2011 -- H 5953 SUBSTITUTE A
A N A C T
RELATING TO INSURANCE
Introduced By: Representative Michael J. Marcello
Date Introduced: March 17, 2011
It is enacted by the General Assembly as follows:
SECTION 1. The title of Chapter 27-3 of the General Laws entitled "Agents, Brokers,
and Solicitors" is hereby amended to read as follows:
Brokers, and Solicitors
SURPLUS LINES INSURANCE
SECTION 2. Sections 27-3-38, 27-3-38.1, 27-3-39 and 27-3-40 of the General Laws in
Chapter 27-3 entitled "Agents, Brokers, and Solicitors" are hereby amended to read as follows:
27-3-38. Surplus line brokers -- License -- Affidavit of inability to obtain insurance -
- Reports and records -- Premium tax -- Notice to purchasers. -- (a) The insurance
commissioner may issue a surplus line broker's license to any person
who or which is licensed as a property and casualty insurance producer in this
state, authorizing the licensee to
subject to the restrictions provided in this section, policies of insurance, except life and health and
accident, from eligible surplus lines insurers
are on the commissioner's list of approved surplus insurers in this state residents of this state must hold a property and
producer license to qualify for a surplus lines broker license. This license may be denied,
suspended or revoked by the insurance commissioner whenever, in the commissioner's judgment,
a suspension or revocation will best promote the
interest of the people of this state any
bases under section 27-2.4-14 exist. Before any license is issued by the insurance commissioner
and before each renewal of a license, there shall be filed in his or her office a written application
by the person desiring the license in the form
forms and supplements to the form, and
containing any information, that the insurance commissioner may prescribe. For the purposes of
carrying out the provisions of the Nonadmitted and Reinsurance Reform Act of 2010, the
commissioner is authorized to utilize the national insurance producer database of the NAIC, or
any other equivalent uniform national database, for the licensure of a person as a surplus lines
producer and for renewal of such license. For insureds whose home state is this state, a person
shall not procure a contract of surplus lines insurance with a nonadmitted insurer unless the
person possesses a current surplus lines insurance license issued by the commissioner.
obtain a surplus line broker license. Application shall be made using the uniform business entity
application. Prior to approving the application, the commissioner shall find both of the following:
(1) The business entity has paid the appropriate fees.
(2) The business entity has designated a licensed surplus line broker responsible for the
business entity's compliance with the insurance laws and rules of this state.
(c) When any policy of insurance is procured under the authority of that license, there
shall be executed, both by the licensee and by the insured, affidavits setting forth facts showing
that the insured or a licensed
from no less than three (3)
insurers the full amount of insurance required to
protect the property owned or controlled by the insured or the risks insured. Provided, however
the aforementioned affidavit shall not be required when insuring the following interest:
amusement parks and devices, environmental improvement and/or remediation sites, vacant
property or property under renovation, demolition operations, event cancellation due to weather,
railroad liability, discontinued products, fireworks and pyrotechnics, warehouseman's legal
liability, excess property coverage, and contingent liability. In addition, no such affidavit is
required for exempt commercial purchasers as defined by the Nonadmitted and Reinsurance
Reform Act of 2010. For purposes of this section, residual market mechanisms shall not be
considered authorized insurers. Prior to renewing, continuing, or extending any policy, the
licensed surplus line broker must confirm that the insurer is on the insurance commissioner's list
of approval surplus line insurers in this state.
(d) The licensee shall keep a complete and separate record of all policies procured from
approved surplus lines insurers under the license and these records shall be open to the
examination of both the insurance commissioner and tax administrator at all reasonable times,
and shall show the exact amount of each kind of insurance permitted under this section which has
been procured for each insured, the gross premiums charged by the insurers for each kind of
insurance permitted under this section which were returned to each insured, the name of the
insurer or insurers which issued each of these policies, the effective dates of these policies, and
the terms for which these policies were issued. The licensee shall file a yearly report with the
insurance commissioner on a form prescribed by the insurance commissioner showing the
business procured under the surplus line license for the preceding calendar year, and the report
shall be due annually on or before April 1.
(e) Every person, firm, or corporation licensed pursuant to the provisions of this section
shall file with the insurance commissioner, at the time of the insurance producer license renewal,
sufficient information as determined by the insurance commissioner whether a licensee or a
person acting on the licensee's behalf, has paid to the tax administrator, for all policies procured
by the licensee pursuant to the license during the next preceding calendar year, a tax, computed at
the rate of four percent (4%) on the gross premiums charged the insured by the insurers, less the
amount of premiums returned to the insured.
(f) Every application form for insurance from a surplus lines insurer, every affidavit
form executed by the insured, and every policy (on its front and declaration pages) issued by the
surplus lines insurer, shall contain in ten (10) point type the following notice:
THIS INSURANCE CONTRACT HAS BEEN PLACED WITH AN INSURER NOT
LICENSED TO DO BUSINESS IN THE STATE OF
A SURPLUS LINES INSURER. THE INSURER IS NOT A MEMBER OF THE RHODE
ISLAND INSURERS INSOLVENCY FUND. SHOULD THE INSURER BECOME
INSOLVENT, THE PROTECTION AND BENEFITS OF THE RHODE
INSOLVENCY FUND ARE NOT AVAILABLE.
