WSR 12-01-107

PROPOSED RULES

OFFICE OF

INSURANCE COMMISSIONER

[ Insurance Commissioner Matter No. R 2011-10 -- Filed December 21, 2011, 9:06 a.m. ]

     Original Notice.

     Preproposal statement of inquiry was filed as WSR 11-11-061.

     Title of Rule and Other Identifying Information: Unauthorized (surplus line) insurers.

     Hearing Location(s): Insurance Commissioner's Office, TR 120, 5000 Capitol Boulevard, Tumwater, WA 98504-0255, on January 24, 2012, at 1:30 p.m.

     Date of Intended Adoption: January 31, 2012.

     Submit Written Comments to: Jim Tompkins, P.O. Box 40258, Olympia, WA 98504-0258, e-mail jimt@oic.wa.gov, fax (360) 586-3109, by January 23, 2012.

     Assistance for Persons with Disabilities: Contact Lorrie [Lorie] Villaflores by January 23, 2012, TTY (360) 586-0241 or (360) 725-7087.

     Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: Chapter 31, Laws of 2011 (HB 1694) amended RCW 48.15.040 and 48.15.090 to comply with a portion of the Dodd-Frank Wall Street Reform Act. Also, these amendments changed the affidavit of due diligence to a certification. This proposed rule will amend existing rules to comport with these statutory changes and to make clear that the payment of premium taxes is based upon the year in which the surplus line business was transacted, not when the surplus line broker files the certification of due diligence.

     Statutory Authority for Adoption: RCW 48.02.060, 48.15.040(4), and 48.15.090(2).

     Statute Being Implemented: Chapter 31, Laws of 2011 (HB 1694).

     Rule is necessary because of federal law, 15 U.S.C. 8201-8206.

     Name of Proponent: Mike Kreidler, insurance commissioner, governmental.

     Name of Agency Personnel Responsible for Drafting: Jim Tompkins, P.O. Box 40258, Olympia, WA 98504-0258, (360) 725-7036; Implementation and Enforcement: John Hamje, P.O. Box 40256, Olympia, WA 98504-0256, (360) 725-7262.

     No small business economic impact statement has been prepared under chapter 19.85 RCW. The process changes proposed in this rule will not cost domestic small business entities (surplus line brokers) to incur anything more than minor costs and may end up reducing expenses, therefore no small business economic impact statement is required.

     A cost-benefit analysis is required under RCW 34.05.328. A preliminary cost-benefit analysis may be obtained by contacting Jim Tompkins, P.O. Box 40258, Olympia, WA 98504-0258, phone (360) 725-7036, fax (360) 586-3109, e-mail jimt@oic.wa.gov.

December 21, 2011

Mike Kreidler

Insurance Commissioner

OTS-4124.3


AMENDATORY SECTION(Amending Matter No. R 2008-04, filed 7/2/08, effective 8/2/08)

WAC 284-15-020   Surplus line broker -- Solvent insurer required.   (1) A surplus line broker must not knowingly place surplus line insurance with financially unsound insurers. Foreign ((and alien)) insurers must meet or exceed the minimum financial and other conditions required by RCW 48.15.090 ((and WAC 284-15-090)).

     (2) A surplus line broker must substantiate the financial condition of ((an)) a foreign unauthorized insurer before placing insurance with the insurer. The broker must also maintain evidence of the financial condition of the insurer for at least five years.

     (((a) If)) (3) A surplus line broker may place((s)) insurance with an alien unauthorized insurer shown on the National Association of Insurance Commissioners (NAIC) Quarterly Listing of Alien Insurers ((dated within three months after placement of the risk, it will be deemed that the insurer meets the financial requirements of RCW 48.15.090 and WAC 284-15-090 and that the financial condition of the insurer is)). The financial condition of an insurer named on the listing is deemed to be adequately documented.

