BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 131|
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THIRD READING
Bill No: SB 131
Author: Gaines (R), et al.
Amended: 5/17/11
Vote: 21
SENATE INSURANCE COMMITTEE : 8-0, 05/11/11
AYES: Calderon, Gaines, Anderson, Corbett, Correa, Lieu,
Price, Wyland
NO VOTE RECORDED: Lowenthal
SUBJECT : Insurance: surplus line brokers
SOURCE : American International Group
DIGEST : This bill clarifies the allocation of Department
of Insurance reporting requirements under the surplus lines
law when multiple brokers are involved in a single surplus
lines transaction by permitting delegation of the
responsibility by mutual agreement among the brokers as a
recognized option.
ANALYSIS : Existing law:
1.Requires insurers that "transact" insurance in California
be "admitted" to transact in the state. "Admitted" is
the Insurance Code terminology for being licensed to
transact insurance in this state.
2.Provides that "transact" as it applies to insurance
includes solicitation, negotiations preliminary to the
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execution of an insurance contract, execution of the
contract, and transaction of matters subsequent to the
execution of, and arising out of, the insurance contract.
3.Authorizes licensed "surplus lines brokers", when a risk
cannot be placed with an admitted insurer, to place the
risk with an insurer that is not fully licensed in
California, subject to rules and financial requirements
designed to strengthen the public's confidence when
dealing with such entities.
4.Imposes various duties on surplus lines broker to ensure
compliance with the Surplus Lines law.
5.Among these duties is a requirement that on or before the
first day of March of each year, a surplus line broker
must file with the Insurance Commissioner a sworn
statement of all business transacted under his or her
surplus line license during the prior calendar year.
6.Requires each surplus line broker to file with the
Insurance Commissioner a confidential written report
regarding the insurance placement within 60 days of
placing any insurance with a nonadmitted insurer. The
report is required to contain various matters, including
the insured's name and address, identity of the
insurer/insurers, a description of the subject and
location of the risk, the premium charged for the
insurance, a copy of the declarations page or of the
surplus line broker's certificate or binder evidencing
the placement, and other pertinent information that the
commissioner may reasonably require.
7.Provides that when multiple surplus line brokers are each
involved in placing a policy, only the one responsible
for negotiating, effecting the placement, remitting the
premium to the nonadmitted insurer or its representatives
and filing the confidential written report described
above is considered" transacting" under their surplus
line broker's license.
This bill:
1.Permits, if multiple surplus lines brokers are involved
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in a single transaction, that only one shall include the
report concerning the transaction in the required sworn
statement of business transacted which is filed with the
Insurance Commissioner.
2.Allows the surplus line brokers to delegate by agreement
the responsibility for filing the confidential written
report on the transaction which must be provided to the
Insurance Commissioner if the agreement is:
A. Made by all surplus line brokers involved in the
transaction;
B. Signed by all the surplus line brokers involved in
the transaction; and
C. Provides by its terms that the agreement shall be
made available to the commissioner or his or her
designee, upon request.
Related Legislation
AB 315 (Solorio) is a pending bill to conform California's
surplus lines law to the mandatory surplus line reforms of
the Nonadmitted and Reinsurance Reform Act set forth in
Title V of the Dodd Frank Wall Street Reform and Consumer
Protection Act. It is anticipated that these two bills
will be subject to technical conformity amendments as the
bills move forward.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 5/16/11)
American International Group (source)
ARGUMENTS IN SUPPORT : According to the sponsor, SB 131's
purpose is clarify the reporting requirements under the
Surplus Lines law when multiple surplus lines brokers are
involved in a single insuring transaction. The bill will
permit the surplus line brokers involved in a placement to
designate among themselves, by a written agreement between
and signed by all the participating brokers, which broker
is responsible for the required filings. This approach is
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said to be a better fit for actual practice in the
marketplace. The bill requires that agreement must be made
available to the Insurance Commissioner upon request.
JJA:nl 5/17/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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