HOT NEWS TOPICS

Revised Comptroller EFT Tax Payment Requirements - June 16, 2008

Amendments to Comptroller Rule 34 TAC §3.9 impose new requirements for the electronic payment of premium taxes. Any taxpayer who paid at least $10,000 in premium taxes during the preceding year must make all premium tax payments to the Comptroller that are due on or after May 1, 2008 by means of electronic funds transfer (EFT). The previous threshold was $100,000. The Comptroller will contact any taxpayer who falls into this category and will provide instructions for the electronic remittance of taxes.

Effective September 1, 2008, Senate Bill 377 amends Tax Code § 111.0626 to allow the Comptroller by rule to require electronic filing of reports by a taxpayer who paid $50,000 or more during the preceding fiscal year.

Proposed TDI Regulation Re: Termination of Coverage for Underground Storage Tanks - - April 14, 2008

The Texas Department of Insurance has adopted regulations (28 TAC §§5.9101-5.9107) concerning required notice of termination of insurance for underground storage tanks, as mandated by HB 1956, passed in the 80^th Texas Legislature last year. The required notice must be sent by the insurer to the Texas Commission on Environmental Quality within 30 days after cancellation or non-renewal of insurance coverage. Surplus lines insurers are included under the definition of “insurer.” The regulations include information regarding the content of the notice and would apply only to notices issued on or after May 1, 2008. See link below for detailed information:

http://www.tdi.state.tx.us/rules/2008/0320-059.html

Commissioner’s Bulletin Re: Reauthorization of Terrorism Risk Insurance Program

Texas Commissioner’s Bulletin No. B-0011-08 has been issued to all P&C insurers and eligible surplus lines insurers. Insurers subject to rate and form regulation must submit policy language and rates regarding terrorism coverage. For surplus lines insurers, the bulletin is primarily advisory, reminding them that domestic acts of terrorism must now be covered. Also, insurers must provide a clear disclosure to policyholders of the existence of a cap of $100 million in aggregate industry insured losses before federal reimbursement is triggered under the program. The bulletin can be accessed at the link:

http://www.tdi.state.tx.us/bulletins/2008/cc10.html

Stamping Offices 2007 Production Statistics

Click here for U.S. Stamping Office Statistics  (Adobe Acrobat pdf file)  


NCOIL Endorses Surplus Lines Compact - November 19, 2007

At its Annual Meeting in mid-November, the National Conference of Insurance Legislators (NCOIL) approved a resolution supporting the Surplus Lines Insurance Multi-State Compliance Compact (SLIMPACT). The resolution expressed support for the adoption of SLIMPACT by all states and also called upon the NAIC and state insurance regulators to advocate for the enactment of the compact in their respective states.

SLIMPACT has been in development over the past 18 months by a working group (the “Group of 60”) as a proposal for solving the regulatory and tax compliance problems that agents face when procuring surplus lines policies insuring risks located in multiple states.


Amendments to TDI Regulations Delete Agent Surety Bond

The requirement that a surplus lines agent maintain a $50,000 surety bond was repealed by Senate Bill 1564 in the 2005 Texas Legislature. However, the requirement remained in the text of TDI rules regulating surplus lines. Amendments to 28 TAC §15.3 and §15.4 delete the bond requirement, to be consistent with current law. Also deleted is a provision in §15.5 authorizing the Commissioner to sanction an agent for failing to procure and maintain the bond. These amendments are effective September 3, 2007 

Stamping Offices 2007 Mid-Year Production Statistics

Click here for U.S. Stamping Office Statistics  (Adobe Acrobat pdf file)  

House Passes Nonadmitted & Reinsurance Reform Act

HR 1065, the Nonadmitted and Reinsurance Reform Act of 2007, a bill focusing on modernizing the taxation and regulation of multi-state surplus lines procurements, was passed by the US House of Representatives on June 25. Important provisions of the bill include: 

— All premium taxes on a multi-state procurement would be paid only to the home state of the insured.

— States may enter into a compact for the allocation of taxes by the home state to other states having incidental insured exposures on a given transaction.

— All nonadmitted transactions are subject solely to the laws and regulations of the home state.

— No state but the home state can require that a broker/agent be licensed.

Automatic export: a surplus lines licensee procuring nonadmitted insurance for an “exempt commercial purchaser” is not subject to state diligent effort requirements.

A companion bill has been introduced in the Senate, S 929, but no action has been taken on it to date.

