CHAPTER 981. SURPLUS LINES INSURANCE
INSURANCE CODE
TITLE 6. ORGANIZATION OF INSURERS AND RELATED ENTITIES
SUBTITLE I. COMPANIES THAT ARE NOT ORGANIZED IN TEXAS
CHAPTER 981. SURPLUS LINES INSURANCE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 981.001. PURPOSE. (a) An insurance transaction that is
entered into by a resident of this state with an eligible surplus
lines insurer through a surplus lines agent because of difficulty
in obtaining coverage from an authorized insurer is a matter of
public interest.
(b) The transaction of surplus lines insurance is a subject of
concern and it is necessary to provide for the regulation,
taxation, supervision, and control of these transactions and the
practices and matters related to these transactions by:
(1) requiring appropriate standards and reports concerning the
placement of surplus lines insurance;
(2) imposing requirements necessary to make regulation and
control of surplus lines insurance reasonably complete and
effective;
(3) providing orderly access to eligible surplus lines insurers;
(4) ensuring the maintenance of fair and honest markets;
(5) protecting the revenues of this state; and
(6) protecting authorized insurers, which under the laws of this
state must meet strict standards relating to the regulation and
taxation of the business of insurance, from unfair competition by
unauthorized insurers.
(c) To regulate and tax surplus lines insurance placed in
accordance with this chapter within the meaning and intent of 15
U.S.C. Section 1011, this chapter provides an orderly method for
the residents of this state to effect insurance with eligible
surplus lines insurers through qualified, licensed, and
supervised surplus lines agents in this state, if coverage is not
available from authorized and regulated insurers engaged in
business in this state, under reasonable and practical
safeguards.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.002. DEFINITIONS. In this chapter:
(1) "Eligible surplus lines insurer" means an insurer that is
not an authorized insurer, but that is eligible under Subchapter
B, in which surplus lines insurance is placed or may be placed
under this chapter.
(2) "Stamping office" means the Surplus Lines Stamping Office of
Texas.
(3) "Surplus lines agent" means an agent licensed under
Subchapter E to procure an insurance contract from a surplus
lines insurer.
(4) "Surplus lines insurance" means insurance coverage:
(A) for a subject that is resident, located, or to be performed
in this state; and
(B) that may be placed, in accordance with this chapter, with an
eligible surplus lines insurer.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.003. APPLICABILITY OF CHAPTER. This chapter applies to
insurance:
(1) of a subject that is resident, located, or to be performed
in this state; and
(2) that is obtained, continued, or renewed through:
(A) negotiations or an application wholly or partly occurring or
made within or from within this state; or
(B) premiums wholly or partly remitted directly or indirectly
from within this state.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.004. SURPLUS LINES INSURANCE AUTHORIZED. (a) An
eligible surplus lines insurer may provide surplus lines
insurance only if:
(1) the full amount of required insurance cannot be obtained,
after a diligent effort, from an insurer authorized to write and
actually writing that kind and class of insurance in this state;
(2) the insurance is placed through a surplus lines agent; and
(3) the insurer meets the eligibility requirements of Subchapter
B as of the inception date and annual anniversary date of each
insurance contract, cover note, or other confirmation of
insurance.
(b) An eligible surplus lines insurer may provide surplus lines
insurance only in the amount that exceeds the amount of insurance
obtainable from authorized insurers.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.005. VALIDITY OF CONTRACTS. (a) Unless a material and
intentional violation of this chapter or Chapter 225 exists, an
insurance contract obtained from an eligible surplus lines
insurer is:
(1) valid and enforceable as to all parties; and
(2) recognized in the same manner as a comparable contract
issued by an authorized insurer.
(b) A material and intentional violation of this chapter or
Chapter 225 does not preclude the insured from enforcing the
insured's rights under the contract.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 2E.125, eff. April 1, 2009.
Sec. 981.006. SANCTIONS. Chapter 82 applies to a surplus lines
agent or an eligible surplus lines insurer that violates:
(1) this chapter;
(2) Chapter 225; or
(3) a rule or order adopted under Subchapter B or Section
981.005.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 2E.126, eff. April 1, 2009.
Sec. 981.007. LIABILITY OF SURPLUS LINES INSURER FOR LOSSES AND
UNEARNED PREMIUMS. (a) This section applies if:
(1) an eligible surplus lines insurer has assumed a risk under
this chapter; and
(2) the surplus lines agent who placed the insurance has
received the premium for that risk.