     (((b) If a surplus line broker places insurance with an alien unauthorized insurer that is not shown on the NAIC Quarterly Listing of Alien Insurers, the broker must maintain information for at least five years adequate to show that the requirements of subsection (1) of this section 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, in English with United States dollar equivalents;

     (ii) Any other information obtained by the broker that verifies the financial condition of the alien unauthorized insurer; and

     (iii) The current NAIC annual statement or its equivalent on file for any alien unauthorized insurer used.))

[Statutory Authority: RCW 48.02.060, 48.15.040(4), 48.15.073(2), and 48.15.160(2). 08-14-169 (Matter No. R 2008-04), § 284-15-020, filed 7/2/08, effective 8/2/08. Statutory Authority: RCW 48.02.060. 81-03-082 (Order R 81-1), § 284-15-020, filed 1/21/81.]


AMENDATORY SECTION(Amending Matter No. R 2006-04, filed 6/6/06, effective 7/7/06)

WAC 284-15-030   Surplus line brokers' form to be filed -- Contract ((stamp)) statement to be used.   (1) ((RCW 48.15.040 requires that a surplus line broker execute an affidavit at the time of procuring insurance from an unauthorized insurer, and to file such affidavit with the commissioner within thirty days after the insurance is procured.)) For the purpose of complying with the requirements of RCW 48.15.043 and 48.15.040, the date insurance is procured is the date coverage is bound or the date coverage is effective, whichever is later. The ((form for filing such affidavit shall)) certification required by RCW 48.15.040 must be in substantially the following form, and may include additional information to satisfy requirements of the Surplus Line Association of Washington:

Policy or

Certificate No:

 Premium, including

any policy fee:

1. Name and license number of filing Surplus Line Broker:
2. Name and address of ((producing agent or broker)) referring insurance producer (if any):
3. Name(s) of unauthorized insurer(s):
4. Name and address of insured:
5. Binding or effective date, whichever is later:
6. Brief statement of coverages (common trade terms may be used, e.g. "furrier's block"):

((STATE OF WASHINGTON

COUNTY

 |

>

|

SS.

 SURPLUS LINE

BROKER'S

AFFIDAVIT))
7. Certification:

I have procured insurance from an unauthorized insurer or insurers, in accordance with the laws and regulations of the state of Washington under my surplus line broker's license. Details of such transaction are set forth above.


((Such)) The insurance could not be procured, after diligent effort was made to do so from among a majority of the insurers authorized to transact that kind of insurance in this state, and placing the insurance in such unauthorized insurer(s) was not done for the purpose of securing a lower premium rate than would be accepted by any authorized insurer.


I certify that I am duly authorized to place this coverage on behalf of the insured, that the risk has been duly accepted by the insurer(s), and that ((I ascertained)) the financial condition of the unauthorized insurer(s) before placing the insurance therewith meets or exceeds the financial requirements provided by law.


I certify that under the penalty of the suspension or revocation of my surplus line broker's license that the facts contained in this certification are true and correct.

. . . . . . . . . . . .

(Signature of Surplus Line Broker)
     ((Subscribed and sworn to before me this . . . . . . day of . . . . . . , 20. . .
. . . . . . . . . . . . . . . . . . . . . .

Notary Public in and for the State of Washington, residing at)) . . . . . (Date)


     (2) Every insurance contract, including those evidenced by a binder, procured and delivered on or after January 1, 2012, as a surplus line coverage ((pursuant to)) under chapter 48.15 RCW ((shall)) must have a conspicuous statement ((stamped)) upon its face, which ((shall)) must be initialed by or bear the name of the surplus line broker who procured it, as follows:


"This contract is registered and delivered as a surplus line coverage under the insurance code of the state of Washington, ((enacted in 1947)) Title 48 RCW. It is not ((issued by a company regulated by the Washington state insurance commissioner and is not)) protected by any Washington state guaranty ((fund)) association law."