Insurance independently procured -- Duty to report and pay tax. -- (a)
Each insured in this state who procures or continues or renews insurance with an insurer not
licensed to do an insurance business in this state on properties, risks or exposures located or to be
performed in whole or in part in this state, other than insurance procured through a surplus lines
licensee, shall, within thirty (30) days after the date the insurance was so procured, continued or
renewed, file a written report with the tax administrator, upon forms prescribed by the tax
administrator, showing the name and address of the insured or insured's, name and address of the
insurer, the subject of the insurance, a general description of the coverage, the amount of
premium currently charged and additional pertinent information reasonably requested by the tax
(2) For the purposes
of this subsection, properties, risks or exposures only partially located or to be performed in this state, which are covered
under a multi-state policy placed by a surplus lines licensee in another state, shall be deemed to
be insurance independently procured unless the insurer is licensed to do business in this state.
(b) Where the insurance covers properties, risks or exposures located or to be performed
both in and out of this state, the sum payable shall be computed based on: (1) An amount equal to
four percent (4%) on that portion of the gross premiums allocated to this state pursuant to section
27-3-38.3; plus (2) An amount equal to the portion of the premiums allocated to other states or
territories on the basis of the tax rates and fees applicable to properties, risks or exposures located
or to be performed outside of this state.
(c) Pursuant to applicable sections of the general laws, the commissioner shall participate
in a multi-state surplus lines compact or agreement for the purpose of collecting and disbursing to
reciprocal states any funds collected pursuant to subdivision (b)(2) of this section applicable to
other properties, risks or exposures located or to be performed outside of this state. To the extent
that other states where portions of the properties, risks or exposures reside have failed to enter
into compact or reciprocal allocation procedure with this state, the net premium tax collected
shall be retained by this state.
Gross premiums charged for the insurance, less any return premiums, are subject
to a tax at the rate of
three percent (3%) four
percent (4%). At the time of filing the report
required in subsection (a) of this section, the insured shall file with the tax administrator, in the
form that he or she may prescribe, a return under oath or affirmation containing information that
may be deemed necessary for the determination of the tax imposed by this section. The insured
shall at the same time pay the tax due to the tax administrator.
an independently procured policy covers properties, risks or exposures only
partially located or to be performed in this state, the tax payable by the insured shall be computed
on the portion of the premium properly attributable to the properties, risks or exposures located or
to be performed in this state in the manner provided in section 27-3-38.3.
This section does not abrogate or modify chapter 16 of this title (Unauthorized
Insurance Business), or any other provision of this title.
27-3-39. Surplus line broker's bond. -- (a) No license to act as a resident surplus line
broker in this state shall be issued until a certificate of the general treasurer is deposited with the
insurance commissioner on a blank furnished by the insurance commissioner, stating that the
licensee has filed with the general treasurer a bond in the penal sum of twenty-five thousand
dollars ($25,000) executed by the licensee as principal and by a surety company authorized to
transact business in this state as surety, and conditioned upon the licensee faithfully complying
with all of the requirements of section 27-3-38.
(b) Any bond required by this section shall be continuous while the principal is licensed
to act as a surplus line broker in this state; provided, that before the bond may be cancelled, the
insurance commissioner must have been notified in writing by the surety of the proposed
cancellation at least thirty (30) days prior to the date cancellation is to become effective; and,
provided, that in the event of cancellation, any license covered by the bond shall be suspended by
the insurance commissioner pending the substitution of a similar bond for the cancelled bond.
The surety shall be released from further liability under any bond covering a license revoked,
terminated, or expired as to any acts committed after the date that license is revoked, terminated,
or expired. The aggregate liability of the surety for any and all claims or recoveries that arise
under any bond shall in no event exceed the amount of the penal sum of the bond. The
commissioner may promulgate standards and procedures for collecting under bonds issued
pursuant to this section.
(c) Authorized surplus line agents or brokers of a licensed firm may meet the
requirements of this section with a bond in the name of the licensed firm, continuous in form and
in the amounts set forth in subsection (a).
27-3-40. Limitations on placing insurance with approved surplus lines insurers. --
No person licensed to act as a surplus line broker in
the state shall place any insurance with an approved surplus lines insurer unless that insurer has
furnished the commissioner with a certified copy of its current annual statement or documentary
evidence that it has investments in the amount of at least two hundred fifty thousand dollars
($250,000) market value of bonds of the United States , or of any state, county, or municipality of the alien insurer, a trust fund must be established and
maintained in the of not less than five million dollars ($5,000,000), for
the protection of all of its policyholders in the to be placed on commissioner determines, in his or her judgment, that an approved
surplus lines insurer is not in a safe or solvent financial condition, or has refused to pay
just claims, the commissioner shall direct that no insurance shall be placed with that insurer; upon
the commissioner's written notice to that effect mailed to licensees under this chapter, no insurance
shall be placed with that insurer.