(b) If a coverage question between the eligible surplus lines
insurer and the insured arises regarding the assumed risk, the
insurer is considered to have received the premium due for that
coverage.
(c) The eligible surplus lines insurer is liable to the insured
for any:
(1) loss covered by the insurance; and
(2) unearned premium payable to the insured on cancellation of
the insurance.
(d) This section applies without regard to whether the surplus
lines agent is indebted to the insurer regarding the insurance or
for any other cause.
(e) An eligible surplus lines insurer that assumes a risk under
this chapter subjects itself to this section.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.008. SURPLUS LINES INSURANCE PREMIUM TAX. The premiums
charged for surplus lines insurance are subject to the premium
tax imposed under Chapter 225.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 2E.127, eff. April 1, 2009.
Sec. 981.009. RULES. The commissioner may adopt rules to
implement this chapter or satisfy requirements under federal law
or regulations.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003. Amended by Acts 2003, 78th Leg., ch. 1276, Sec. 10A.228(a),
eff. Sept. 1, 2003.
SUBCHAPTER B. ELIGIBILITY REQUIREMENTS FOR SURPLUS LINES INSURERS
Sec. 981.051. AUTHORIZATION REQUIRED. (a) Before an insurer
may issue surplus lines insurance, the insurer must hold an
authorization to engage in the business of insurance from its
domiciliary state or country.
(b) The authorization from the domiciliary state or country must
be for the same kind or class of insurance to be written in this
state as surplus lines insurance.
(c) The surplus lines insurer must provide to the commissioner
satisfactory evidence that the insurer holds the authorization.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.052. GOOD REPUTATION AND PROMPT SERVICE REQUIRED. To
issue surplus lines insurance, an insurer must have a good
reputation and provide reasonably prompt service to its
policyholders in the payment of just losses and claims.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.053. COMPETENCE, TRUSTWORTHINESS, AND EXPERIENCE
REQUIRED. An insurer may not issue surplus lines insurance if:
(1) the insurer's management is:
(A) incompetent or untrustworthy; or
(B) so lacking in insurance company managerial experience as to
make the insurer's proposed operation hazardous to the
insurance-buying public; or
(2) the commissioner has good reason to believe that the insurer
is affiliated directly or indirectly, through ownership, control,
reinsurance transactions, or other insurance or business
relations, with a person whose business operations are or have
been detrimental to policyholders, shareholders, investors,
creditors, or the public.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.054. CERTAIN PRECONDITIONS NOT ALLOWED. An eligible
surplus lines insurer may not require as a condition precedent to
writing new or renewal surplus lines insurance that the insured
or prospective insured place with the insurer other insurance
that is not obtainable as surplus lines insurance.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.055. FAILURE TO PAY PENALTY. An insurer may not issue
surplus lines insurance if the insurer or its agents have failed
to pay a statutory penalty imposed on the insurer or its agents.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.056. FAILURE TO PAY PREMIUM TAXES. An insurer may not
issue surplus lines insurance if the insurer is obligated to pay
a premium tax in this state and has not paid the tax.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.057. MINIMUM CAPITAL AND SURPLUS REQUIREMENTS. (a)
Except as provided by Subsection (b), an eligible surplus lines
insurer must maintain capital and surplus in an amount of at
least $15 million.
(b) If an eligible surplus lines insurer is an insurance
exchange created by the laws of another state:
(1) the syndicates of the exchange must maintain under terms
acceptable to the commissioner capital and surplus, or the
equivalent under the laws of the exchange's domiciliary
jurisdiction, in an amount of at least $75 million in the
aggregate;
(2) the exchange must maintain under terms acceptable to the
commissioner at least 50 percent of the policyholder surplus of
each individual syndicate in a custodial account accessible to
the exchange or the exchange's domiciliary commissioner in the
event of insolvency or impairment of the individual syndicate;
and
(3) an individual syndicate, to be eligible to accept surplus
lines insurance placements from this state as an exchange member,
must maintain under terms acceptable to the commissioner capital
and surplus, or the equivalent under the laws of the exchange's
domiciliary jurisdiction, in the amount of at least:
(A) $5 million, if the syndicate is a member of an insurance
exchange that maintains at least $15 million for the protection
of all exchange policyholders; or
(B) the greater of:
(i) the minimum capital and surplus of the exchange's
domiciliary jurisdiction; or
(ii) $15 million.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.058. ALIEN INSURERS: TRUST FUND REQUIREMENT. In
addition to meeting the minimum capital and surplus requirements
prescribed by Section 981.057, an alien surplus lines insurer
must provide evidence that:
(1) the insurer maintains in the United States an irrevocable
trust fund in a Federal Reserve System member bank in an amount
of at least $5.4 million for the protection of all its
policyholders in the United States; and
(2) the trust fund consists of:
(A) cash;
(B) securities;
(C) letters of credit; or
(D) investments of substantially the same character and quality
as those that are eligible investments for the capital and
statutory reserves of an insurer authorized to write similar
kinds and classes of insurance in this state.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.059. ALTERNATIVE FOR CERTAIN INSURER GROUPS. (a) This
section applies only to an insurer group that includes
unincorporated individual insurers.
