H-4679              _______________________________________________

                                          SUBSTITUTE HOUSE BILL NO. 1378

                        _______________________________________________

State of Washington                              50th Legislature                              1988 Regular Session

By House Committee on Financial Institutions & Insurance (originally sponsored by Representatives Zellinsky, Winsley and P. King)

Read first time 2/3/88 and passed to Committee on Rules.

AN ACT Relating to the licensure of insurance companies; amending RCW 48.05.340 and 48.15.090; adding a new section to chapter 48.07 RCW; providing an effective date; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

        Sec. 1.  Section 7, chapter 195, Laws of 1963 as last amended by section 3, chapter 181, Laws of 1982 and RCW 48.05.340 are each amended to read as follows:

          (1) Subject to RCW 48.05.350 and 48.05.360 to qualify for authority to transact any one kind of insurance as defined in chapter 48.11 RCW or combination of kinds of insurance as shown below, a foreign or alien insurer, whether stock or mutual, or a domestic insurer hereafter formed shall possess and thereafter maintain unimpaired paid-in capital stock, if a stock insurer, or unimpaired surplus if a mutual insurer, and shall possess when first so authorized additional funds in surplus as follows:

@h0@p1!tp1,1,1,1!tj2!trPaid!sc-,001in!sc ,001capital

!tcKind!sc ,001or!sc ,001kinds !tj1!trstock!sc ,001or !w Additional

!tcof!sc ,001insurance !tj1!trbasic!sc ,001surplus !w surplus!sc ,001

!w

@p0@h2 !ix!tp2,1,1Life !w× !tj1!tr$((1,000,000))!tr$((1,000,000))

!tj1!tr2,000,000!tr2,000,000

Disability !w× !tj1!tr((1,000,000))!tr((1,000,000))

!tj1!tr2,000,000!tr2,000,000

Life and disability !w× !tj1!tr((1,200,000))!tr((1,200,000))

!tj1!tr2,400,000!tr2,400,000

Property !w× !tj1!tr((1,000,000))!tr((1,000,000))

!tj1!tr2,000,000!tr2,000,000

Marine & transportation !w× !tj1!tr((1,000,000))!tr((1,000,000))

!tj1!tr2,000,000!tr2,000,000

General casualty !w× !tj1!tr((1,200,000))!tr((1,200,000))

!tj1!tr2,400,000!tr2,400,000

Vehicle !w× !tj1!tr((1,000,000))!tr((1,000,000))

!tj1!tr2,000,000!tr2,000,000

Surety !w× !tj1!tr((1,000,000))!tr((1,000,000))

!tj1!tr2,000,000!tr2,000,000

@i9!tp1,1!tl!ss1!ir*,2

!ae0 Any two of the following kinds of insurance:  Property, marine & transportation, general casualty, vehicle, surety, disability !ix!tp2,1,1!w× !tj1!tr((1,500,000))!tr((1,500,000))

!tj1!tr3,000,000!tr3,000,000

@i9!tp1,1!tl!ss1!ir*,2

!ae0Multiple lines (all insurances except life and title insurance) !ix!tp2,1,1!w× !tj1!tr((1,500,000))!tr((1,500,000))

!tj1!tr3,000,000!tr3,000,000

@i9!tp1,1!tl!ss1!ir*,2

!ae0Title (in accordance with the provisions of chapter 48.29 RCW)

!te@h3

          (2) Capital and surplus requirements are based upon all the kinds of insurance transacted by the insurer wherever it may operate or propose to operate, whether or not only a portion of such kinds are to be transacted in this state.

          (3) An insurer holding a certificate of authority to transact insurance in this state immediately prior to July 1, ((1980)) 1988, may continue to be authorized to transact the same kinds of insurance as long as it is otherwise qualified for such authority and thereafter maintains unimpaired the amount of paid-in capital stock, if a stock insurer, or basic surplus, if a mutual or reciprocal insurer, and special surplus as required of it under laws in force immediately prior to such effective date; and any proposed domestic insurer which is in process of formation or financing under a solicitation permit which is outstanding immediately prior to July 1, ((1980)) 1988, shall, if otherwise qualified therefor, be authorized to transact any kind or kinds of insurance upon the basis of the capital and surplus requirements of such an insurer under the laws in force immediately prior to such effective date((:  PROVIDED, That any applicable action pending from the period between June 8, 1967, and July 1, 1980, shall be governed by this section as then in effect)).  The requirements for paid-in capital stock, basic surplus, and special surplus that were in effect immediately before the effective date of this section, apply to any completed application for a certificate of authority from a foreign or alien insurer that is on file with the commissioner on the effective date of this section.

