty workmanship in residential construction (construction defects) was in question. In the matter of HDI v Morrison, the Eleventh Circuit Court specifically asked: 1. Whether, for an “occurrence” to exist under a standard CGL policy, Georgia law requires there to be damage to “other property,” that is, property other than the insured’s completed work itself. 2. If the answer to Question One (1) is in the negative, whether, for an “occurrence” to exist under a standard CGL policy, Georgia law requires that the claims being defended not be for breach of contract, fraud, or breach of warranty from the failure to disclose material information.
In its filed ruling, the Georgia Supreme Court answered the first question in the negative, and the second question in the affirmative as to fraud and in the negative as to breach of warranty. In so ruling, the Court specifically reaffirmed its recent holding in American Empire Surplus Lines Ins. Co. v. Hathaway Dev. Co., 707 S.E.2d 369 (Ga. 2011) that claims of faulty workmanship in residential construction may constitute an occurrence under standard CGL policies.
California, Hull & Company, Inc. v Superior Court A wholesale broker is sued by a third party claimant for professional negligence. Plaintiff, having been the subject of a shooting at a bar, initially sued the bar and its security guard company, claiming that they should have prevented the shooting. After settling claims with the security guard company pursuant to an assignment of rights and a covenant not to execute, plaintiff brought this lawsuit against the security guard company’s insurer, claiming that the insurer had committed bad faith by denying coverage for the underlying lawsuit against the security guard company based on an assault and battery exclusion. The trial court, however, found the exclusion to be conspicuous and enforceable, thus granting summary judgment in favor of the insurer. In addition to suing the insurer, plaintiff – the third party claimant – sued the wholesale broker, in the same action, claiming to have standing based on the same assignment of rights. Arguing that the wholesale broker owed a duty of care to the security guard company to ensure that the insurance policy covered the underlying lawsuit against the security guard company, plaintiff claimed that the wholesale broker breached its duty of care to the security guard company and, by extension, to plaintiff. While finding the insurance policy exclusion to be enforceable, the trial court – in response to the broker’s summary judgment motion – held that there was a triable issue of fact as to duty of care, thus warranting a jury trial. As a result, the broker is filing petition to obtain immediate appellate review of the trial court’s order denying its summary judgment motion.
PCI Insurer Survey on the Impact of the NRRA Summary of responses include: o
Responses suggest that larger insurers (>$250M DPW) and those writing >50% surplus lines, may be seeing more benefit from a compliance cost perspective as a result of NRRA.
o
Most respondents across the board (in size & whether predominantly a SL writer or not) indicate their statistical system needed to be updated to capture “home state” as a result of NRRA.
o
Particularly for the predominately surplus lines respondents, state annual filing requirements and reconciliation of broker tax filings were considered to be of most burden. Policy level detail reporting requirements were NOT identified at all as being of most burden.
o
The majority of respondents across the board saw Florida as maintaining the most burdensome insurer requirements.
o
Respondents, especially the predominately surplus lines writers, indicated that the market would benefit with states moving to a single home-state tax rate basis on multi-state premiums and use of a uniform policy detail reporting format for those states requiring that information.
Agenda Item XI
2
o
In the opinion of the vast majority of respondents, NIMA and the Surplus Lines Clearinghouse have not promoted regulatory uniformity as intended by the NRRA.
o
There was unanimous consent that the federal ECP provisions have had no impact on the demand for surplus lines coverage.
o
Most respondents indicated that their company has not experienced a change in surplus lines market share since enactment of the NRRA.
o
Pursuant to the NRRA, the GAO is required to report on the market impact of the implementation of the NRRA. Across the board, responses reflected no market impact in terms of shift of business from admitted to surplus lines business; pricing or availability of insurance coverage; or, the # of individuals with nonadmitted policies, types of coverage provided, or availability in admitted insurance coverage.
NAIC Surplus Lines Financial Analysis Working Group The Surplus Lines Financial Analysis Working Group operates in Executive Session. The authority of the working group is limited to that of an advisory body, with a goal of formulating recommendations to the Chairs of the Surplus Lines (C) Task Force and Financial Condition (E) Committee for the appropriate regulatory response. Issues upon which the Surplus Lines Financial Analysis (E) Working Group may formulate a recommendation might include, but are not limited to, approval or disapproval of applicants to the Quarterly Listing, delisting of listed insurers, changes to trust fund requirements, or placement of limitations or restrictions on a listed insurer's business activity in the United States.
NAIC IID Plan of Operation Review Group IID Plan of Operation Review Group maintains the IID Plan of Operation and its requirements relating to standards for inclusion on the NAIC Quarterly Listing of Alien Insurers (“Quarterly List”) concerning capital and/or surplus funds, U.S. trust accounts and fitness of management among other criteria. Click here to access the company annual filing requirements and company applications forms. Quarterly Listing of Alien Insurers
Supporting documents:
Agenda Item XI
3
Agenda Item State Insurer Eligibility & Reporting Requirements Agenda Item XII.
Action required: Members will review and discuss state surplus line insurer eligibility and reporting requirements. Overall and state level advocacy priorities will be discussed relative to ensuring states adhere to the letter and intent of the related NRRA provisions. Discussion will also cover insurer deposits, eligibility lists, application and filing fees.
Background information: Surplus Lines Reporting Requirements - The chart identifies current statutory and regulatory provisions addressing filing requirements applicable to foreign and alien surplus lines insurers, exemptions and policy level premium reporting requirements. Surplus Lines Select Requirements – The chart is an overview of select requirements for surplus lines insurers, including insurer eligibility lists and capital & surplus requirements.