(b) Instead of the minimum capital and surplus requirements
prescribed by Section 981.057, an insurer group may maintain a
trust fund in an amount of at least $50 million as security to
the full amount of the trust fund for all policyholders and
creditors in the United States of each group member.
(c) Except as provided by this section, the trust fund must
comply with the terms specified by Section 981.058 for the trust
fund required by that section.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.060. EXEMPTION DUE TO MINIMUM PREMIUM LEVEL. (a) The
commissioner by rule shall exempt an eligible surplus lines
insurer from the minimum capital and surplus requirements
prescribed by Section 981.057 if the insurer writes less than a
minimum level of insurance premium in this state.
(b) The rules must specify the minimum level of insurance
premium.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.061. EXEMPTION DUE TO CERTAIN INSURER CHARACTERISTICS.
The commissioner may exempt an eligible surplus lines insurer
from the minimum capital and surplus requirements prescribed by
Section 981.057 if the commissioner determines, after a hearing,
that the exemption is warranted based on factors such as:
(1) the insurer's quality of management;
(2) the capital and surplus of a parent company;
(3) the insurer's underwriting profit and investment income
trends;
(4) the insurer's reinsurance contracts;
(5) the insurer's record and reputation in the industry; and
(6) any other information the commissioner requires to make a
determination.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.062. EXEMPTION DUE TO SIZE OF INSURER AND OTHER
FACTORS. (a) The commissioner may exempt an eligible surplus
lines insurer from the minimum capital and surplus requirements
prescribed by Section 981.057 if the commissioner determines,
after a hearing, that the insurer complies with the following
requirements:
(1) the insurer has capital and surplus in an amount of at least
$6 million;
(2) the amount of net risk retained by the insurer after ceding
to a reinsurer is reasonable and does not exceed 10 percent of
the insurer's capital and surplus;
(3) the annual ratio of net written premiums to surplus of the
insurer does not exceed 2.5 to 1;
(4) the insurer's reinsurance company is rated at least "B+" by
the A. M. Best Company;
(5) the ownership interest in the insurer of an agent who places
insurance with the insurer does not exceed 10 percent;
(6) the insurer's managing head, officers, or directors have
sufficient insurance ability, standing, and good record to make
probable the continued success of the insurer;
(7) the composition, quality, duration, and liquidity of the
insurer's investment portfolio are prudent;
(8) the insurer is audited annually by an independent certified
public accountant who is in good standing with the American
Institute of Certified Public Accountants and is licensed to
practice by the Texas State Board of Public Accountancy, and a
copy of the audit is filed with the commissioner;
(9) the number and type of complaints against the insurer are
not excessive in relation to the number of insurance policies
written by the insurer; and
(10) the insurer is acting in good faith in requesting an
exemption.
(b) The commissioner may waive any of the requirements
applicable to an insurer under Subsection (a) if, in the
commissioner's judgment, a waiver would not adversely affect the
insurer's policyholders.
(c) The commissioner may annually renew the exemption if the
eligible surplus lines insurer certifies each year that the
insurer continues to comply with the requirements under
Subsection (a).
(d) The commissioner may hold a hearing at any time to determine
if the continued exemption is warranted.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.063. COMMISSIONER OR DEPARTMENT NOT RESPONSIBLE FOR
DETERMINING UNAUTHORIZED INSURER'S FINANCIAL CONDITION OR CLAIMS
PRACTICES. This subchapter does not impose on the commissioner
or department a responsibility to determine the actual financial
condition or claims practices of an unauthorized insurer as
described by Chapter 101.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.064. COMMISSIONER MAY ORDER REVOCATION OF CONTRACTS.
