Bill Text: AZ HB2149 | 2016 | Fifty-second Legislature 2nd Regular | Chaptered
Bill Title: Domestic surplus lines insurance; fees
Spectrum: Partisan Bill (Republican 1-0)
Status: (Passed) 2016-03-17 - Chapter 38 [HB2149 Detail]
Download: Arizona-2016-HB2149-Chaptered.html
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House Engrossed |
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State of Arizona House of Representatives Fifty-second Legislature Second Regular Session 2016
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CHAPTER 38
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HOUSE BILL 2149 |
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AN ACT
Amending section 20‑401, Arizona Revised Statutes; amending title 20, chapter 2, article 5, Arizona Revised Statutes, by adding section 20‑407.01; amending sections 20‑410, 20‑415, 20-416.01 and 20‑661, Arizona Revised Statutes; relating to surplus lines insurance.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 20-401, Arizona Revised Statutes, is amended to read:
20-401. Definitions
In this article, unless the context otherwise requires:
1. "Affiliated" means, with respect to an insured, any entity that controls, is controlled by or is under common control with the insured. For the purposes of this paragraph, "control" means either:
(a) Directly or indirectly acting through one or more other persons who own, control or have the power to vote twenty‑five per cent percent or more of any class of voting securities of the other entity.
(b) Control in any manner over the election of a majority of the directors or trustees of the other entity.
2. "Affiliated group" means any group of entities that are affiliated.
3. "Clearinghouse" means the mechanism or entity established pursuant to a multistate agreement or compact for the receipt and distribution of premium taxes and transaction data related to the sale of unauthorized insurance.
4. "Diligent effort" means having sought insurance for the same risk from at least three insurers authorized in this state to write the particular insurance coverage or type, class or kind of insurance.
5. "Domestic surplus lines insurer" means an insurer that is domiciled in and authorized to transact insurance in this state and that has received approval from the department pursuant to section 20‑407.01 to write surplus lines insurance coverage in this state.
5. 6. "Foreign decree" means any decree or order in equity of a court located in a reciprocal state, including a court of the United States located therein, obtained by a qualified party against any insurer incorporated or authorized to do business in this state.
6. 7. "Home state" means one of the following:
(a) The state in which an insured maintains its principal place of business or, in the case of an individual, the individual's principal place of residence.
(b) If one hundred per cent percent of the insured risk is located out of the state that would be the insured's home state pursuant to subdivision (a) of this paragraph, the state to which the greatest percentage of the insured's taxable premium is allocated for the insurance contract in question.
(c) If more than one insured from an affiliated group are named insureds on a single nonadmitted insurance contract, the state as determined pursuant to subdivision (a) of this paragraph of the member of the affiliated group that has the largest percentage of premium attributed to it under the insurance contract.
7. 8. "Multistate risk" means a risk covered by an unauthorized insurer with insured exposures in more than one state.
8. 9. "Qualified party" means a state regulatory agency acting in its capacity to enforce the insurance laws of such that state.
9. 10. "Reciprocal state" means any state or territory of the United States the laws of which give to insurers organized under the laws of this state the same right to defend actions as that granted to foreign insurers under the laws of this state and the laws of which contain procedures substantially similar to those specified in this article for the enforcement of decrees or orders in equity issued by courts located in other states or territory of the United States against any insurer incorporated or authorized to do business in such that state or territory.
10. 11. "Single‑state risk" means a risk with insured exposures in only one state.
11. 12. "Unauthorized insurance", "surplus lines insurance" or "nonadmitted insurance" means any insurance permitted to be placed directly or through a surplus lines broker with an insurer who is not licensed to transact insurance in this state or with a domestic surplus lines insurer.
Sec. 2. Title 20, chapter 2, article 5, Arizona Revised Statutes, is amended by adding section 20-407.01, to read:
20-407.01. Designation as a domestic surplus lines insurer; requirements; scope of business activity permitted
A. Notwithstanding any other law, a domestic insurer possessing minimum capital and surplus of at least fifteen million dollars, pursuant to a resolution by its board of directors and on the written approval of the director, may be designated as a domestic surplus lines insurer. A domestic surplus lines insurer shall be considered an unauthorized insurer for purposes of writing surplus lines insurance coverage pursuant to the requirements of this article.