Supporting documents: A. FSLSO Insurer Procedures Manual B. Nevada DOI Statement Regarding Certificates of Eligibility for Nonadmitted Insurers
Department of Business and Industry
Nevada Division of Insurance 1818 E. College Pkwy, Suite 103, Carson City, Nevada 89706 Phone: (775) 687-0700 Fax: (775) 687-0787 Web: doi.nv.gov
SURPLUS LINES INSURERS Statement Regarding Certificates of Eligibility for Nonadmitted Insurers The Nevada Division of Insurance no longer issues Certificates of Eligibility for foreign or alien insurers that write surplus lines or nonadmitted insurance. Instead, eligibility to write such insurance in Nevada is determined solely by compliance with recent federal and Nevada law. On July 21, 2011, the federal Nonadmitted and Reinsurance Reform Act (NRRA) – part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 – became federal law. The NRRA limits the eligibility criteria that states may require for nonadmitted insurers. To comply with the NRRA, the Nevada Legislature enacted Senate Bill (SB) 289, effective June 13, 2011. Section 25 of SB 289 revises the eligibility criteria for nonadmitted insurers. The eligibility criteria only apply to insurance for risks whose Home State, as defined in SB 289, is Nevada. A US-domiciled insurer is eligible to write nonadmitted insurance in Nevada for risks whose Home State is Nevada if: (1) It is eligible in its state of domicile to write the kinds of insurance which it intends to write in Nevada; and (2) It maintains minimum capital and surplus (or equivalent) requirements in the amount of $15,000,000 or the minimum requirements of NRS 680A.120, whichever requirements are greater. These requirements may be reduced for an insurer as a result of an affirmative finding of acceptability by the Commissioner – based upon such factors as quality of management, capital and surplus of any parent company, company underwriting profit and investment income trends, market availability, and company record and reputation within the industry. For risks whose Home State is not Nevada, the law of the Home State, and not Nevada law, determines an insurer’s eligibility to write nonadmitted insurance on that risk. An alien insurer is eligible to write nonadmitted insurance in Nevada for risks whose Home State is Nevada if the alien insurer is listed on the Quarterly Listing of Alien Insurers maintained by the International Insurers Department of the National Association of Insurance Commissioners. If an alien insurer is not listed on the Quarterly Listing of Alien Insurers, then the insurer may still be eligible to write nonadmitted insurance for risks whose Home State is Nevada if the insurer meets the eligibility criteria in Subsection 4 of Section 25 of SB 289. For such alien insurers, these eligibility criteria are substantially similar to the criteria in existence prior to the enactment of SB 289.
ADDITIONAL INFORMATION For Compliance with the Nonadmitted and Reinsurance Reform Act of 2010 See Bulletin 11-002 - http://doi.nv.gov/sinfo/bulletin/11-002.pdf
ALSO SEE http://www.nsla.org/Default.aspx 10/2011
Agenda Item Legislative State Issues Agenda Item XIII.
Action required: David Kodama will report on legislative issues that affect surplus lines insurers. Members will receive an update on the states that have enacted, and states that may be introducing, legislation to create a domestic surplus lines insurer charter in the state.
Background information:
Seven states now offer a DSLI designation Illinois was the first. Effective August 14, 1998, section 445(a) was added to the Illinois Insurance Code creating a new category of insurer called a Domestic Surplus Lines Insurer (DSLI). In general, a surplus lines insurer was always an admitted insurer in its own state of domicile. This IL provision provided for an Illinois-domiciled insurer to be treated as non-admitted in Illinois for certain purposes. A DSLI is an insurer that is specially licensed under the domestic surplus lines insurer law. Prior to the inception of DSLI laws, a U.S. based surplus lines insurer had to operate on a licensed, admitted basis in its state of domicile. Therefore, if an insurer wanted to write surplus lines contracts in all fifty states, two companies had to be created and capitalized. For example, a primary insurance company would be domiciled in Illinois to write policies in 49 states (all states except Illinois), and a secondary insurance company had to be created and capitalized (domiciled in a different state) just to write surplus lines policies in Illinois. The DSLI law was intended to address this unnecessary use of capital and an inefficiency of the surplus lines insurance system. Oklahoma followed suit in 2009. During the 2011 legislative sessions, in an effort to attract new surplus lines companies to their state, DSLI legislation was enacted in Arkansas (SB 45), Delaware (SB 109), New Hampshire (HB 424) and New Jersey (AB 2670). Most recently, North Dakota House Bill 1181 was approved on April 2, 2013 and became effective on August 1, 2013. This act creates new section 26.1-44-03.2 of the North Dakota Century Code, relating to domestic surplus lines insurers.
Supporting documents: A. DSLI State Comparison Chart
B. Missouri DSLI Draft Legislation C. Connecticut DSLI Draft Legislation
Agenda Item XIII
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State AR
Statutory Citation Arkansas Code § 2365-320
Authority to Write Allowed to write surplus lines insurance in any jurisdiction in which it is eligible.
DE
Delaware Code § 191932
Such insurers may write surplus lines insurance in any jurisdiction, including this State.
IL
15 ILCS 5/445-445a
A domestic surplus line insurer may insure in this State an Illinois risk only if procured from a surplus line producer pursuant to Section 445 of this Code.
NRRA Deemed a nonadmitted surplus lines insurer under the 34 DoddFrank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-35 203.
