Washington State

House of Representatives

Office of Program Research

BILL

ANALYSIS

Financial Institutions & Insurance Committee

SSB 6251

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

Brief Description: Concerning nonresident surplus line brokers and insurance producers.

Sponsors: Senate Committee on Financial Institutions, Housing & Insurance (originally sponsored by Senator Benton; by request of Insurance Commissioner).

Brief Summary of Substitute Bill

  • Modifies licensing requirements for nonresident insurance producers and nonresident surplus lines brokers.

Hearing Date: 2/23/10

Staff: Jon Hedegard (786-7127).

Background:

The Insurance Commissioner (Commissioner) licenses and regulates insurance producers doing business in this state. An insurance producer is a person required to be licensed under the laws of the state to sell, solicit, or negotiate insurance.

Licensing of Insurance Producers.

Insurance producers must meet a number of licensing requirements, including:

Surplus Lines and Licensing of Surplus Lines Brokers.

Under insurance statutes, if coverage cannot be purchased from an authorized insurer, the coverage may be purchased from an unauthorized insurer only if:

Licensing requirements regarding surplus lines brokers include:

In 2007, 2008, and 2009 legislation was passed that altered the regulatory framework for insurance producers and surplus lines brokers. These bills were based largely on the National Association of Insurance Commissioners' Producer Licensing Model Act. Among the many modifications were changes to the categories of licenses, background checks, fees, and commissions. All of these bills took effect on July 1, 2009.

Summary of Bill:

The Commissioner may license a qualified nonresident as a surplus lines broker if the nonresident lives in a state that offers reciprocal licensing to a Washington resident. The license is for the same duration and costs the same fees as a resident's license. The nonresident surplus lines broker is not required to submit fingerprints as a part of a background check and is not required to meet the same financial responsibility requirements.

The Commissioner must waive certain license requirements for nonresident insurance producers if the applicant has a valid license from their home state and that state offers reciprocal treatment for insurance producers from this state. The nonresident insurance producer is not required to submit fingerprints as a part of a background check and is not required to meet the same financial responsibility requirements.

Entities acting as nonresident title agents must designate an officer to be responsible for compliance with the state's insurance laws and rules.

Standards for service of process are created for legal actions against a nonresident producer or surplus lines broker who may be served by service of process on the Commissioner. The service of process must be sent or made available in a secure manner that provides a verifiable receipt. The Commissioner may adopt rules to implement the service of process provisions.

Appropriation: None.

Fiscal Note: Available.

Effective Date: The bill takes effect on July 26, 2010.