- Texas maintains a list of eligible surplus lines insurers (see Other Comments section #1).
- Texas does have a Surplus Lines Association and a Stamping Office (see Other Comments section #8).
- Texas does not have an Export List.
- Texas does have an industrial insured exemption but adopted legislation in 2013 which aligns the Exempt Commercial Purchaser definition of the NRRA.
- Surplus lines tax: 4.85% (+ stamping fee of .15% (.0015)), payable by broker (TX DOI imposes assessments/enforcement actions for late filings).
- Texas has not affiliated with any existing compact but has adopted legislation allowing it to keep 100% of surplus line premium tax where Texas is the home state (SB 1, Article 18).
- Texas does allow domestic surplus lines insurers in the state.
Eligibility and Filing Requirements (All Insurers):
- The provisions of the NRRA are effective July 21, 2011.
- The placement of nonadmitted insurance is solely subject to the statutory and regulatory requirements of the insured’s home state.
- Nonadmitted insurance includes both surplus lines and independently procured insurance but does not include unauthorized insurance transactions by a non-licensed insurer that may be subject to regulatory actions and taxation by a state.
- New and renewal policies and any modifications made with an effective date prior to July 21, 2011, remain subject to the laws and regulations of each state as of the policy effective date.
- New and renewal policies and any modifications made with an effective date on or after July 21, 2011, are only subject to the laws and regulations of the home state of the insured.
- The NRRA provisions should be applied to multi-year and continuous-until-cancelled policies on the policy’s first anniversary date on or after July 21, 2011.
- Only the home state of an insured can require premium tax on a multi-state policy; however, states may join an agreement or compact to allocate the taxes among the various states afforded coverage under the policy.
Eligibility and Filing Requirements (Alien Insurers Only):
(For Alien Insurers Not on NAIC Quarterly List but Grandfathered under New Law Effective 6/14/13)
- Annual Report: expressed in US Dollars.
- Certificate of Authority: must be certified and indicate the kind and classes of business the company is entitled to write.
- List of Texas Surplus Lines Agents.
- Three Year Business Plan: using Form FIN 424.
- Biographical Affidavits: (current within 3 years) for each officer, director and management of the insurer.
- Trust Agreement and Current Statement of Account.
- Premium Report.
- Actuarial Opinion: due August 1.
Eligibility and Filing Requirements (Foreign Insurers Only):
- Certificate of Authority or License: certified copy from insurer’s state of domicile.
- Financial Statements: The Texas DOI may review statements filed with the NAIC and in accordance with NAIC’s guidelines.
- Lines of Business: Anticipated to be written in Texas.
- Texas Insurance Code, Chapter 229, gives the Comptroller the authority to join in a tax compact or other agreement. If the Comptroller decides to join in such an agreement, the industry will be notified in order to prepare for any necessary reporting and filing changes.
- The NRRA does not preempt any state law, rule or regulation that applies to the placement of workers’ compensation or excess insurance for self-funded workers’ compensation plans.
Types of Insurance Exempted from Surplus Lines Regulation:
None. (see Other Comments section #3 below).
Other Comments or Requirements:
- Texas eligibility search available at https://apps.tdi.state.tx.us/pcci/pcci_search.jsp or at Surplus Lines Service Office of Texas: https://www.sltx.org/insurers/eligible-insurer-list/eligible-insurers/.
- Onus is on broker to ascertain financial stability of insurer.
- Texas Insurance Code (Chapter 225) provides tax exemption for premiums on risks or exposures which are properly allocated to federal waters, international waters or under jurisdiction of a foreign government. Risks located in Texas waters are taxable under state law. Tax exemption does not pre-empt the reporting of the surplus lines policy to the Surplus Lines Stamping Office of Texas, unless 100% of the exposure is tax-exempt or located in other state(s).
- If a non-resident broker license is being sought by a corporation or partnership, at least one officer or director must also obtain an individual surplus lines license to receive the corporate license for the agency or partnership. If there are any other officers, directors, partners or employees in the agency that will be doing the acts of a surplus lines agent, they will be required to have an individual surplus lines license as well. Applicant must also have either an underlying General Lines P&C Agent license or an MGA license in Texas. SB697 adopted in the 83rd Legislative session does not require an underlying license for certain non-resident surplus lines agents who meet specific criteria outlined in Texas Insurance Code section 981.203(a-1).
- All insurance companies, including surplus lines insurers, are required to promptly refund to the insured any unearned premium for a policy.
- Rates charged by all insurers, including surplus lines insurers, must be “just, fair, reasonable, adequate, not confiscatory and not excessive for the risks to which they apply, and not unfairly discriminatory.”
- Texas no longer requires a surety bond or other proof of financial responsibility for licensure of surplus lines agents.
- Texas Surplus Lines AssociationWebsite: www.tsla.org.
Contact: Jean Patterson, Executive DirectorTexas Stamping Office
Contact: (TBD), Executive Director
- In 2009, Texas created an unauthorized insurance guaranty fund to help pay the claims of unauthorized insurers. Funds will be derived from fines and penalties imposed on unlicensed insurance entities and licensed entities that are doing insurance business in Texas without a license.
- The Texas legislature enacted legislation in 2011 which made significant reforms to the operation of the Texas Windstorm Insurance Association. It affects surplus lines insurers in that it redefines the types of policies subject to premium allocation reporting and potential surcharging for the funding of Class 2 public securities. It specifies that only fire and allied lines, farm and ranch owners, residential property, private passenger automobile liability and physical damage, commercial automobile liability and physical damage, and the property portion of commercial multi-peril insurance policies are subject to surcharging.
- The Texas Legislature enacted Legislation in 2013 which aligns state law to the NRRA requirements.
- A policy issued by an eligible surplus lines insurer or a certificate of insurance issued by the surplus lines agent must contain a provision stating and designating the Person to whom the commissioner is to mail process. The plaintiff must supply this address in any citation served under this section.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.
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.
- Texas enacted Legislation in 2017 which exempts from diligent effort requirements any industrial insureds that employ qualified risk managers, have aggregate nationwide commercial insurance premiums of $25,000 in the previous year and have 25 full-time employees.