For the purposes of the federal Nonadmitted and Reinsurance Reform Act of 2010 (15 USC 8201 et seq.), a domestic surplus line insurer shall be considered a nonadmitted insurer, as the term is defined in the Act, with respect to risks insured in this State. "Unauthorized insurer" means an insurer that does not hold a valid certificate of authority issued by the Director but, for the purposes of this Section, shall also include a domestic surplus line insurer as defined in Section 445a.
October 23, 2013 © 2013 Property Casualty Insurers Association of America
Taxing Authority
Regulatory Authority
A surplus lines broker that obtains surplus lines insurance from a domestic surplus lines insurer shall comply with § 2365-315.
Unless specifically exempt, the insurance laws of this state regarding financial and solvency requirements apply to a domestic surplus lines insurer.
In this State, a Delaware domestic surplus lines insurer may only insure a Delaware risk when such coverage is procured pursuant to this chapter governing surplus lines insurance, and the premium shall be subject to surplus lines premium tax pursuant to § 1917 of this title. Reference 445.3
A domestic surplus lines insurer must agree to abide by all the requirements of this chapter, and all other requirements of the Delaware Code applicable to Delaware domestic insurers, unless otherwise exempted. The provisions of Chapters 42 and 44 of this title will not apply to a domestic surplus lines insurer. Surplus line insurance procured under this Section, including insurance procured from a domestic surplus line insurer, is not subject to the provisions of the Illinois Insurance Code other than Sections 123, 123.1, 401, 401.1, 402, 403, 403A, 408, 412, 445, 445.1, 445.2, 445.3, 445.4, and all of the provisions of Article XXXI to the extent that the provisions of Article XXXI are not inconsistent with the terms of this Act. A domestic surplus line insurer is not subject to the provisions of Articles XXXIII, XXXIII 1/2, XXXIV, XXXVIIIA, Section 468, or Section 478.1 of this Code.
2
State NH
Statutory Citation NH Rev Stat § 405:24
NJ
NJ Rev Stat 17:22-6.45
ND
North Dakota Code 26.1-44-03.2
Authority to Write
NRRA
Taxing Authority
A domestic surplus lines insurer is not subject to the provisions of Title XXXVII, except that it shall be subject to any statute or regulation which specifically references unadmitted surplus lines companies and to the provisions of RSA 400-A:37, RSA 400-A:39, RSA 404-F, and RSA 417:1 through 417:31.
The authority of a domestic surplus lines insurer in this state shall be limited to providing insurance covering risks procured from a surplus lines producer in accordance with this section. A domestic surplus lines insurer shall only insure in this State a New Jersey risk procured from a surplus lines agent in accordance with the provisions of "the surplus lines law," A domestic surplus lines insurer may write surplus lines insurance in North Dakota and any other jurisdiction in which the insurer is eligible.
October 23, 2013 © 2013 Property Casualty Insurers Association of America
Regulatory Authority
A domestic surplus lines insurer shall be considered an eligible, unauthorized insurer for purposes of writing surplus lines insurance coverage.
Insurance written by a domestic surplus lines insurer shall be subject to the tax on premiums provided by section 25 of P.L.1960, c.32
For purposes of the federal Nonadmitted and Reinsurance Reform Act of 2010 [15 U.S.C. 8201 et seq.], a domestic surplus lines insurer is considered a nonadmitted insurer as defined under that Act, with respect to risks insured in this state.
A domestic surplus lines insurer may insure in this state any risk if: a. Produced pursuant to chapter 26.1 - 44; b. The premium is subject to surplus lines premium tax pursuant to section 26.1 - 44 - 03.1 ; and, c. Issued pursuant to the surplus lines insurance multistate compliance compact
Except as specifically exempted from such requirements, a domestic surplus lines insurer is subject to compliance with all financial examination and solvency requirements that apply to domestic insurers under chapter 26.1 - 03 regarding examinations and reports .
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State OK
Statutory Citation 36 O.S. § 1101.1
Authority to Write Such insurers may write surplus line insurance in this state and in any other jurisdiction allowed under the Nonadmitted and Reinsurance Reform Act of 2010.
October 23, 2013 © 2013 Property Casualty Insurers Association of America
NRRA
Taxing Authority
… in any other jurisdiction allowed under the Nonadmitted and Reinsurance Reform Act of 2010.
The premiums of a domestic surplus line insurer shall be subject to surplus line premium tax pursuant to Section 1115 of this title. The surplus lines broker or licensee shall pay all premium taxes to the Insurance Commissioner when Oklahoma is the home state of the insured until and unless in the exercise of his or her sole discretion and judgment, the Insurance Commissioner decides to join the Nonadmitted Insurance MultiState Agreement or any other multistate agreement or compact with the same function and purpose.