B. A domestic surplus lines insurer shall only write surplus lines insurance in this state procured pursuant to the requirements of this article. A domestic surplus lines insurer may write surplus lines insurance in any other jurisdiction in which the insurer is eligible to write surplus lines insurance if the domestic surplus lines insurer complies with any requirements of that jurisdiction.
C. Insurance written by a domestic surplus lines insurer is subject to the tax on premiums required by section 20‑416 and is exempt from the tax on premiums required by chapter 2, article 1 of this title.
D. A domestic surplus lines insurer shall be considered a nonadmitted insurer as referenced in 15 United States Code section 8206 with respect to surplus lines insurance issued in this state.
E. Surplus lines insurance policies issued by a domestic surplus lines insurer in this state are not subject to the protection of or other provisions of the Arizona property and casualty insurance guaranty fund established by section 20‑662.
F. Surplus lines insurance policies issued in this state by a domestic surplus lines insurer are not subject to and are exempt from all statutory requirements relating to insurance rating and rating plans, policy forms, policy cancellation and nonrenewal in the same manner and to the same extent as a surplus lines insurer domiciled in another state.
Sec. 3. Section 20-410, Arizona Revised Statutes, is amended to read:
20-410. Validity of surplus lines insurance; disclosure; policy fees
A. Insurance contracts procured as surplus lines coverage are fully valid and enforceable as to all parties and shall be recognized in all matters in the same manner as like contracts issued by authorized insurers.
B. Any policy and any evidence of surplus lines coverage from that is issued by an unauthorized insurer pursuant to this article and that is issued for delivery to the insured shall contain a conspicuously stamped or written notice in bold‑faced type that states one of the following:
1. If the surplus lines policy or evidence of coverage is issued by a surplus lines insurer that is not a domestic surplus lines insurer:
Pursuant to Arizona Revised Statutes section 20‑401.01, subsection B, paragraph 1, Arizona Revised Statutes, this policy is issued by an insurer that does not possess a certificate of authority from the director of the Arizona Department of Insurance. If the insurer that issued this policy becomes insolvent, insureds or claimants will not be eligible for insurance guaranty fund protection pursuant to Arizona Revised Statutes title 20, Arizona Revised Statutes.
2. If the surplus lines policy or evidence of coverage is issued by a domestic surplus lines insurer:
If the insurer that issued this policy becomes insolvent, insureds or claimants will not be eligible for insurance guaranty fund protection pursuant to title 20, Arizona Revised Statutes.
C. A surplus lines broker may charge and receive a fee in addition to the premium for services provided in the transaction of surplus lines insurance if before effecting any coverage both of the following conditions are met:
1. The service fees and the specific services for which the fees are charged are disclosed to the insured or the insured's representative and are agreed to in writing by the insured or the insured's representative.
2. The taxes prescribed in section 20‑416 are paid on any fees charged to the insured.
Sec. 4. Section 20-415, Arizona Revised Statutes, is amended to read:
20-415. Statement of surplus lines insurance business transacted by broker; reporting periods; exception
A. Each surplus lines broker shall file with the director a statement of all surplus lines insurance business covering Arizona risks transacted by the broker during the period for which the statement is being filed. The statement shall be on a form prescribed by the director and shall show:
1. Gross amount of each kind of insurance transacted.
2. Aggregate gross premiums charged.
3. Aggregate of return premiums paid to insureds.
4. Aggregate of net premiums.
5. Such additional information as may reasonably be required by the director.
B. The statement required by subsection A of this section is due on or before February 15 of each year for the preceding July through December and on or before August 15 of each year for the preceding January through June for business covering Arizona single‑state risks, except that for multistate transactions occurring on or before December 31, 2014, the statement shall be due on or before the date specified in subsection D of this section.
C. If a clearinghouse is established, and is in operation and if the director enters into a multistate agreement or compact pursuant to section 20‑416.01, each surplus lines broker shall file quarterly, with the clearinghouse responsible for administering the compact or multistate agreement, a notarized statement of all surplus lines insurance business covering multistate risks transacted by the broker on behalf of insureds whose home state is Arizona during the calendar quarter for which the statement is being filed. The statement shall be on a form prescribed by the clearinghouse and shall include all information required by the clearinghouse. A facsimile of the original notarized statement may be submitted in lieu of the original notarized statement. The broker shall maintain the original notarized statement for a period of six years after the calendar year in which the statement was filed.
