20-413

20-413. Placing of surplus lines coverage;
endorsement by broker; list of unauthorized insurers; removal from
list; definition

A. A surplus lines broker shall not knowingly place any surplus lines coverage with
an unauthorized insurer, Lloyd's association, insurance exchange or syndicate of an
insurance exchange that does not meet the minimum financial requirements of this section
or that is declared by the director to be in a hazardous financial condition, improperly
managed or unreliable in insurance transactions. A surplus lines broker may place
surplus lines coverage with a syndicate of an unauthorized insurance exchange even if
another syndicate of the insurance exchange is declared by the director to be in a
hazardous financial condition, improperly managed or unreliable in insurance
transactions, as long as that syndicate does not participate in insuring the risk and
unless the declaration of the director specifies that the insurance exchange shall not
accept surplus lines placements.

B. An unauthorized foreign insurer authorized to transact insurance on an admitted
or surplus lines basis in at least one other state shall possess a minimum capital and
surplus of at least five million dollars and shall maintain a deposit of at least two
million five hundred thousand dollars in public custody in trust, in part, for the
purpose of protecting all of the foreign insurer's policyholders.

C. An unauthorized alien insurer other than a title insurer shall possess minimum
capital and surplus of at least fifteen million dollars and shall maintain within the
United States in public depositories or trust institutions approved by the director
assets in the amount of two million five hundred thousand dollars. The director may
require the unauthorized alien insurer to maintain a larger deposit if the director
determines that the public interest reasonably requires a larger deposit. A broker
shall not knowingly place any insurance with the unauthorized alien insurer until the
insurer complies with the director's requirement to maintain a larger deposit.

D. Any unauthorized Lloyd's association or any similar association of individual or
incorporated insurers under a common administration shall maintain a trust fund in the
United States of at least one hundred million dollars as joint and several security for
all United States policyholders of any member of the association. The director may
require the association to maintain a larger fund if the director determines that the
public interest reasonably requires a larger fund. A broker shall not knowingly place
any insurance with the association until the association complies with the director's
requirement to maintain a larger fund.

E. An unauthorized insurance exchange authorized to transact insurance on an
admitted or surplus lines basis in at least one other state shall possess minimum
aggregate capital and surplus of at least fifty million dollars. Each syndicate of the
insurance exchange with which a risk is to be placed shall possess minimum aggregate
capital and surplus of at least four million dollars until December 31, 1996. Beginning
January 1, 1997 each syndicate with which a risk is to be placed shall possess minimum
capital and surplus of at least five million dollars. The insurance exchange shall
maintain a deposit of at least two million five hundred thousand dollars in public
custody in trust, in part, for the purpose of protecting all of the policyholders of the
insurance exchange. Each syndicate of an insurance exchange qualified to transact
surplus lines insurance in this state shall file with the director on or before June 1 an
annual statement for the preceding year in a form prescribed by the national association
of insurance commissioners. The annual statement is in addition to any other document
required of the insurance exchange by the director.

F. If the surplus lines broker delivers a certificate in a form prescribed by the
director, it is prima facie evidence of the insurer's compliance with the financial
requirements of this section. The certificate shall state the names of the public
officials or other persons who have supervision over the insurer in any other state and
shall certify the amount of capital and surplus that the insurer possesses and the amount
of the trust deposit that the insurer maintains, as determined from the records and
knowledge of the public officials or other persons, together with any supporting
documentation that the director requires. The certifying surplus lines broker of an
alien insurer may deliver other evidence acceptable to the director to establish that the
alien insurer meets the financial requirements of this section. The certifying surplus
lines broker may withdraw the certificate by providing written notice of intent to
withdraw to the director and the affected insurer. The withdrawal is not effective until
forty-five days after delivery of the notice to all parties. The withdrawal is not
grounds for removal from the list pursuant to subsection H if, before the withdrawal
becomes effective, another licensed surplus lines broker delivers to the director a
replacement certificate based on the qualifying documentation already on file with the
department.

G. The director may periodically publish a list of unauthorized insurers that may
write surplus lines insurance in this state established on the basis of documentation
provided to the director pursuant to this section. The director may mail a copy of the
list to each licensed surplus lines broker at the last address on the records of the
department. This subsection is not deemed to require the director to determine the
actual financial condition or claims practices of any unauthorized insurer, and the
appearance of an unauthorized insurer on the list indicates only that the insurer appears
to be financially sound and to have satisfactory claims practices. A broker shall
restrict all surplus lines business placed by the broker with an unauthorized insurer to
those insurers qualified with the director as provided in this section.

H. The director may refuse to add an insurer to the list established pursuant to
subsection G or may remove an insurer from that list if the director believes that the
insurer:

1. Is in a hazardous financial condition.

2. No longer meets the requirements of this article.

3. Does not have the endorsement of a surplus lines broker pursuant to subsection
F.

4. Does not comply with all applicable provisions of this title.

5. Is improperly managed.

6. Is unreliable in insurance transactions.

I. In addition to any other penalty provided by law, if a surplus lines broker's
license is revoked for a violation of this section, the director shall not license the
broker again within a period of two years thereafter.

J. For the purposes of subsections F, G and H, "insurer" means an unauthorized
insurer, Lloyd's association, insurance exchange or syndicate of an insurance exchange.