Regulatory Authority
4
AN ACT to amend section 384.015 and to enact a new section relating to domestic surplus lines insuranceinsurers. Be it enacted by the General Assembly of the State of Missouri, as follows: Section A. Section 379.316, RSMo, is repealed and one new section enacted in lieu thereof, to be known as section 379.316, to read as follows: 379.316. Scope of act (section 379.017 and sections 379.316 to 379.361)--exemption from insurance laws 1. Section 379.017 and sections 379.316 to 379.361 apply to insurance companies incorporated pursuant to sections 379.035 to 379.355, section 379.080, sections 379.060 to 379.075, sections 379.085 to 379.095, sections 379.205 to 379.310, and to insurance companies of a similar type incorporated pursuant to the laws of any other state of the United States, and alien insurers licensed to do business in this state, which transact fire and allied lines, marine and inland marine insurance, to any and all combinations of the foregoing or parts thereof, and to the combination of fire insurance with other types of insurance within one policy form at a single premium, on risks or operations in this state, except: (1) Reinsurance, other than joint reinsurance to the extent stated in section 379.331; (2) Insurance of vessels or craft, their cargoes, marine builders' risks, marine protection and indemnity, or other risks commonly insured pursuant to marine, as distinguished from inland marine, insurance policies; (3) Insurance against loss or damage to aircraft; (4) All forms of motor vehicle insurance; [and] (5) All forms of life, accident and health, and workers' compensation insurance[.]; and (6) All insurance issued by a domestic surplus lines insurer as set forth in section 384.018. 2. Inland marine insurance shall be deemed to include insurance now or hereafter defined by statute, or by interpretation thereof, or if not so defined or interpreted, by ruling of the director, or as established by general custom of the business, as inland marine insurance. 3. Commercial property and commercial casualty insurance policies are subject to rate and form filing requirements as provided in section 379.321. Section B. Section 384.015, RSMo, is repealed and one new section enacted in lieu thereof, to be known as section 384.015, to read as follows: 384.015. Definitions. As used in sections 384.011 to 384.071, the following terms shall mean:
(1) “Admitted insurer”, an insurer licensed to do an insurance business in this state; (2) “Capital”, funds paid in for stock or other evidence of ownership; (3) “Director”, the director of the department of insurance, financial institutions and professional registration; (4) “Domestic surplus lines insurer”, an admitted nonadmitted insurer that is domiciled in this state with which a surplus lines licensee may place surplus lines insurance; [4] (5) “Eligible surplus lines insurer”, a nonadmitted insurer with which a surplus lines licensee may place surplus lines insurance; [5](6) “Exempt commercial purchaser”, any person purchasing commercial insurance that, at the time of placement, meets the following requirements: (a) The person employs or retains a qualified risk manager to negotiate insurance coverage; (b) The person has paid aggregate nationwide commercial property and casualty insurance premiums in excess of one hundred thousand dollars in the immediately preceding twelve months; and (c) a. The person meets at least one of the following criteria: i. The person possesses a net worth in excess of twenty million dollars, as such amount is adjusted under subparagraph b. of this paragraph; ii. The person generates annual revenues in excess of fifty million dollars, as such amount is adjusted under subparagraph b. of this paragraph; iii. The person employs more than five hundred full-time or full-time equivalent employees per individual insured or is a member of an affiliated group employing more than one thousand employees in the aggregate; iv. The person is a not-for-profit organization or public entity generating annual budgeted expenditures of at least thirty million dollars, as such amount is adjusted under subparagraph b. of this paragraph; or v. The person is a municipality with a population in excess of fifty thousand persons. b. Effective on the fifth January first occurring after the date of the enactment of United States Public Law 111-203 and each fifth January first occurring thereafter, the amounts in items i, ii, and iv of subparagraph a. of this paragraph shall be adjusted to reflect the percentage change for such five-year period in the consumer price index for all urban consumers published by the United States Bureau of Labor Statistic of the Department of Labor;
[6](7) “Export”, to place surplus lines insurance with a nonadmitted insurer; [7](8) “Home state”: (a) Except as provided in paragraph (b) of this subdivision, the term “home state” means, with respect to an insured: a. The state in which an insured maintains its principal place of business or, in the case of an individual, the individual’s principal residence; or b. If one hundred percent of the insured risk is located out of the state referred to in subparagraph a. of this paragraph, the state to which the greatest percentage of the insured’s taxable premium for that insurance contract is allocated; (b) If more than one insured from an affiliated group are named insureds on a single nonadmitted insurance contract, the term “home state” means the home state, as determined under paragraph (a) of this subdivision, of the member of the affiliated group that has the largest percentage of premium attributed to it under such insurance contract; (c) The principal place of business is the state where the insured maintains its headquarters and where the insured’s high-level officers direct, control and coordinate the business activities of the insured; [8](9) “Kind of insurance”, one of the types of insurance required to be reported in the annual statement which must be filed with the director by admitted insurers; [9](10) “Nonadmitted insurance”, any property and casualty insurance permitted to be placed directly or through a surplus lines licensee with a nonadmitted insurer eligible to accept such insurance; [10](11) “Nonadmitted insurer”, an insurer not licensed to do an insurance business in this state, including insurance exchanges authorized under the laws of other states; but does not include a risk retention group, as that term is defined in section 2(a)(4) of the Liability Risk Retention Act of 1986 (15 U.S.C. 3901(a)(4)).; [11](12) “Producing broker”, the individual broker or agent dealing directly with the party seeking insurance; [12](13) “Qualified risk manager”, shall have the same meaning prescribed in the Nonadmitted and Reinsurance Reform Act of 2010 (15 U.S.C. Section 8206); [13](14) “Surplus”, funds over and above liabilities and capital of the company for the protection of policyholders; [14](15) “Surplus lines insurance”, any insurance of risks resident, located or to be performed in this state, permitted to be placed through a surplus lines licensee with a nonadmitted insurer eligible to accept such insurance, other than reinsurance, and life and health insurance and annuities;
[15](16) “Surplus lines licensee”, a person licensed to place insurance on risks resident, located or to be performed in this state with nonadmitted insurers eligible to accept such insurance; [16](17) “Wet marine and transportation insurance”: (a) Insurance upon vessels, crafts, hulls and of interests therein or with relation thereto; (b) Insurance of marine builder’s risks, marine war risks and contracts of marine protection and indemnity insurance; (c) Insurance of freights and disbursements pertaining to a subject of insurance coming within this section; and (d) Insurance of personal property and interests therein, in the course of exportation from or importation into any country, or in the course of transportation coastwise or on inland waters, including transportation by land, water or air from point of origin to final destination, in connection with any and all risks or periods of navigation, transit or transportation, and while being prepared for and while awaiting shipment, and during any delays, transshipment, or reshipment incident thereto. Section C. A new section is enacted, to be known as section 384.018, to read as follows: 384.018. Domestic surplus lines insurer. (a) An admitted nonadmitted insurer that is domiciled in this state will be deemed a domestic surplus lines insurer if all of the following are satisfied: (1) The insurer must possess policyholder surplus of at least twenty million dollars ($20,000,000); (2) The insurer is an approved or eligible surplus lines insurer in at least one jurisdiction other than this state; (3)The board of directors of the insurer has passed a resolution seeking to be a domestic surplus lines insurer in this state; and (4) The Director has given written approval for the insurer to be a domestic surplus lines insurer. (b) For the purposes of the federal Nonadmitted and Reinsurance Reform Act of 2010 (15 USC 8201 eq seq.) a domestic surplus lines insurer shall be considered a nonadmitted insurer as the term is defined in the Act, with respect to risks insured in this state. (c) A domestic surplus lines insurer is deemed an eligible surplus lines insurer and may issue any policyauthorized to write any kind of insurance that a nonadmitted insurer not domiciled in this state is authorized to issueeligible to write.