     (3) Every insurance contract, including those evidenced by a binder, procured and delivered on or before December 31, 2011, as a surplus line coverage under chapter 48.15 RCW must have a conspicuous statement upon its face, which must be initialed by or bear the name of the surplus line broker who procured it, either as set forth in subsection (2) of this section, or as follows:


"This contract is registered and delivered as a surplus line coverage under the insurance code of the state of Washington, enacted in 1947. It is not issued by a company regulated by the Washington state insurance commissioner and is not protected by any Washington state guaranty fund law."

[Statutory Authority: RCW 48.02.060. 06-12-077 (Matter No. R 2006-04), § 284-15-030, filed 6/6/06, effective 7/7/06; 81-03-082 (Order R 81-1), § 284-15-030, filed 1/21/81.]


NEW SECTION
WAC 284-15-035   Exempt commercial purchasers.   A surplus line broker who has procured insurance with an unauthorized insurer for an exempt commercial purchaser must file with the commissioner within sixty days of the procurement (binding or effective date, whichever is later) of the insurance a report of the insurance. The report must be in a format acceptable to the commissioner. The report must include the following information:

     (1) Policy or certificate number;

     (2) Premium, including any policy fee;

     (3) Name and license number of the filing surplus line broker;

     (4) Name and address of referring insurance producer (if any);

     (5) Name(s) of unauthorized insurer(s);

     (6) Name and address of insured;

     (7) Binding or effective date, whichever is later;

     (8) Brief statement of coverages (common terms may be used); and

     (9) Other information as required by the commissioner.

[]


AMENDATORY SECTION(Amending Matter No. R 2008-04, filed 7/2/08, effective 8/2/08)

WAC 284-15-050   Surplus line -- Waiver of financial requirements.   (1) The commissioner may waive the financial requirements specified in RCW 48.15.090 ((and WAC 284-15-090)) in circumstances where insurance cannot be otherwise procured on risks located in this state. Except as set forth in (e) of this subsection (((5) of this section)), at least the following information must be submitted when a surplus line broker requests the commissioner to waive the financial requirements:

     (((1))) (a) A detailed letter explaining the need to waive the financial requirements;

     (((2))) (b) 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))) (c) Summary information showing the number of years the company has been writing the specific line of insurance;

     (((4))) (d) A written ((acknowledgement)) acknowledgment signed by the proposed insured confirming all of the following:

     (((a))) (i) The insured has been informed that the coverage will be issued by an insurer (or insurers) that is not an authorized insurer in the state of Washington;

     (((b))) (ii) The insured understands that financial requirements for surplus line insurers must be waived by all parties concerned to enable this coverage to be obtained; and

     (((c))) (iii) 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;

     (((5))) (e) For accounts requiring a multiplicity of insurers, in lieu of the requirements in ((subsections (2))) (b) and (((3))) (c) of this ((section)) subsection, the commissioner may accept certification from a surplus line broker that the broker has investigated the financial condition of the prospective insurers and is satisfied that they are capable of underwriting the specified risks. Records and documents supporting the broker's certification must be maintained by the broker for the 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.

     (2) In no event will the commissioner waive the financial requirements when the insurer's capital and surplus is less than four million five hundred thousand dollars.

[Statutory Authority: RCW 48.02.060, 48.15.040(4), 48.15.073(2), and 48.15.160(2). 08-14-169 (Matter No. R 2008-04), § 284-15-050, filed 7/2/08, effective 8/2/08. 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.]


NEW SECTION
WAC 284-15-110   Surplus line insurance premium tax.   RCW 48.15.120 requires that surplus line brokers must, by the first day of March, remit to the state treasurer through the commissioner a premium tax on surplus line insurance transacted by the surplus line broker during the preceding calendar year. The date the insurance was transacted is the date coverage is bound or the date coverage is effective, whichever is later.

[]

OTS-3981.1


REPEALER

     The following section of the Washington Administrative Code is repealed:
WAC 284-15-090 Financial requirements for unauthorized foreign and alien insurers increased.

© Washington State Code Reviser's Office