The commissioner may order the revocation of an insurance
contract issued by an eligible surplus lines insurer that does
not meet the eligibility requirements of this subchapter.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.065. APPLICABILITY TO CONTRACT EXTENSION. This
subchapter and Sections 981.101(b), 981.210, and 981.211 apply to
an extension of an insurance contract beyond its original
expiration date.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER C. REQUIREMENTS AND PROCEDURES FOR ISSUANCE OF SURPLUS
LINES DOCUMENTS
Sec. 981.101. REQUIREMENTS FOR SURPLUS LINES DOCUMENTS. (a) In
this section, "surplus lines document" means each new or renewal
insurance contract, certificate, cover note, or other
confirmation of insurance obtained and delivered as surplus line
coverage under this chapter.
(b) A surplus lines document must state, in 11-point type, the
following:
This insurance contract is with an insurer not licensed to
transact insurance in this state and is issued and delivered as
surplus line coverage under the Texas insurance statutes. The
Texas Department of Insurance does not audit the finances or
review the solvency of the surplus lines insurer providing this
coverage, and the insurer is not a member of the property and
casualty insurance guaranty association created under Chapter
462, Insurance Code. Chapter 225, Insurance Code, requires
payment of a __________ (insert appropriate tax rate) percent tax
on gross premium.
(c) A surplus lines document must show:
(1) the description and location of the subject of the
insurance;
(2) the coverage, conditions, and term of the insurance;
(3) the premium and rate charged, and premium taxes to be
collected from the insured;
(4) the name and address of:
(A) the insured;
(B) the insurer; and
(C) the insurance agent who obtained the surplus line coverage;
and
(5) if the direct risk is assumed by more than one insurer:
(A) the name and address of each insurer; and
(B) the proportion of the entire direct risk assumed by each
insurer.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 2E.128, eff. April 1, 2009.
Sec. 981.102. LIMIT ON USE OF SURPLUS LINES POLICY OR CONTRACT
FORMS. A surplus lines insurance policy or contract form may not
be used unless use of the form is:
(1) reasonably necessary for the principal purposes of the
insurance coverage; or
(2) not contrary to the purposes of this chapter regarding the
reasonable protection of authorized insurers from unwarranted
competition by unauthorized insurers.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.103. DELIVERY TO INSURED OF SURPLUS LINES DOCUMENTS.
(a) On placing new or renewal surplus lines coverage, a surplus
lines agent shall promptly issue and deliver to the insured or to
the insured's agent the following evidence of insurance:
(1) the policy issued by the insurer; or
(2) if the policy is not available, a certificate, cover note,
or other confirmation of insurance.
(b) If the policy is not available at the time of placement of
the insurance, the surplus lines agent shall, on the insured's
request and as soon as reasonably possible:
(1) obtain the policy from the insurer; and
(2) deliver the policy to the insured to replace the
certificate, cover note, or other confirmation of insurance
previously issued.
(c) A surplus lines agent may not deliver the evidence of
insurance described by Subsection (a), or purport to insure or
represent that insurance will be or has been granted by an
eligible surplus lines insurer, unless the agent:
(1) has prior written authority from the insurer for the
insurance; or
(2) has received information from the insurer in the regular
course of business that:
(A) the insurance has been granted; or
(B) an insurance policy providing the insurance actually has
been issued by the insurer and delivered to the insured.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.104. DELIVERY TO INSURED OF REVISED SURPLUS LINES
DOCUMENTS. (a) A surplus lines agent shall promptly deliver to
the insured a substitute certificate, cover note, confirmation,
or endorsement for the original document showing the current
status of the coverage and the insurers responsible for that
coverage if, after the delivery of the original document, a
change is made:
(1) to the identity of the insurers;
(2) to the proportion of the direct risk assumed by the insurer
as stated in the original document; or
(3) in any other material respect as to the insurance coverage
evidenced by the document.
(b) A change made under Subsection (a) may not result in
coverage or an insurance contract that would violate this chapter
or Chapter 225, if originally issued on that basis.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 2E.129, eff. April 1, 2009.