(d) Notwithstanding any other statute, the policies issued in this state by a domestic surplus lines insurer shall be subject to taxes assessed upon surplus lines policies issued by nonadmitted insurers including the surplus lines premium tax pursuant to section 384.059 but will not be subject to other taxes levied upon admitted insurers, whether domestic or foreign, including but not limited to taxes imposed by section 148.320. (e) Policies issued by a domestic surplus lines insurer are not subject to protections of or other provisions of the Missouri Property and Casualty Insurance Guaranty Association Act or the Missouri Life and Health Insurance Guaranty Association Act. (f) All financial and solvency requirements imposed by this state's law upon domestic admitted insurers shall apply to domestic surplus lines insurers unless domestic surplus lines insurers are otherwise specifically exempted. Text in bold is added; text in brackets [ ] is stricken. ******************************
Nonadmitted insurers, purchases from allowed, when. 384.017. Surplus lines insurance may be placed by a surplus lines licensee if: (1) Each insurer is an eligible surplus lines insurer; (2) Each insurer is authorized to write the [type]kind of insurance in its domiciliary jurisdiction; (3) The full amount or kind of insurance is not obtainable from admitted insurers who are actually transacting in this state the class of insurance required by the insured. Insurance shall be deemed obtainable within the meaning of this section if there is available a market with admitted insurers that can supply the insured's requirements both as to type of coverage and as to quality of service. "Type of coverage", as used in this section, refers to hazards covered and limits of coverage. "Quality of security and service", as used in this section, refers to the rating by a recognized financial service; and (4) All other requirements of sections 384.011 to 384.071 are met. (L. 1987 H.B. 700 § 2, A.L. 1989 S.B. 250, A.L. 2011 S.B. 132) Effective 7-07-11
Nonadmitted insurers, limitation on furnishing coverage--exempt commercial purchaser, licensee exemptions. 384.021. 1. A surplus lines licensee shall not place coverage with a nonadmitted insurer, unless, at the time of placement, the surplus lines licensee has determined that the nonadmitted insurer:
(a) (1)(2) Each insurer iIs authorized to write the [type]kind of insurance in its domiciliary jurisdiction; and meets one of these criteria:
(12) Has capital and surplus or its equivalent under the laws of its domiciliary jurisdiction, which equals the greater of the minimum capital and surplus requirements under the laws of this state or fifteen million dollars, except that the requirements of this subdivision may be satisfied by an insurer's possessing less than the minimum capital and surplus upon an affirmative finding of acceptability by the director provided that the finding shall be based upon such factors as quality of management, capital and surplus of any parent company, company underwriting profit and investment income trends, market availability and company record and reputation within the industry, and in no event shall the director make an affirmative finding of acceptability when the nonadmitted insurer's capital and surplus is less than four million five hundred thousand dollars; and/or (2b) Appears on the most recent list of eligible surplus lines insurers published by the director from time to time but at least semiannually or on the most recent quarterly listing of alien insurers maintained by the international insurers department of the National Association of Insurance Commissioners. 2. Notwithstanding any other provision of this chapter or rules adopted to implement the provisions of this chapter, a surplus lines licensee seeking to procure or place nonadmitted insurance in Missouri for an exempt commercial purchaser shall not be required to satisfy any requirement to make a due diligence search to determine whether the full amount or type of insurance sought by such exempt commercial purchaser can be obtained from nonadmitted insurers if: (1) The surplus lines licensee procuring or placing the surplus lines insurance has disclosed to the exempt commercial purchaser that such insurance may or may not be available from the admitted market that may provide greater protection with more regulatory oversight; and (2) The exempt commercial purchaser has subsequently requested in writing the surplus lines licensee to procure or place such insurance from a nonadmitted insurer. (L. 1987 H.B. 700 § 3, A.L. 1989 S.B. 250, A.L. 1994 H.B. 1449 merged with S.B. 687, A.L. 2011 S.B. 132) Effective 7-07-11
Unlisted nonadmitted insurers may be used for coverage, when--requirements. 384.023. Only that portion of any rRisk eligible for export for which the full amount of coverage is not procurable from eligible surplus lines insurers may be placed with any other nonadmitted insurer which does not appear on the list of eligible surplus lines insurers published by the director pursuant to subdivision (4)1(b) of section 384.021 but nonetheless meets the requirements set forth in subdivisions (1) to (3)1(a) of section 384.021 and any related complying
regulations of the director. The surplus lines licensee seeking to provide coverage through an unlisted nonadmitted insurer shall make a filing specifying the amount and percentage of each risk to be placed, and naming the nonadmitted insurer with which placement is intended. Within twenty days after placing the coverage, the surplus lines licensee shall also send written notice to the insured or the producing broker that the insurance, or a portion thereof, has been placed with such nonadmitted insurer. (L. 1987 H.B. 700 § 4)
AN ACT CONCERNING REVISIONS TO THE INSURANCE STATUTES. Be it enacted by the Senate and House of Representatives in General Assembly convened: Section 1. Section 38a-1 of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2014): Terms used in this title, unless it appears from the context to the contrary, shall have a scope and meaning as set forth in this section. (1) “Affiliate” or “affiliated” means a person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with another person. (2) “Alien insurer” is defined in subparagraph (A) of subdivision (11) of this section. (3) “Annuities” means all agreements to make periodical payments where the making or continuance of all or some of the series of the payments, or the amount of the payment, is dependent upon the continuance of human life or is for a specified term of years. This definition does not apply to payments made under a policy of life insurance. (4) “Commissioner” means the Insurance Commissioner. (5) “Control”, “controlled by” or “under common control with” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with the person. (6) “Domestic insurer” is defined in subparagraph (B) of subdivision (11) of this section. (7) “Foreign country” means any jurisdiction not in any state, district or territory of the United States.
