Surplus Lines - WA Statutes & Regulations Flashcards
Insurance Definition
Contract whereby one undertakes to indemnify another or pay a speciifed amount upon determinable contingencies.
Insurance Transaction Defined
1) Solicitation
2) Negotiations preliminary to execution
3) Execution of an Insuraance Contract
4) Transaction of matters subsequent to execution of the contract & arising out of it
5) Insuring
Person Defined
Any individual, company, insurer, association, organization, reciprocal or interinsurance exchange, partnership, business trust or corporation
Immunity from Civil Liability
1) Any person who provides information required by Commissioner is immune from liability in civil action arising from providing the information unliss malice, fraud or bad faith shown.
2) NAIC for publication of information
3) Any licensee or licensee assoc. providing information regarding unauthorized insurers.
Domestic Insurer
Insurer formed under laws of WA state
Foreign Insurer
Insurer formed under US laws or US state, other than WA, or DC or Puerto Rico
Alien Insurer
Insurer formed under laws of country other than US
Certificate of Authority
Authorization by the insurance commissioner to transact business in state.
What must Certificate of Authority include?
1) Name of Insurer
2) Location of principal office
3) Name & location of attorney in fact id reciprocal insurer
4) Kinds of business authorized
Capital Funds
Excess of the assets of an insurer over its liabilities. Capital stock is not considerd a liability.
Foreign Insurer Deposit
Asset deposit w/commissioner in same amount required of a domesic insurer or certificae of proof of equivalent deposit in another state.
Alien Insurer Asset Requirement
Assets held in US equal to liabilites of US transactions.
Alien Insurer Deposit
1) Trust amount for not less than reserves
plus:
1) assets equal to equivalent domestic insurer
or
2) $200,000
Jurisdiction of State Courts
Alien & Foreign insures subject to WA state law if do business in WA
Service of Suit - Response Time
40 days from date of service on commissioner
Venue of actions against insurer
County in which cause of action arose
Affiliate (Insured)
Any entity that contols or is controlled by or under common control with the insured.
Control with respect to an insured is defined as:
1) Owns, controls, has voting power for 25% or more of any voting stock, OR
2) Contols the election of the majority of directors or trustees
Requirements to Qualify as Exempt Commerical Purchaser
1) Retains qualified risk manager to negotiate insurance
2) Paid aggregate premium > $100,000 for P&C in prior 12 months
3) One of the following:
i. net worth > 20M
ii. annual revenues > 50M or nonprofit expenditure > 30M
iii. FT Employees > 500 or >1000 in affiliated group
iv. municipality with population > 50,000
Are policies issued by an unauthorized insurer in violation of code enforceable?
Only with respect to the insurer. Otherwise voidable.
To what lines of commerical insurance does “Exempt Commercial Purchaser” apply?
P&C pertaining to a business, profession, occupation, nonprofit organization, public entity.
Definition of Insured’s Home State
1) State in which insured’s principal place of business is located
2) State in which individual insured resides
3) State to which greatest % of insured’s taxable premium for insurance contract is allocated - if 100% of insured risk is outside WA
Determination of “Home State” when affiliated group are named insureds on single policy.
Home State of affiliated group with highest % of premium on policy
State of Principal Place of Business is determined by
1) Insured HQ Location
2) Location where highest level officers direct, control & coordinate business activities of insured
Qualified Risk Manager criteria:
1) Employee or 3rd party consultant of commerical policyholder
2) Provides services in loss prevention, reduction or risk/insurance coverage analysis and purchase
3) BA or higher in discipline related to business & risk mgt + 3 Years experience in risk mgt/comm’l lines ins or insurance designation - CPCU, ARM - RIMS
OR
3) 7 Years experience + insurance designation
OR
3) 10 years experience
OR
3) Graduate degree
Personal Liability
Applies if RCW not followed in good faith
Penalties for violating statute re unauth insurers
$25,000 (each rule) & license suspension/revocation
Knowing Violation of RCW 48.15 is what kind of crime?
Class B Felony
Bond Requirements
1) $25,000 - State of WA - Taxes
2) $2,500 or 5% of premiums placed in preceding calendar year/ $100,000 max - People of WA - Premium Collection
Conditions of Surplus Lines Eligibility
1) Licensed SL Broker
2) Diligent Effort to procure from among a majority of authorized insurers
3) Not for purpose of lower premium or other competitive advantage
Diligent Effort Certification
1) Unable to procure from among a majority of authorized insurers
2) No competitive advantage
3) True & Correct under eanlty of losing SL license
4) Filed within 60 days of procurement
Is a JUA considered an authorized insurer for SL purposes?
No
Exemption from Diligent Effort Requirement
If Exempt Commerical Purchaser requests unauthorized insurer in writing to SL broker
Penalty for failure to have or maintain bonds.