Sec. 981.105. FILING WITH STAMPING OFFICE. (a) Not later than
the 60th day after the later of the effective date or the issue
date of new or renewal surplus lines insurance, a surplus lines
agent shall file with the stamping office:
(1) a copy of the policy issued; or
(2) if the policy has not been issued, a copy of the
certificate, cover note, or other confirmation of insurance
delivered to the insured.
(b) A surplus lines agent shall also promptly file with the
stamping office:
(1) a copy of each substitute certificate, cover note, or other
confirmation of insurance delivered to an insured;
(2) a copy of each endorsement of an original policy,
certificate, cover note, or other confirmation of insurance
delivered to an insured; and
(3) a memorandum from the agent informing the stamping office of
the substance of any change represented by a document described
by Subdivision (1) or (2), as compared with the original
coverage.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER D. SURPLUS LINES STAMPING OFFICE
Sec. 981.151. STATUS AS NONPROFIT ASSOCIATION. The Surplus
Lines Stamping Office of Texas is a nonprofit association.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.152. BOARD OF DIRECTORS. (a) The board of directors
of the stamping office exercises the powers of the office.
(b) The board consists of nine members appointed by the
commissioner. Four members must represent the public and have a
minimum of three years of experience in purchasing commercial
insurance. A public representative may not:
(1) be an officer, director, or employee of an insurer,
insurance agency, agent, broker, solicitor, or adjuster or any
other business entity regulated by the department;
(2) be a person required to register under Chapter 305,
Government Code; or
(3) be related to a person described by Subdivision (1) or (2)
within the second degree by affinity or consanguinity.
(c) A board member serves a term as established in the plan of
operation.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.153. PLAN OF OPERATION. (a) The procedures to
administer the stamping office are established by a plan of
operation approved by the commissioner. The plan of operation
establishes the terms of the members of the board of directors of
the office.
(b) The stamping office shall submit any amendment to the plan
of operation to the commissioner. An amendment to the plan of
operation is effective on approval by commissioner order.
(c) If the stamping office fails to submit a suitable amendment
to the plan of operation, the commissioner may, after notice and
hearing, adopt:
(1) an amendment to the plan of operation; and
(2) any rules necessary or advisable to implement this
subchapter.
(d) A rule adopted under Subsection (c) continues until:
(1) modified by the commissioner; or
(2) superseded by an amendment to the plan of operation
submitted by the stamping office and approved by the
commissioner.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.154. POWERS AND DUTIES. (a) The stamping office shall
perform its functions under the plan of operation.
(b) The stamping office shall conduct the following activities
as provided in the plan of operation:
(1) receive, record, and review each surplus lines insurance
contract that a surplus lines agent is required to file with the
office;
(2) provide to the commissioner an evaluation of the eligibility
of each surplus lines insurance contract and surplus lines
insurer;
(3) prepare monthly reports for the commissioner relating to
surplus lines insurance obtained during the preceding month in a
form prescribed by the commissioner;
(4) prepare reports for the commissioner relating to surplus
lines business;
(5) collect from each surplus lines agent a stamping fee for the
costs of operations to be paid by the insured and determined by
the department in an amount not to exceed three-fourths of one
percent of gross premium resulting from surplus lines insurance
contracts;
(6) employ persons;
(7) borrow money;
(8) enter into contracts;
(9) perform any other acts to facilitate or encourage compliance
with this chapter and rules adopted under this chapter; and
(10) provide any other service incidental or related to an
office purpose.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.155. SUPERVISION BY COMMISSIONER. The commissioner
shall supervise the stamping office. The stamping office is
subject to the applicable provisions of this code and rules of
the commissioner.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.156. EXAMINATION BY COMMISSIONER. (a) The
commissioner shall examine the stamping office at any time the
commissioner considers an examination necessary.
(b) The stamping office shall pay the cost of the examination.
(c) During an examination, a stamping office board member,
officer, agent, or employee:
(1) may be examined under oath regarding the operation of the
office; and
(2) shall make available any book, record, account, document, or
agreement relating to the operation of the office.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.157. IMMUNITY FROM LIABILITY. A person or entity is
not liable for, and a cause of action does not arise out of, an
act or omission in performing a power or duty under this
subchapter if the person or entity is:
(1) the stamping office or a board member, officer, agent, or
employee of the stamping office; or
(2) the department or an employee or representative of the
department, including the commissioner.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.158. EXEMPTION FROM PUBLIC INFORMATION LAW. (a) An
individual surplus lines insurance contract filed with the
stamping office is:
(1) confidential; and
(2) not public information under Chapter 552, Government Code.