(8) “Foreign insurer” is defined in subparagraph (C) of subdivision (11) of this section. (9) “Insolvency” or “insolvent” means, for any insurer, that it is unable to pay its obligations when they are due, or when its admitted assets do not exceed its liabilities plus the greater of: (A) Capital and surplus required by law for its organization and continued operation; or (B) the total par or stated value of its authorized and issued capital stock. For purposes of this subdivision “liabilities” shall include but not be limited to reserves required by statute or by regulations adopted by the commissioner in accordance with the provisions of chapter 54 or specific requirements imposed by the commissioner upon a subject company at the time of admission or subsequent thereto. (10) “Insurance” means any agreement to pay a sum of money, provide services or any other thing of value on the happening of a particular event or contingency or to provide indemnity for loss in respect to a specified subject by specified perils in return for a consideration. In any contract of insurance, an insured shall have an interest which is subject to a risk of loss through destruction or impairment of that interest, which risk is assumed by the insurer and such assumption shall be part of a general scheme to distribute losses among a large group of persons bearing similar risks in return for a ratable contribution or other consideration. (11) “Insurer” or “insurance company” includes any person or combination of persons doing any kind or form of insurance business other than a fraternal benefit society, and shall include a receiver of any insurer when the context reasonably permits. When modified as follows, the term has the following meanings: (A) “Alien insurer” means any insurer that has been chartered by or organized or constituted within or under the laws of any state or country without the United States. (B) “Domestic insurer” means any insurer that has been chartered by, incorporated, organized or constituted within or under the laws of this state. (C)[“Foreign insurer” means any insurer that has been chartered by or organized or constituted within or under the laws of another state or a territory of the United States.] “Domestic surplus lines insurer” means a domestic insurer that has been chartered by, incorporated, organized or constituted within or under the laws of this state and which has been declared to be an eligible surplus lines insurer by the commissioner. Such insurer shall be deemed a nonadmitted insurer under the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, as amended from time to time. (D) “Foreign insurer” means any insurer that has been chartered by or organized or constituted within or under the laws of another state or a territory of the United States. [(D)](E) “Mutual insurer” means any insurance company without capital stock, the managing directors or officers of which are elected by its members. [(E)](F) “Unauthorized insurer” or “nonadmitted insurer” means (i) an insurer that has not been granted a certificate of authority by the commissioner to transact the business of insurance in this state or an insurer transacting business not authorized by a valid certificate or, (ii) a domestic surplus lines insurer .
Nothing in this section shall be construed to override contractual and delivery system arrangements governing a health care center's provider relationships. Sec. 10. (NEW) (Effective July 1, 2014) (a) A domestic surplus lines insurer may issue policies of insurance against any loss from any contingency as provided by the insurance laws of this state, except any coverage which can be placed through a residual market mechanism, as defined in subsection (x) of section 38a-976. (b) The provisions of section 38a-271 to 38a-278, inclusive, other than section 38a-277, 38a663 th 38a-691, inclusive, 38a-695 and 38a-836 to 38a-902, inclusive, will not apply to a domestic surplus lines insurer. Sec 11. Section 38a-702q of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2014): Except as provided in section 38a-702g and section 38a-702n, sections 38a-702a to 38a-702r, inclusive, shall not apply to [excess and ]surplus lines [agents and ]brokers licensed pursuant to sections 38a-740 to 38a-745, inclusive, and section 38a-794. Sec. 12. Subsection (a) of section 38a-712 of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2014): (a) Each insurance company authorized or permitted to do business in this state and each residual market mechanism established pursuant to section 38a-329 shall report to the Insurance Commissioner (1) any failure on the part of an insurance producer or [excess line] surplus lines broker to remit premiums for policies or endorsements issued to insureds directly or through the producer within thirty days following the due date of the account of the producer with the company, its state agent or managing general agent or (2) whenever a check issued by such producer to the company or residual market mechanism is returned for insufficient funds or otherwise dishonored and remains outstanding fifteen days following receipt of such return.
