AB 604

Surplus lines insurance

This bill makes a few changes related to surplus lines insurance, which is

defined in the bill as insurance that is permitted to be placed through an agent or

broker with an insurer that is not authorized to do an insurance business in this state

and that covers an insured for which this state is the home state, which is defined

in the bill as: 1) the state in which the insured maintains its principal place of

business; 2) the insured's principal residence if the insured is an individual; or 3) if

100 percent of the insured risk is outside this state, the state to which the greatest

percentage of the insured's taxable premium for the insurance is allocated.

Current law contains some limitations on and requirements for the placement

of insurance with, and the direct procurement of insurance from, an insurer that is

not authorized to do an insurance business in this state. The bill specifies that

certain of these requirements do not apply if this state is not the insured's home state

and the placement complies with the laws of the insured's home state. The bill also

specifies that an intermediary may not place surplus lines insurance with an insurer

that is not authorized to do an insurance business in this state unless certain criteria

are satisfied. If the insurer is domiciled in another United States jurisdiction, the

insurer must be authorized to write the type of insurance in its domiciliary

jurisdiction that the intermediary is placing, the insurer must have a specified level

of capital and surplus or the commissioner of insurance (commissioner) must find the

insurer's capital and surplus acceptable, and the insurer must provide to the

commissioner a certified copy of its current annual statement that is filed and

approved by the regulatory authority in the insurer's domicile. If the insurer is

domiciled outside the United States, the insurer must be on the list maintained by

the international insurers department of the National Association of Insurance

Commissioners and must meet any additional requirements regarding the use of the

list established by the commissioner by rule.

Under current law, the policyholder of surplus lines insurance generally must

pay a 3 percent tax on gross premium. If a policy covers risks in more than one state

including this state, the tax payable to this state is computed on the premium

allocated to this state for the portion of the risk located in this state. Under the bill,

that computation applies only for policies issued or renewed before July 21, 2011.

For policies issued or renewed on or after that date, the tax is payable to this state

only if this state is the home state of the insured, and it is computed on the entire

premium, including premium attributable to risks outside of this state.

The bill specifies that the licensing requirements for intermediaries in this

state do not apply to a person who solely procures insurance that may be placed

directly or through a broker with an insurer that is not authorized to do an insurance

business in this state and that is not surplus lines insurance; that the requirements

related to filing insurance forms with the commissioner for approval do not apply to