(b) This section does not prevent access by a state agency to an
individual surplus lines insurance contract filed with the
stamping office.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.159. EXEMPTION FROM LIBRARY AND ARCHIVES LAW. Chapter
441, Government Code, does not apply to the stamping office or
its records.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.160. NO ENFORCEMENT AUTHORITY. This subchapter does
not give the stamping office authority to enforce this chapter or
Chapter 225.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 2E.130, eff. April 1, 2009.
SUBCHAPTER E. SURPLUS LINES AGENTS
Sec. 981.201. DEFINITION. In this subchapter, "managing general
agent" means an agent licensed under Chapter 4053.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 2E.131, eff. April 1, 2009.
Sec. 981.202. SURPLUS LINES LICENSE REQUIRED. An agent licensed
by this state may not issue or cause to be issued an insurance
contract with an eligible surplus lines insurer unless the agent
possesses a surplus lines license issued by the department.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.203. QUALIFICATIONS FOR SURPLUS LINES LICENSE. (a)
The department may issue a surplus lines license to an applicant
who the department determines complies with Subsection (b) and
is:
(1) an individual who:
(A) has passed an examination under Chapter 4002 and department
rules; and
(B) holds a current license as:
(i) a general property and casualty agent authorized under
Subchapter B, Chapter 4051; or
(ii) a managing general agent; or
(2) a corporation, limited liability company, or partnership
that:
(A) has at least one officer or director or at least one active
partner who has passed the required surplus lines license
examination;
(B) holds a current license as:
(i) a general property and casualty agent authorized under
Subchapter B, Chapter 4051; or
(ii) a managing general agent; and
(C) conducts insurance activities under this chapter only
through an individual licensed under this section.
(b) The agent must:
(1) pay an application fee as determined by the department; and
(2) submit a properly completed license application.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003. Amended by Acts 2003, 78th Leg., ch. 1276, Sec. 10A.229(a),
eff. Sept. 1, 2003.
Amended by:
Acts 2005, 79th Leg., Ch.
402, Sec. 1, eff. January 1, 2006.
Acts 2007, 80th Leg., R.S., Ch.
548, Sec. 2.09, eff. September 1, 2007.
Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 2E.132, eff. April 1, 2009.
Acts 2009, 81st Leg., R.S., Ch.
87, Sec. 14.012, eff. September 1, 2009.
Sec. 981.204. CLASSIFICATION OF SURPLUS LINES AGENTS. The
department may classify surplus lines agents and issue a surplus
lines license to an agent in accordance with:
(1) a classification created under this section; and
(2) reasonable rules of the commissioner.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.210. PLACEMENT OF COVERAGE. A surplus lines agent may
not place surplus lines coverage with an insurer unless:
(1) the insurer meets the eligibility requirements of Subchapter
B; and
(2) the stamping office provides evidence to the department that
the insurer meets those requirements.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.211. FINANCIAL CONDITION OF SURPLUS LINES INSURERS.
(a) A surplus lines agent must make a reasonable effort to
determine the financial condition of an eligible surplus lines
insurer before placing insurance with that insurer.
(b) A surplus lines agent may not knowingly place surplus lines
insurance with a financially unsound insurer.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.212. ACCEPTING SURPLUS LINES INSURANCE FROM OTHER
AGENTS. (a) A surplus lines agent may originate surplus lines
insurance or accept surplus lines insurance from another agent
who is licensed to handle the kind of insurance being accepted.
(b) A surplus lines agent who accepts surplus lines insurance
from an agent may share a commission with that agent.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.213. FILING CONTRACT WITH STAMPING OFFICE. A surplus
lines agent shall report to and file with the stamping office a
copy of each surplus lines insurance contract as provided in the
stamping office's plan of operation. The department may accept
that filing instead of the filings required under Section
981.105.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.214. COMPLIANCE WITH STAMPING OFFICE PLAN OF OPERATION.