Agenda Item Regulatory State Issues Agenda Item XIV.
Action required: David Kodama will report on regulatory issues that affect surplus lines insurers.
Background information:
New Jersey Introduces Surplus Lines Automation System for Insurers New Mexico Surplus Line Insurer Policy Filing South Carolina Bulletin 2011-05 New Online Surplus Lines Broker Premium Tax System Guidelines Rhode Island DBR Adopts Amendments to Regulation 21-Medical Malpractice – To qualify under this section the insurance policy must be issued by an insurer licensed to write medical malpractice insurance in Rhode Island or by a self-insurer authorized by the Department pursuant to Section 7 of this regulation or the coverage may be provided by an indemnification agreement under a program established in compliance with R.I. Gen. Laws § 27-16-2.6. Policies issued by approved surplus lines insurers do not qualify to satisfy the minimum limit. This is not a prohibition on the sale of surplus lines policies which may be purchased in the voluntary market in addition to the minimum liability policy at the option of the insured. Surplus Lines Insurer Security Deposit Requirements: Massachusetts, New Jersey, New Mexico (NY)
Supporting documents: A. PCI NM PROPOSED Bulletin_13NMAC19-2-17
Insurance Bulletin No. 2013-XXX August XX, 2013 TO:
ELIGIBLE SURPLUS LINES INSURERS
RE:
SURPLUS LINE INSURER POLICY FILINGS
THE FOLLOWING BULLETIN is issued pursuant to 13.1.2.1 to 13.1.2.10 NMAC. The purpose of this Bulletin is to clarify 13 NMAC 19.2.17.4 [now 13.19.2.17.D] for eligible surplus lines insurers and replaces Bulletin No. 1999-001, dated January 27, 1999, which is hereby rescinded. 13 NMAC 19.2.17.D requires that each surplus lines insurer file certain documents, including the annual summary report prescribed in 13 NMAC 19.2.21, with the Superintendent on or before March 1 of each year. PURSUANT TO FEDERAL LEGISLATION ENTITLED THE NONADMITTED AND REINSURANCE REFORM ACT (15 UNITED STATES CODE SECTION 8201) AND 2011 NEW MEXICO LEGISLATION TO IMPLEMENT THE FEDERAL ACT, SURPLUS LINES INSURERS ARE NO LONGER REQUIRED TO FILE SUCH DOCUMENTS PRESCRIBED BY 13 NMAC 19.2.17.D.
Agenda Item Legal/Litigation Report Agenda Item XV.
Action required: Members will receive a report on litigation and legal court cases that could affect surplus lines insurers. Background information:
TX: Lennar Corporation et al., v. Markel American Insurance Company, No. 11-394, SUPREME COURT OF TEXAS On Petition for Review from the Court of Appeals, Fourteenth District of Texas at Houston, No. 1410-0008-CV o Brief in support of motion for rehearing of Amici Curae by American Home Assurance Company, Republic Underwriters Insurance Company, RSUI Group, Inc., and Property Casualty Insurers Association of America An amicus brief supporting Markel’s request for rehearing argues that the Texas Supreme Court decision shifts the insured’s burden to establish coverage under the duty to defend and effectively eliminates an insurer’s ability to require an insured to obtain consent before settlement of a claim. Further, the decision, when viewed against prior case law, leaves insurers with no right to subrogation from other insurers if it capitulates to the insured’s demand for payment of the settlement. Additionally, the Court’s “property damage” holding likely exposes insurers to liability for a disproportionate share of indemnity.
FL: Canal Indem. Co. v. Margaretville of NSB, Inc., 2013 U.S. Dist. LEXIS 93658. Plaintiff sought to rescind the CGL Policy it issued pursuant to the remedy provided in Florida Statute § 627.409, based upon Plaintiff's contention that defendant made material misrepresentations on the application for insurance. Defendant insists that the remedy of rescission under section 627.409 is not available to surplus lines insurers, such as Plaintiff. Plaintiff contends that this statutory remedy is available. The Court found that rescission pursuant to Fla. Stat. § 627.409 is unavailable, and Plaintiff is not entitled to summary judgment. Common law rescission may be available. http://docs.justia.com/cases/federal/districtcourts/florida/flmdce/6:2011cv02001/266325/112/0.pdf?ts=1376380861
NY: B&A Demolition and Removal, Inc., v. Markel Insurance Company, 11-cv-0572 (ADS)(ARL) US DISTRICT COURT FOR THE EASTERN DISTRICT OF NY, 4/18/13, Filed. At issue was whether the policy was governed by New York’s “no prejudice” rule, whereby an insurer need not demonstrate prejudice in order to disclaim coverage based on an insured’s delay in providing notice of claim or suit, or whether the policy was governed by the “notice prejudice” standard set forth in New York Insurance Law §3420(a), as amended by the New York legislature effective January 17, 2009. The amended §3420(a) states late notice disclaimers will only be effective if the insurer has been prejudiced by the insured’s delay in providing notice. The changes
to §3420(a) only apply to policies “issued or delivered” on or after January 17, 2009. There was no dispute that the insurer transmitted a copy of the policy, via email, to the wholesale broker, on December 1, 2008. The wholesaler testified that she emailed a copy of the policy to the retail broker, on the same day. The retailer, however, claimed not to have received the email because of an apparent technical problem with its email server. The retailer contended that it did not have actual receipt of a copy of the policy until sometime in February 2009. The Court held that "an individual's legal agency status in an insurance transaction, including delivery of the policy, is not determined by occupational classification, i.e. insurance broker or insurance agent, or any other formalistic test, but rather by the nature and weight of the surrounding circumstances." Here, the Court found that the evidence reveals that the wholesale “broker” was an agent of the insured with regard to the "delivery" of the Policy. The "delivery" took place when the wholesale broker received the Policy prior to January 17, 2009, when the requirement to show prejudice was enacted, therefore, the untimely notice by the insured precluded recovery under the Policy. http://www.leagle.com/decision/In%20FDCO%2020130419C41