(a) Surplus lines insurance may be placed by a surplus lines broker if each insurer is
authorized to write the type of insurance in its domiciliary jurisdiction;
(b) A surplus lines licensee shall not place coverage with a nonadmitted insurer, unless, at
the time of placement, the nonadmitted insurer:
(1) Has established satisfactory evidence of good repute and financial integrity; and
(2) Qualifies under one of the following subparagraphs:
(i) Has capital and surplus or its equivalent under the laws of its domiciliary jurisdiction
which equals the greater of:
(A) The minimum capital and surplus requirements under the law of this state; or
(B) Fifteen million dollars ($15,000,000); or
(ii) For an insurer
not domiciled in the
on the quarterly listing of alien insurers maintained by the NAIC international insurers
department or its equivalent
(c) The capital and surplus requirements of paragraph (b)(2)(i) above may be satisfied by
an insurer possessing less than the minimum capital and surplus upon an affirmative finding of
acceptability by the commissioner. The finding shall be based upon such factors as quality of
management, capital and surplus of any parent company, company underwriting profit and
investment income trends, market availability and company record and reputation within the
industry. In no event shall the commissioner make an affirmative finding of acceptability when
the nonadmitted insurer's capital and surplus is less than four million five hundred thousand
(d) The commissioner is authorized to enter into a multi-state surplus lines agreement to
establish additional and alternative nationwide uniform eligibility requirements that shall be
applicable to nonadmitted insurers
domiciled in another state or territory of the
SECTION 3. Chapter 27-3 of the General Laws entitled "Agents, Brokers, and Solicitors"
is hereby amended by adding thereto the following section:
27-3-38.2. Definitions. -- As used in this chapter:
(1) "Admitted insurer" means an insurer licensed to do an insurance business in this state.
(2) "Capital" as used in the financial requirements of section 27-3-40, means funds paid
in for stock or other evidence of ownership.
"Commissioner" means the insurance commissioner of
designee, deputies or staff, or the commissioner, director or superintendent of insurance in any
(4) "Eligible surplus lines insurer" means a nonadmitted insurer with which a surplus
lines licensee may place surplus lines insurance pursuant to section 27-3-38.
(i) With respect to an insured:
(A) The state in which an insured maintains its principal place of business or, in the case
of an individual, the individual's principal residence; or
(B) If one hundred percent (100%) of the insured risk is located out of the state referred
to in subparagraph (i), the state to which the greatest percentage of the insured's taxable premium
for that insurance contract is allocated.
(ii) "Principal place of business" means, with respect to determining the home state of the
(A) the state where the insured maintains its headquarters and where the insured's high-
level officers direct, control and coordinate the business activities; or
(B) if the insured's high-level officers direct, control and coordinate the business
activities in more than one state, the state in which the greatest percentage of the insured's taxable
premium for that insurance contract is allocated; or
(C) if the insured maintains its headquarters or the insured's high-level officers direct,
control and coordinate the business activities outside any state, the state to which the greatest
percentage of the insured's taxable premium for that insurance contract is allocated.
(iii) "Principal residence" means, with respect to determining the home state of the
insured, (i) the state where the insured resides for the greatest number of days during a calendar
years; or (ii) if the insured's principal residence is located outside any state, the state to which the
greatest percentage of the insured's taxable premium for that insurance contract is allocated.
(iv) Affiliated groups. If more than one insured from an affiliated group are named
insureds on a single nonadmitted insurance contract, the term "home state" means the home state,
as determined above, of the member of the affiliated group that has the largest percentage of
premium attributed to it under such insurance contract.
(v) Group insurance. When the group policyholder pays one hundred percent (100%) of
the premium from its own funds, the term "home state" means the home state, as determined
above, of the group policyholder. When the group policyholder does not pay one hundred percent
(100%) of the premium from its own funds, the term "home state" means the home state, as
determined above, of the group member.
(6) "Insurer" means any person, corporation, association, partnership, reciprocal
exchange, interinsurer, Lloyds insurer, insurance exchange syndicate, fraternal benefit society,
and any other legal entity engaged in the business of insurance.
(7) "NAIC" means the National Association of Insurance Commissioners.
(8) "Nonadmitted insurer" means an insurer not licensed to do an insurance business in
(9) "Person" means any natural person or other entity, including, but not limited to,
individuals, partnerships, associations, trusts or corporations.
(10) "Surplus" as used in the financial requirements of section 27-3-40, means funds over
and above liabilities and capital of the company for the protection of policyholders.
(11) "Surplus lines insurance" means any property and casualty insurance in this state on
properties, risks or exposures, located or to be performed in this state, permitted to be placed
through a surplus lines licensee with a nonadmitted insurer eligible to accept such insurance,
pursuant to section 27-3-40.
(12) "Surplus lines licensee" means an individual, firm or corporation licensed under
section 27-3-38 to place insurance on properties, risks or exposures located or to be performed in
this state with nonadmitted insurers eligible to accept such insurance.
SECTION 4. This act shall take effect upon passage.