Preproposal statement of inquiry was filed as WSR 08-03-122.
Title of Rule and Other Identifying Information: Surplus line brokers, these rules increase Washington state's compliance with the standards for licensing and regulating insurance producers, including surplus line brokers. The amendments will clarify the requirements for resident and nonresident surplus line brokers. For example: Surplus line brokers must be licensed as an agent or broker with both property and casualty lines of authority and the state will provide reciprocity to nonresident surplus line brokers on the same basis as another state grants reciprocity to Washington resident surplus line brokers including waiver of testing requirements for a nonresident surplus line broker license applicant who possesses an equivalent license in the applicant's home state. In addition, several sections of rules will be edited for clarity and consistency. WAC 284-15-100 will be repealed to eliminate an old limited surplus line broker's license category.
Hearing Location(s): Insurance Commissioner's Office, Room TR 120, 5000 Capitol Boulevard, Tumwater, WA 98504-0255, on June 12, 2008, at 2:00.
Date of Intended Adoption: June 19, 2008.
Submit Written Comments to: Kacy Scott, P.O. Box 40258, Olympia, WA 98504-0258, e-mail Kacys@oic.wa.gov, fax (360) 586-3109, by June 10, 2008.
Assistance for Persons with Disabilities: Contact Lorie Villaflores by June 10, 2008, TTY (360) 586-0241 or (360) 725-7087.
Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: These proposed rules will simplify requirements for surplus line brokers and more closely align this state's requirements for holding a surplus line broker's license with national standards.
Reasons Supporting Proposal: National standards for uniformity and reciprocity in personal qualification, education, training and experience of licensed insurance agents were enacted as part of the Gramm-Leach-Bliley Act (Public Law No. 106-102). These proposed rules are a result of that legislation.
Statutory Authority for Adoption: RCW 48.02.060, 48.15.040(4), 48.15.073(2), and 48.15.160(2).
Statute Being Implemented: RCW 48.15.070.
Rule is not necessitated by federal law, federal or state court decision.
Name of Proponent: Mike Kreidler, insurance commissioner, governmental.
Name of Agency Personnel Responsible for Drafting: Melodie Bankers, P.O. Box 40258, Olympia, WA 98504-0258, (360) 725-7039; Implementation: John Hamje, P.O. Box 40255, Olympia, WA 98504-0255, (360) 725-7262; and Enforcement: Carol Sureau, P.O. Box 40255, Olympia, WA 98504-0255, (360) 725-7050.
No small business economic impact statement has been prepared under chapter 19.85 RCW. After a review of RCW 19.85.025, it has been determined that a small business economic impact statement is not required for this rule making because these amendments: (1) Clarify current rules without changing their effect; (2) repeal a rule thereby eliminating an outdated license category; and (3) relate to process requirements and standards for applying for a surplus line broker's license.
A cost-benefit analysis is required under RCW 34.05.328. A preliminary cost-benefit analysis may be obtained by contacting Kacy Scott, P.O. Box 40258, Olympia, WA 98504-0258, phone (360) 725-7041, fax (360) 586-3535, e-mail firstname.lastname@example.org.
May 7, 2008
AMENDATORY SECTION(Amending Order R 81-1, filed 1/21/81)
WAC 284-15-010 Brokers -- Surplus line -- Qualifications and examination. (1) Each applicant for ((
initial)) a resident
surplus line broker's license (( as a surplus line broker
shall, prior to issuance of any such license,)) must take and
pass (( to the satisfaction of the commissioner an)) the
required examination (( given by the commissioner. It shall be
a test of his or her)) and pay the required fee prior to
acting as a surplus line broker. The examination will test an
applicant's qualifications and competence in all areas of
surplus line insurance. (( The examination shall be given in
the same manner and under the same conditions as are
prescribed for brokers in chapter 48.17 RCW, except that such
surplus line examination will generally be given twice each
year at times set by the commissioner.
(2) Minimum requirements to be met by an applicant before he or she will be permitted to take the examination are:
(a) An applicant must have been licensed as a casualty-property broker in accordance with RCW 48.17.150 for not less than five years preceding the date of the application, or have received the chartered property casualty underwriter (CPCU) designation with not less than five years' experience in the insurance industry preceding the date of the application, or have not less than ten years' experience as an insurance company employee, or an employee of an insurance broker's office or other related insurance industry experience preceding the date of the application, or have other equivalent experience acceptable to the insurance commissioner.
(b) Such applicants shall complete application forms supplied by the commissioner.
(3) For the purpose of this regulation "applicant" and "surplus line broker" are defined to include any individual who is to be empowered and designated in the license as authorized to exercise the powers conferred thereby.
(4) The applicant, and each surplus line broker while so licensed, must be a resident of the state of Washington.)) Current information about testing procedures and examination dates is available on the commissioner's web site at: www.insurance.wa.gov.
(2) Before the commissioner can issue a surplus line broker's license, the applicant must be licensed in this state as an agent or broker with both property and casualty lines of authority. This requirement may be satisfied if the licenses are issued simultaneously.
(3) The commissioner deems that a nonresident person holding a surplus line broker's license, or the equivalent, in the applicant's home state is qualified, competent and trustworthy and, therefore, meets the minimum standards of this state for holding a surplus line broker's license. For that reason, the commissioner will waive the Washington surplus line broker's examination for a person who has and maintains a current resident surplus line broker's license, or the equivalent, in the applicant's home state.