TX: Magnum Minerals, v. Homeland Insurance Company of New York, No. 2:13-CV-103-J UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS, 2013 U.S. Dist. LEXIS 126606. September 5, 2013, Decided, September 5, 2013, Filed. The allegations are that Defendants have been violating Chapter 102 and Chapter 981 of the Texas Insurance Code through the issuance of surplus lines policies to potential class members from 2005 to the present. Specifically, the class alleges that the Defendants are violating: (1) Section 101.201 of the Code, which prohibits the issuance of insurance by an unauthorized insurer, unless the policy has been procured by a licensed surplus lines agent from an eligible surplus lines insurer; and (2) Section 981.004, which prohibits the procurement of surplus lines insurance before a diligent search for an authorized insurer willing to cover the risk. Plaintiffs therefore seek injunctive relief prohibiting Defendant "from enforcing any contractual rights or exclusions to insurance coverage" against any of the class members, as well as prospective and retrospective injunctive relief mandating that all Defendants "actually and expressly make a diligent effort and attempt to secure coverage" from an admitted Texas insurer and "present the results of such efforts and attempts to secure such coverage" to any "Texas insured or customer." The motion to remand was denied. http://docs.justia.com/cases/federal/districtcourts/texas/txndce/2:2013cv00103/233364/82/0.pdf?ts=1378502573
TX: Jetpay Merchant Services, LLC, v. Chartis Specialty Insurance Company, and Royal Group Services, LLC, No. 3:13-CV-0401-M UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION 2013 U.S. Dist. LEXIS 94370 July 8, 2013, Decided July 8, 2013, Filed. Texas Insurance Code § 981.004 authorizes surplus lines insurers to provide surplus lines insurance in Texas only if the insurance is placed through a surplus lines agent. Tex. Ins. Code § 981.004. A surplus lines agent cannot issue or cause to be issued an insurance contract with an eligible surplus lines insurer unless the agent possesses a surplus lines license issued by the Texas Department of Insurance. Tex. Ins. Code § 981.202. After the hearing, RGS submitted the declaration of one of its principals, Richmond, confirming that, due to an "administrative error," he had not registered with the Texas Department of Insurance as a surplus lines agent when Chartis issued a surplus lines insurance policy to JetPay in Texas. Neither RGS, Chartis, nor any other person or entity involved with issuing JetPay's Binder and Policy had registered with the Texas Department of Insurance as a surplus lines agent. The parties thus agree that at the time Chartis issued its policy to JetPay, it did so with an agent who did not meet the state's licensing requirements. The motion to transfer to NY was denied. http://docs.justia.com/cases/federal/districtcourts/texas/txndce/3:2013cv00401/228219/48/0.pdf?ts=1376380861
Agenda Item XV
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Agenda Item Recognition & Open Discussion Agenda Item XVI.
Action required: PCI and members will recognize the Committee Chair, Ernie Taylor, for his years of leadership of the Surplus Lines Committee. A new Chair will be named. Committee members will then raise additional topics and issues for discussion and further consideration. Background information:
Other state issues that require member discussion and potential PCI advocacy effort Specific 2014 issues that warrant further consideration by the committee Ten Reforms to Fix Florida’s Property Insurance Marketplace — Without Raising Rates o
Solution 4: Allow excess and surplus lines carriers to do voluntary take-outs from Citizens. Because surplus lines carriers are not admitted insurers, they are not legally allowed to participate in the Citizens depopulation program. Legislation has been proposed in recent years to allow such participation, but opponents have cited concerns over consumer protection due to the lack of rate regulation and FIGA protection. The Legislature should nevertheless explore ways to open the Citizens depopulation program to surplus lines carriers. This would increase competition, spread risk, and protect taxpayers by reducing the size and potential liability of Citizens. Surplus lines insurers that choose to participate in Citizens’ depopulation efforts should be subject to additional criteria to protect consumers. To ensure consumer protection, only surplus lines insurers meeting strict financial criteria should be allowed to take policies out of Citizens. To participate, they should: maintain at least $50 million in surplus (surplus lines insurers are currently required to maintain only $15 million in surplus to transact business in Florida); receive or maintain an A.M. Best Financial Strength Rating of A- or better (surplus lines insurers are not currently required to be rated by A.M. Best); maintain resources to cover a 100-year probable maximum loss at least twice in a hurricane season (through surplus and/or reinsurance coverage); and agree to provide coverage substantially similar to that of the Citizens policy. In addition, any surplus lines carrier that wants to assume policies from Citizens should provide an OIR-approved notice to any affected policyholders detailing the company’s A.M. Best ratings and financial resources, as well explanations that the policy will not be covered by FIGA, regulated by the state for rates, or subject to Citizens, Cat Fund, or FIGA assessments. The notice should also include explanations of any differences in coverage, online and telephone contact details for any consumer questions, and a clear opt-out period.
Agenda Item Adjournment Agenda Item XVII.
Action required: The Committee Chair will schedule the next Committee conference call and identify key agenda items based on the day’s discussion. A motion will be requested to adjourn the meeting, followed by a second.