License revocation
Deadline to show proof of bond
3 days
Penalites for Late License Renewal
1) 30 days - 50% of renewal fee
2) 30-60 days - 100% or renewal fee
3) 60 days -12 months - 200% of renewal fee & application for reinstatement
Solvency - Foreign Insurer
1) Lines authorized in its domiciliary jurisdiction
2) Capital or surplus = greater of minimum required to be domiciled in WA or $15M.
Solvency - Alien Insurer
Must be on NAIC quarterly list of alien insurers
Penalty for using insurer that doesn’t meet solvency requirements.
Min $100/ Max $5,000
License suspension or revocation
SL Records Retention
5 Years
Brokers Annual / Verified Statement Due
March 1
Brokers Annual / Verified Statement Includes
Agg net premiums
SL Premium Tax Due Date
March 1 for preceding calendar year based on premium shown in brokers annual statement.
SL Premium Tax Rate
1) Insured Home State - 2% of total premium
2) Multi State - 2% of portion of premium allocated to exposure in WA
Who must be designated for service of suit against SL (unauthorized) insurer on SL policy?
WA State Commissioner of Insurance
Reponse period after service of suit.
40 days
Exemptions from SL Requirements (LOB)
1) Reinsurance
2) Ocean Marine & Foreign Trade
3) Insurance on subjects located wholly outside WA
4) Vehicles & aircraft principally garaged outside WA
5) RR engaged in interstate commerce & their property used in the operations
6) Aircraft owned by aircraft manufacturers or operated in scheduled interstate flight incl cargo & liability (except WC & EL)
Are Records Retention Requirements the same on Exempt SL business?
Yes / 5 years
Qualifies US Financial Institution Defined
1) Organized or licensed under US laws
2) Regulated, supervised & examined by US /State authorities
3) Approved by commissioner or NAIC
4) Not affiliated with insurance co. assuming risk
Premium Tax Due Date
March 1, Late March 31
Late Penalty on Tax Statement Filing & Payments (Unauthorized Insurers/ Not SL Broker)
5% of tax amount - up to 45 days
10% of tax amount - 45-60 days
20% of tax amount - over 60 days
Interest on Late Tax Payment (Unauthorized Insurers/ Not SL Broker)
Max legal rate permitted stating 61 days after due date
Premium - Definition
All sums chaarges, received or deposited as consideration for an insurance contract - includes any membership, policy, survey, etc. fees chared by insurer
Do additional charges have to be included on policy premium?
Yes, except fee paid to producer by insured.
Maximum Binder Length
90 dyas or until policy issued
Financial Condition Documentation (Not on NAIC Quarterly Report)
Substantiate & retain record thereof for 5 years
Do policies purchased by Exempt Commercial Purchasers have to be reported to the commissioner?
Yes, within 60 days of procurement (same as SL filing with taxes)
Requirements to request Waiver of Financial Requirements by Commissioner
1) Detailed explanation of why
2) Most recent annual statement of insurer
3) Summary of insurers experience in LOB
4) Signed Insured acknowledgment:
i. informed unauthorized insurer
ii. financial requirements must be waived to enable coverage
iii. no Guaranty Assoc protection
Minimum Capital & Surplus for Waiver of Financial Requirements
$4.5M
If referring producer is not agent of insured, who must reciev premiums/notices, etc.?
Insured
Minimum Cancellation Notice Provisions on SL Policies
10 days non pay
20 days any other reason , except for fire insurance
“Complete COpy of Filing for SL Broker records includes:
1) “Registered” certification form
2) Copy of coverages
What types of endorsements must be filed with Association?
1) Premium
2) Policy Number
3) Change in security
To whom must all surplus lines policies be submitted for review in WA?
WA SL Association
FIling Deadline for Registration of a SL policy
60 days from inception
State SL Tax & Stamping Fee tax is computed on?
Sum of all Premium + Fees
SL Broker Duties regarding financial condition of unauthorized insurer (3)
- Ascertain the financial condition of insurer (annual fiancial statement or NAIC Quaterly)
- Mainstain written evidence thereof before placing insurance
- Not knowingly place with financially unsound carrier
US Carrier Capital & Surplus Requirement
$15M
Alien Insurer Financial Requirements
$15M Capital & Surplus + $5.4M US Trust
Groups of Insurers (incl Lloyds) Financial Requirements
$50M US Trust
US Exchanges Financial Requirements
$50M Capital & Surplus aggregate/$6M Each Individual Syndicate
How many bonds must SL Broker maintain?
2
What bonds must SL Broker have?
1) To people of WA for monies collected - $2500 or 5% of premium for 12 months. Max $100,000
2) To state of WA for compliance & taxes