A surplus lines agent shall comply with the stamping office's
plan of operation.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.215. SURPLUS LINES AGENT RECORDS. (a) A surplus lines
agent shall maintain a complete record of each surplus lines
contract obtained by the agent, including any of the following,
if applicable:
(1) a copy of the daily report;
(2) the amount of the insurance and risks insured against;
(3) a brief general description of the property insured and the
location of that property;
(4) the gross premium charged;
(5) the return premium paid;
(6) the rate of premium charged on the different items of
property;
(7) the contract terms, including the effective date;
(8) the insured's name and post office address;
(9) the insurer's name and home office address;
(10) the amount collected from the insured; and
(11) any other information required by the department.
(b) The surplus lines agent shall keep the record required by
this section open for examination by the department without
notice at any time until the third anniversary of the date the
surplus lines contract expires or is canceled.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003. Amended by Acts 2003, 78th Leg., ch. 1276, Sec. 10A.233(a),
eff. Sept. 1, 2003.
Sec. 981.216. ANNUAL REPORT. (a) Before March 1 of each year,
a surplus lines agent shall submit a report to the department for
the preceding calendar year.
(b) The commissioner shall adopt the form for the annual report.
(c) The annual report must:
(1) demonstrate that the amount of insurance obtained from each
eligible surplus lines insurer is only the amount that exceeds
the amount obtainable from an authorized insurer; and
(2) include any other information required by the commissioner.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.217. NOTICE TO DEPARTMENT REQUIRED. (a) A surplus
lines agent shall notify the department not later than the 30th
day after the date any of the following occurs:
(1) balances due for more than 90 days to an eligible surplus
lines insurer or for more than 60 days to the agent acting on
behalf of the surplus lines insurer exceed $1 million or 10
percent of the insurer's policyholder surplus calculated on
December 31 of the preceding year;
(2) balances due for more than 60 days from a managing general
agent or a local recording agent appointed by or reporting to the
managing general agent exceed $500,000;
(3) authority to settle claims for an eligible surplus lines
insurer is withdrawn;
(4) funds held for an eligible surplus lines insurer for losses
are greater than $100,000 more than the amount necessary to pay
losses and loss adjustment expenses expected to be paid on behalf
of the insurer in the next 60-day period; or
(5) the agent's contract to act on behalf of a surplus lines
insurer is canceled or terminated.
(b) The commissioner shall adopt the form to be used under
Subsection (a).
(c) A surplus lines agent may comply with the notification
requirement under Subsections (a)(1), (2), and (4) by submitting
a single annual report if:
(1) the agent or applicable eligible surplus lines insurer
routinely operates beyond the limits provided by those
subdivisions; and
(2) the commissioner verifies that fact under a procedure
adopted by the commissioner.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.218. DEPARTMENT MONITORING OF SURPLUS LINES AGENTS.
The commissioner shall monitor the activities of surplus lines
agents as necessary to protect the public interest.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003. Amended by Acts 2003, 78th Leg., ch. 1276, Sec. 10A.228(b),
eff. Sept. 1, 2003.
Sec. 981.219. ADVERTISING. A surplus lines agent may advertise
regarding the agent's ability to place surplus lines insurance
permitted by this chapter.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 981.220. MANAGING GENERAL AGENTS; LIMITED AUTHORITY OF
CERTAIN AGENTS. A surplus lines license granted to a managing
general agent who is not also licensed under Chapter 4051 is
limited to the acceptance of business originating through a
licensed general property and casualty agent. The license does
not authorize the agent to engage in business directly with the
insurance applicant.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003. Amended by Acts 2003, 78th Leg., ch. 1276, Sec. 10A.234(a),
eff. Sept. 1, 2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
548, Sec. 2.10, eff. September 1, 2007.
Sec. 981.221. SUSPENSION OR REVOCATION OF LICENSE. If a license
holder does not maintain the qualifications necessary to obtain
the license, the department may revoke or suspend the license or
deny the renewal of that license in accordance with Chapter 4003
and Subchapters B and C, Chapter 4005.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 10A.229(b), eff.
Sept. 1, 2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 2E.134, eff. April 1, 2009.
Sec. 981.222. APPLICABILITY OF OTHER LAW. In addition to the
requirements of this chapter, the administration and regulation
of a surplus lines agent's license is governed by Title 13,
except that the provisions of Sections 4001.002(b)(2)-(6),
4001.003, and 4001.004 and Subchapters C-G, Chapter 4001, do not
apply to a license issued under this subchapter.
Added by Acts 2003, 78th Leg., ch. 1276, Sec. 10A.229(c), eff.
Sept. 1, 2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
730, Sec. 2E.135, eff. April 1, 2009.