[Statutory Authority: RCW 48.02.060. 81-03-082 (Order R 81-1), § 284-15-010, filed 1/21/81.]
(2) A surplus line broker ((
shall ascertain)) must
substantiate the financial condition of (( the)) an
unauthorized insurer (( and maintain written evidence thereof))
before placing insurance (( therewith)) with the insurer. The
broker must also maintain evidence of the financial condition
of the insurer for at least five years.
When the)) If a surplus line broker (( uses)) places
insurance with an alien unauthorized insurer shown on the
National Association of Insurance Commissioners (NAIC)
Quarterly Listing of Alien Insurers dated within three months
(( of the)) after placement of the risk, it (( shall)) will be
(( deemed)) presumed that the insurer meets the financial
requirements of RCW 48.15.090 and WAC 284-15-090 and that
(( its)) the financial condition of the insurer is adequately
When the)) If a surplus line broker (( uses)) places
insurance with an alien unauthorized insurer that is not shown
on the NAIC Quarterly Listing of Alien Insurers, (( there must
be documentation in the broker's files demonstrating)) the
broker must maintain information for at least five years
adequate to show that the requirements of subsection (1) of
this section (( are)) have been met or exceeded. This
documentation shall include at least the following:
(i) A copy of the unauthorized insurer's most recent
available annual financial statement((
. This shall include
an)), in English (( version)) with United States dollar
equivalents; (( and))
(ii) Any other information obtained by the broker that
verifies the financial condition of the alien ((
(c))) unauthorized insurer; and
(iii) The ((
surplus line broker must have at least the))
current NAIC annual statement or its equivalent on file for
any (( foreign)) alien unauthorized insurer used.
[Statutory Authority: RCW 48.02.060. 81-03-082 (Order R 81-1), § 284-15-020, filed 1/21/81.]
(3))) (2) The (( "))person(( ")) designated by the insurer
to receive legal process may be an individual, firm or
(4))) (3) The (( commissioner shall forward)) process
documents will be forwarded by the commissioner to the person
designated in the most recent (( document)) notice filed with
(( him)) the commissioner.
(5) Pursuant to)) (4) As specified in RCW 48.15.150,
each policy issued by an unauthorized insurer as a surplus
line contract must (( contain a provision designating))
designate the commissioner as the person upon whom service of
process may be made.
[Statutory Authority: RCW 48.02.060. 06-12-077 (Matter No. R 2006-04), § 284-15-040, filed 6/6/06, effective 7/7/06; 81-03-082 (Order R 81-1), § 284-15-040, filed 1/21/81.]
(1) A detailed letter ((
of explanation for)) explaining
the need to waive the financial requirements;
(2) Documentation of the financial condition of the
proposed insurer as reported in its annual statement as of the
end of the preceding calendar year ((
(3) Summary information showing the number of years the
company has been writing the specific ((
class)) line of
The reinsurance agreements backing up the class of
coverage or the company;
(5))) A written acknowledgement signed by the proposed
to the effect that)) confirming all of the
(a) The insured ((
is)) has been informed that the
coverage (( is to)) will be issued by an insurer (or insurers)
(( which)) that is not an authorized insurer in the state of
(b) The insured understands that financial requirements
for surplus line insurers ((
otherwise applicable have been))
must be waived by all parties concerned to enable this
coverage to be obtained(( ,)); and
(c) The insured understands that there is no protection for the insured under the Washington Insurance Guaranty Association because the coverage will be issued by an unauthorized insurer;
(6))) (5) For (( jumbo)) accounts requiring a
multiplicity of insurers, in lieu of the requirements in
subsections (2) and (3) of this section, the commissioner
may(( , in lieu of the requirements in subsections (2), (3),
and (4) of this section,)) accept certification from (( an
experienced)) a surplus line(( s)) broker that the broker has
investigated the financial condition of the prospective
insurers and is satisfied that they are capable of
underwriting the (( attendant)) specified risks. Records and
documents supporting the broker's certification must be
maintained by the broker for the (( life)) term of the policies
and as long thereafter as a claim may be litigated, but in no
case less than five years after completion of the transaction.
[Statutory Authority: RCW 48.02.060. 89-03-060 (Order R 89-2), § 284-15-050, filed 1/17/89; 81-03-082 (Order R 81-1), § 284-15-050, filed 1/21/81.]
(1) Return premiums or claim payments ((
delivered by the
surplus line broker to the insurance agent shall)) will not be
deemed to have been paid to the insured or claimant until
(( such)) the payments are actually received by the insured or
(2) Delivery of notices involving the insurance, such as
cancellation or renewal notices, ((
shall)) will not be deemed
to have been made until actually received by the insured. (( Notice to the agent is not notice to the insured. However,
the agent may act on behalf of the broker in giving proper
notices to the insured.))
[Statutory Authority: RCW 48.02.060, 48.05.310, 48.30.010 and 48.15.080. 91-23-032 (Order R 91-7), § 284-15-080, filed 11/13/91, effective 1/1/92.]
The following section of the Washington Administrative Code is repealed:
|WAC 284-15-100||Surplus lines limited broker.|