D. The statement required by subsection C of this section is due on or before February 15 for the quarter ending the preceding December 31, May 15 for the quarter ending the preceding March 31, August 15 for the quarter ending the preceding June 30 and November 15 for the quarter ending the preceding September 30.
E. A surplus lines broker is not responsible for reporting any fees or remitting any premium taxes or stamping fees due on fees charged by an insurance producer in connection with the transaction of surplus lines insurance.
Sec. 5. Section 20-416.01, Arizona Revised Statutes, is amended to read:
20-416.01. Collection and payment of tax on surplus lines; multistate agreement
A. In accordance with the nonadmitted and reinsurance reform act of 2010, the director may enter into a compact or multistate agreement to provide for the reporting, payment, collection and allocation of taxes imposed pursuant to sections 20‑401.07 and 20‑416 on unauthorized surplus lines insurance covering multistate risks if, after a hearing conducted pursuant to section 20‑161, it is determined that entering into a compact or multistate agreement is in the best interests of this state. In determining whether entering into a compact or multistate agreement is in the best interests of this state, the following factors shall be considered:
1. The impact on the state's gross receipt of premium taxes, if any.
2. The regulatory burden and costs placed on insurance companies, surplus lines brokers and insurance agents doing business in this state.
3. The cost impact on insureds resulting from any regulatory requirements attributable to a compact or multistate agreement, if any.
4. Other factors as may be raised by the director or any other interested party.
B. Taxes imposed pursuant to sections 20‑401.07 and 20‑416 on unauthorized insurance covering Arizona single-state risks shall not be covered by or payable through any compact or multistate agreement entered into by the director pursuant to subsection A of this section.
C. If a clearinghouse is not established or otherwise in operation or if the director does not enter into a multistate agreement or compact pursuant to subsection A of this section, any statements and taxes otherwise payable to a clearinghouse pursuant to this article shall be filed with the director or with a voluntary domestic organization of surplus lines brokers with which the director has contracted to accept reports pursuant to section 20‑167.
D. The director may adopt reasonable rules to effectuate any provision of the nonadmitted and reinsurance reform act of 2010 (15 United States Code section 8201).
Sec. 6. Section 20-661, Arizona Revised Statutes, is amended to read:
20-661. Definitions
In this article, unless the context otherwise requires:
1. "Account" means any one of the three accounts within the Arizona property and casualty insurance guaranty fund.
2. "Board" means the guaranty fund board.
3. "Covered claim" means an unpaid claim, including one for unearned premium, which arises out of and is within the coverage of an insurance policy to which this article applies issued by an insurer, if such insurer becomes an insolvent insurer after August 27, 1977 and the claimant or insured is a resident of this state at the time of the insured event or the property from which the claim arises is permanently located in this state. Covered claim does not include any amount due any reinsurer, insurer, insurance pool or underwriting association as subrogation recoveries or otherwise nor shall it include any obligations of the insolvent insurer arising out of any reinsurance contracts nor shall it include attorney fees or adjustment expenses incurred prior to the determination of insolvency.
4. "Fund" means the Arizona property and casualty insurance guaranty fund.
5. "Insolvent insurer" means an insurer that is licensed to transact insurance in this state either at the time the policy was issued or when the insured event occurred and against whom an order of liquidation with a finding of insolvency has been entered after September 19, 2007 by a court of competent jurisdiction in the insurer's state of domicile or by this state pursuant to section 20‑623, and the order of liquidation has not been stayed or been the subject of a writ of supersedeas or other comparable order. For purposes of the workers' compensation insurance account, an "insolvent insurer" shall also include includes any insolvent insurer against which an order of liquidation with a finding of insolvency has been entered on, before or after the effective date of this section.
6. "Member insurer" means any person who writes any kind of insurance, unless such writing is restricted solely to life, title, surety, disability, credit, mortgage guaranty or, ocean‑marine or surplus lines insurance, including the exchange of reciprocal or inter‑insurance contracts, and is licensed to transact insurance in this state.
7. "Net direct written premiums" means direct gross premiums written in this state on insurance policies to which this article applies, less return premiums and dividends paid or credited to policyholders on such direct business. Net direct written premiums do not include premiums on contracts between insurers or reinsurers.
APPROVED BY THE GOVERNOR MARCH 17, 2016.
FILED IN THE OFFICE OF THE SECRETARY OF STATE MARCH 18, 2016.
