BILL NUMBER: AB 1699 CHAPTERED 06/13/08 CHAPTER 29 FILED WITH SECRETARY OF STATE JUNE 13, 2008 APPROVED BY GOVERNOR JUNE 13, 2008 PASSED THE SENATE MAY 29, 2008 PASSED THE ASSEMBLY JUNE 5, 2008 AMENDED IN SENATE APRIL 7, 2008 AMENDED IN ASSEMBLY JANUARY 24, 2008 AMENDED IN ASSEMBLY JANUARY 17, 2008 AMENDED IN ASSEMBLY JANUARY 15, 2008 AMENDED IN ASSEMBLY APRIL 9, 2007 INTRODUCED BY Assembly Member Duvall FEBRUARY 23, 2007 An act to amend Sections 1750, 1765, and 1765.2 of the Insurance Code, relating to license fees, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST AB 1699, Duvall. Insurance: surplus line brokers' fees. Existing law requires certain types of licensees to pay in advance to the department, a fee for filing an application for licensure, as specified. This bill would, in addition, require surplus line brokers transacting only on behalf of a surplus line organization to pay in advance a filing fee of $250 per year or part of a year, as specified. All other surplus line brokers would be required to pay in advance a filing fee of $500 per year or part of a year, as specified. Existing law provides that the filing fee for a license to act as a surplus line broker is $700 every 2 years, or for any initial fractional license year. This bill would provide that the filing fee for a license to act as a surplus line broker is $1,000 every 2 years, or for any initial fractional license year. This bill would provide that for an individual licensed as a surplus line broker who only transacts on behalf of a surplus line broker organization the filing fee is $500 every 2 years, or for any initial fractional license year. This bill would provide that the department is authorized to collect additional license fees resulting from the increases in licensee fees provided by the bill and shall refund or credit any overpayment resulting from reductions in license fees provided by the bill. Existing law generally requires that surplus line insurance be transacted through a surplus line broker, and requires an individual to be licensed in order to transact surplus line brokerage business. This bill would repeal the requirement of licensure of individuals. Existing law provides that surplus line brokers satisfy continuing education requirements, as specified. This bill would provide that an entity licensed as a surplus line broker provide 2 hours of appropriate training every 5 years to its employees who solicit, negotiate, or effect insurance coverage placed by a nonadmitted insurer. The surplus line advisory organization would develop the curriculum for the training, as specified. Existing law provides that a surplus line license may be issued to an individual or any legal business entity. If issued to a business entity or individual that maintains more than one surplus line office in this state, it shall name the natural person or persons located at each surplus line office maintained in this state by the licensee who is or are to be responsible for the proper discharge at each office of all duties placed upon the licensee acting as a surplus line broker or who transacts insurance with the public as distinguished from insurance producers. Existing law provides that each of these natural persons must meet all of the requirements for the license. This bill would instead require that each person who is to be responsible for the proper discharge of licensee duties at each office from which a surplus line broker transacts that business with California residents be licensed as a surplus line broker. This bill would apply that provision to every business entity or individual that maintains more than one such surplus line office. This bill would declare that it is to take effect immediately as an urgency statute. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 1750 of the Insurance Code is amended to read: 1750. The commissioner shall require in advance as a fee for filing application for the hereinafter designated licenses, renewals thereof, or changes in outstanding licenses, an amount calculated as set forth herein. The fee is determined by multiplying the number of license years in the period of the license applied for or the remaining period of an existing license counting any initial fractional license year of that period as one year for that purpose, as follows: (a) Fire and casualty broker-agent, fifty-six dollars ($56). (b) Personal lines broker-agent, resident, fifty-six dollars ($56). (c) Life agent, resident, fifty-six dollars ($56). (d) Life agent, nonresident, fifty-six dollars ($56). (e) Surplus line broker who is an individual transacting only on behalf of a surplus line broker organization, two hundred fifty dollars ($250). (f) Surplus line broker not described in subdivision (e), five hundred dollars ($500). SEC. 2. Section 1765 of the Insurance Code is amended to read: 1765. (a) A license under this chapter shall be applied for and renewed by the filing with the commissioner of a written application therefor, in accordance with Section 1652. (b) Subject to subdivision (f), the commissioner shall issue