Click here for U.S. Stamping Office Statistics  (Adobe Acrobat pdf file)  


Rule Permits Surplus Lines Insurers to Provide Excess Coverage to Workers’ Comp Self-Insurance Groups

The Texas Department of Insurance has adopted 28 TAC §5.6405, which prescribes the requirements for a self-insurance group providing workers’ compensation insurance to obtain its excess insurance coverage from an eligible surplus lines insurer. Among several provisions, the insurer is required to:

1)      Be certified as a trusteed reinsurer by TDI.

2)      Maintain an A.M. Best financial strength rating of A- or better.

3)      Provide a clean, irrevocable, and unconditional letter of credit in favor of the group as beneficiary and held by the group, to secure the payment of losses

Also, the self-insurance group is required to submit the surplus lines policy forms to TDI for review prior to use.

The effective date of the regulation was March 22, 2007.

 Commissioner of Insurance Approves Decrease in
Texas Stamping Fee Rate to .06% Effective July 1, 2007 

In December 2006 the Board of Directors of the Surplus Lines Stamping Office of Texas recommended to the Commissioner of Insurance a decrease in the stamping fee rate charged on Texas surplus lines policies. In March 2007 the Commissioner ordered that the rate be lowered from .1% (.001) to .06% (.0006), effective July 1, 2007.



Nonadmitted & Reinsurance Reform Act Reintroduced in Congress

The Nonadmitted and Reinsurance Reform Act of 2007 (NRRA), a bill focusing on reforming the taxation and regulation of multi-state surplus lines procurements, was introduced in the US House Financial Services Committee on February 15. Very similar to a bill that passed the House in late 2006 by a vote of 417-0, the current NRRA boasts 41 sponsors. Important provisions of the bill as introduced include: 

~ All premium taxes on a multi-state procurement would be paid only to the home state of the insured.

~  States may enter into a compact for the allocation of taxes by the home state to other states having  
    incidental insured exposures on a given transaction.

~  All nonadmitted transactions are subject solely to the laws and regulations of the home state.

~  No state but the home state can require that a broker/agent be licensed.

~    Automatic export: a surplus lines licensee procuring nonadmitted insurance for an “exempt commercial purchaser” is not subject to state diligent effort requirements 

The bill has yet to be introduced in the US Senate.

2006 Policy Count Data Call

On January 10, eligible surplus lines insurers were directed by Commissioner’s Bulletin #B-0001-07 to report to the Texas Department of Insurance (TDI) the number of policies in force in Texas as of December 31, 2006. The deadline for providing this information is February 10, 2007. At the request of NAPSLO and PCI, the Surplus Lines Stamping Office will respond to this data call on behalf of surplus lines insurers, as it did in 2006. Please refer questions to Elaine White, Director of Data Services, SLSOT, at (512) 225-1853.

For more information refer to Commissioner's Bulletin #B-0001-07


Decision in Lexington Insurance Company Tax Case

On December 1, 2006 the Texas Supreme Court issued its opinion in Lexington Insurance Company et al v Strayhorn. This was a lawsuit over the ability of the State of Texas to assess an unauthorized insurance premium tax on eligible surplus lines insurers on Texas insurance placements where no Texas licensed surplus lines agent could be identified. The court found that the tax is applicable when a procurement occurs without a licensed surplus lines agent. However, the court also seemed to alleviate the fear that imposition of the unauthorized insurance tax could have dire broad legal implications for placements thought to be made as surplus lines insurance. The court stated that there did not seem to be legislative intent “that any particular violations of the surplus lines statute would make the unauthorized insurance penalties apply…” The link to the decision is below:

http://www.supreme.courts.state.tx.us/historical/2006/dec/040429.pdf

Stamping Offices First Half 2006 Production Statistics

In the first half of this year, the 15 US stamping offices processed more than $11 billion in surplus lines premium, an increase of 9.1% over the same period last year. Most of that increase is attributable to Florida, which saw an increase of more than $760 million. Total items processed increased 3.5%, to 1.7 million.

Click here for U.S. Stamping Office Statistics  (Adobe Acrobat pdf file)  
 

Revision to ASLI Designation Program

Texas Surplus Lines Bond Repealed

In 2005, Texas legislators passed Senate Bill 1564. This law repealed Section 981.206 of the Insurance Code, eliminating the requirement that a surplus lines agent provide proof of financial responsibility to the Texas Department of Insurance. Agents typically met this requirement through a $50,000 surety bond. Effective January 1, 2006 agents are no longer required to carry that surplus lines bond. Questions regarding the surplus lines agent bond should be directed to the Texas Department of Insurance, Agent License Division (512) 322-3503.