NEW SECTION. Sec. 2.  A new section is added to chapter 48.07 RCW to read as follows:

          (1)(a) Any insurer duly organized under the laws of any other state and admitted to transact insurance business in this state may become a domestic insurer upon complying with all requirements of law for the organization of a domestic insurer in this state and by designating its principal place of business at a location in this state.  Such domestic insurer is entitled to a certificate of authority to transact insurance in this state, subject to the conditions set forth in (b) of this subsection, and is subject to the authority and the jurisdiction of this state.

          (b) Before being eligible to become a domestic insurer under this section, an admitted insurer shall advise the commissioner, in writing, thirty days in advance of the proposed date of its plan to become a domestic insurer.  The commissioner must approve the plan in advance of the proposed date.  The commissioner shall not approve any such plan unless, after a hearing, pursuant to such notice as the commissioner may require, the commissioner finds that the plan is consistent with law, and that no reasonable objection to the plan exists.  If the commissioner fails to approve the plan, the commissioner shall state his or her reasons for failure to approve the plan in an order issued at the hearing.

          (2) After providing thirty days advance written notice of its plan to the commissioner and upon the written approval of the commissioner in advance of the proposed transfer date, any domestic insurer of this state may transfer its domicile to any other state in which it is admitted to transact the business of insurance.  Upon transfer of domicile, the insurer ceases to be a domestic insurer of this state.  If otherwise qualified under the laws of this state, the commissioner shall admit the insurer to do business in this state as a foreign insurer.  The commissioner shall approve any proposed transfer of domicile unless the commissioner determines after a hearing, pursuant to such notice as the commissioner may require, that the transfer is not in the best interests of the public or the insurer's policyholders in this state.  If the commissioner fails to approve a proposed transfer of domicile, the commissioner shall state his or her reasons for failure to approve the transfer in an order issued at the hearing.

          (3) When a foreign insurer, admitted to transact business in this state, transfers its corporate domicile to this state or to any other state, the certificate of authority, appointment of statutory agent, and all approved licenses, policy forms, rates, filings, and other authorizations and approvals in existence at the time the foreign insurer transfers its corporate domicile shall continue in effect.

          (4) Any insurer transferring its corporate domicile under this section shall file any amendments to articles of incorporation, bylaws, or other corporate documents that are required to be filed in this state before the insurer may receive approval of its proposed plan by the commissioner.

        Sec. 3.  Section .15.09, chapter 79, Laws of 1947 as last amended by section 4, chapter 102, Laws of 1980 and RCW 48.15.090 are each amended to read as follows:

          (1) A surplus line broker shall not knowingly place surplus line insurance with insurers unsound financially.  The broker shall ascertain the financial condition of the unauthorized insurer, and maintain written evidence thereof, before placing insurance therewith.  The broker shall not so insure with any insurer having less capital and surplus or combined capital funds than the minimum amounts required for an admitted multiple line insurer in accordance with RCW 48.05.340 ((as now or hereafter amended)), at least one-half of which must be additional surplus, and in the case of an alien insurer, there must be on file with the commissioner a copy of a trust agreement, certified by the trustee, evidencing a subsisting trust deposit of not less than one-((half))quarter of  a like amount by such insurer with a bank or trust company in the United States, and which deposit is held for the protection of United States policyholders.    Such trust account shall consist of cash or other assets acceptable to the commissioner and shall have an expiration date which at no time shall be less than five years hence.  The commissioner may, by rule and regulation, prescribe the terms under which the foregoing financial requirements may be waived in circumstances where insurance cannot be otherwise procured on risks located in this state.

          (2) For any violation of this section the broker may be fined not less than one hundred dollars or more than five thousand dollars, his surplus line broker's license may be revoked, suspended, or nonrenewed.

NEW SECTION. Sec. 4.     Section 2 of this act is necessary for the immediate preservation of the public peace, health, and safety, the support of the state government and its existing public institutions, and shall take effect immediately.  Sections 1 and 3 of this act shall take effect July 1, 1988.