a license authorizing any applicant who is trustworthy and competent to transact an insurance brokerage business in a manner as to safeguard the interest of the insured, to act as a surplus line broker from the date of the license until the expiration date specified in Section 1630. (c) An applicant for a surplus line broker's license shall, as part of the application and a condition of the issuance of the license, file a bond to the people of the State of California in the sum of fifty thousand dollars ($50,000), conditioned that the licensee will fully and faithfully comply with the requirements of this chapter, and all applicable provisions of this code. The bond shall be subject to Sections 1662 and 1663. A surplus line broker bond is not required for an individual licensed as a surplus line broker who only transacts on behalf of a licensed surplus line broker organization. (d) The filing fee for a license to act as a surplus line broker shall be one thousand dollars ($1,000) every two years, or for any initial fractional license year. For an individual licensed as a surplus line broker who only transacts on behalf of a surplus line broker organization, the filing fee shall be five hundred dollars ($500) every two years, or for any initial fractional license year. Every applicant for a business entity license, as provided in subdivision (a) of Section 1765.2, shall provide the names of all persons who may exercise the power and perform the duties under the license. Whenever an organization licensed as a surplus line broker desires to change, remove, or add to the natural person or persons who are to transact insurance under authority of its license, it shall immediately file an application or notice with the commissioner for an endorsement changing its license accordingly, on a form prescribed by the commissioner. The fee for adding or removing from any surplus line broker's license issued to an organization the name of any natural person, named thereon, shall be twenty-four dollars ($24). The commissioner shall require that the qualifying examination provided by subdivision (a) of Section 1676 be taken by any natural person named by the organization to exercise its agency or brokerage powers who would be required to take and pass the qualifying examination. That natural person or persons and the organization are in all other respects subject to the provisions of this chapter and the insurance laws. (e) The department is authorized to collect additional license fees resulting from the increases in licensee fees provided by the act that adds this subdivision and shall credit any overpayment resulting from reductions in license fees provided by that act. (f) A business entity licensed under this chapter shall provide two hours of appropriate training to its employees who solicit, negotiate, or effect insurance coverage placed by a nonadmitted insurer. The training shall be given to each eligible employee every five years. The surplus line advisory organization authorized pursuant to Chapter 6.1 (commencing with Section 1780.50) shall develop the curriculum for the training. (g) The license shall be renewed in accordance with, and subject to, Sections 1717, 1718, 1719, and 1720. (h) The commissioner may deny, suspend, or revoke any license applied for or granted pursuant to this chapter on all or any one of the grounds and in accordance with the procedures provided in Article 6 (commencing with Section 1666) and Article 13 (commencing with Section 1737) of Chapter 5, whenever the commissioner finds that the applicant or licensee has committed a violation of any provision of this code. SEC. 3. Section 1765.2 of the Insurance Code is amended to read: 1765.2. (a) A license under this chapter may be issued to an individual or any legal business entity. If issued to a business entity or individual that maintains more than one surplus line office from which it transacts that business with California residents, it shall name the natural person or persons located at each such surplus line office maintained by the licensee who is or are to be responsible for the proper discharge at each office of all duties placed upon the licensee acting as a surplus line broker and each of these natural persons must be licensed as a surplus line broker. Each natural person shall meet all of the requirements for the license. (b) Every application for a license filed by a corporation shall contain the names and addresses of all stockholders owning 10 percent or more of the corporation's stock, and of all officers and directors of the corporation. Every licensed corporation shall file a written notice with the commissioner of all changes, except address changes, of its stockholders who own 10 percent or more of the corporation's stock and of all officers and directors of the corporation. SEC. 4. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: This act is required for the proper regulation of surplus line brokers and to provide for the proper education of nonlicensed employees of surplus line brokers at the earliest possible time.