2006 Louisiana Laws - RS 22:1262 — Surplus lines in solvent insurers; capital and surplus requirements; deposits and bond requirements

§1262.  Surplus lines in solvent insurers; capital and surplus requirements; deposits and bond requirements

A.(1)  A surplus lines broker shall not knowingly place surplus lines insurance with insurers unsound financially.

(2)  Each insurer is authorized to write the type of insurance in its domiciliary jurisdiction.

(3)  The full amount or type of insurance cannot be obtained from insurers who are authorized to do business in this state.  In addition to the other requirements of this Part, including but not limited to R.S. 22:1257 and 1263.1, the full amount or type of insurance may be procured from an approved unauthorized insurer, provided that a diligent search is made among the insurers who are authorized to transact business and are actually writing the particular type of insurance in this state if any are writing it.

B.  The surplus lines broker shall not so insure with any insurer unless the insurer has met the requirements of R.S. 22:1262.1, unless otherwise provided by law, has established satisfactory evidence of good repute and financial integrity, and has done the following:

(1)  If it is a foreign insurer:

(a)  Has capital and surplus of not less than fifteen million dollars exclusive of either surplus debentures or subordinated notes if a stock insurer, or surplus of not less than fifteen million dollars exclusive of either surplus debentures or subordinated notes if any other type insurer, and has on deposit with the commissioner of insurance a safekeeping or trust receipt from a bank or a savings and loan association doing business within Louisiana, indicating that one hundred thousand dollars in money, or approved bonds of the United States government, the state of Louisiana or any political subdivision thereof, or in lieu of such deposit has delivered to the commissioner of insurance a bond in the amount of one hundred thousand dollars of an authorized surety company doing business in this state and approved by the commissioner of insurance.

(b)  Such deposit or surety bond shall be conditioned for the prompt payment of all claims arising and accruing to any person by virtue of any policy issued by any such unauthorized insurer upon the life or person of any citizen of the state of Louisiana, or upon any property or other risk situated in this state, and to be held subject to any claims, liens or judgments that may be judicially obtained against any such company in the courts of this state, or arising from any contract of insurance, or indemnity, or fidelity, or guaranty entered into in this state, and shall be liable to seizure and sale at the instance of any judgment creditor of such insurer, under judgment obtained in any of the courts of this state or in any of the federal courts of this state.

(c)  No surety bond furnished as provided herein shall be cancelled unless a new bond or deposit has been substituted or satisfactory evidence has been submitted to the commissioner of insurance that the insurer has discharged all of its assured obligations and liabilities in this state, and that it has no assessed liabilities whatever remaining in this state.  The term of these bonds shall be for one year ending March 1st, but the last bond filed shall always remain in effect until a new bond is filed or a deposit is made as a substitution therefor.  Withdrawal of any bond or deposit required herein may be made only upon the approval by the commissioner of insurance.

(d)  The requirements of Subparagraph (a) of this Paragraph, with respect only to capital and surplus, may be satisfied by an insurer's possessing less than the minimum capital and surplus upon an affirmative finding by the commissioner.  If the commissioner finds such acceptable, the finding shall be in effect for a one-year period and shall be applied for annually thereafter to be renewed on an annual basis, unless the finding is revoked 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 dollars.

(e)  In the case of an insurance exchange created by the laws of a state other than this state:

(i)  The syndicates of the exchange shall maintain under terms acceptable to the commissioner capital and surplus, or its equivalent under the laws of its domiciliary jurisdiction, of not less than seventy-five million dollars in the aggregate.

(ii)  The exchange shall maintain under terms acceptable to the commissioner not less than fifty percent of the policyholder surplus of each syndicate in a custodial account accessible to the exchange or its domiciliary commissioner in the event of insolvency or impairment of the individual syndicate.

(iii)  In addition, each individual syndicate to be eligible to accept surplus lines insurance placements from this state shall meet either of the following requirements: For insurance exchanges which maintain funds in an amount of not less than fifteen million dollars for the protection of all exchange policyholders, the syndicate shall maintain under terms acceptable to the commissioner minimum capital and surplus, or its equivalent under the laws of the domiciliary jurisdiction, of not less than five million dollars; or for insurance exchanges which do not maintain funds in an amount of not less than fifteen million dollars for the protection of all exchange policyholders, the syndicate shall maintain under terms acceptable to the commissioner minimum capital and surplus, or its equivalent under the laws of its domiciliary jurisdiction, of not less than the minimum capital and surplus requirements under the laws of its domiciliary jurisdiction or fifteen million dollars, whichever is greater.

(2)  If it is an alien Lloyd's plan or other similar group of insurers, which consists of unincorporated individual insurers, or a combination of both unincorporated and incorporated insurers:

(a)  The plan or group maintains in the United States a trust or trusts equal to thirty percent of the group's United States surplus lines gross liabilities excluding those types of insurance liabilities set forth in R.S. 22:1249.1(C)(4), not to exceed five hundred million dollars; however, after notice and an opportunity to be heard, the commissioner may require that the trust or trusts equal an amount in excess of five hundred million dollars if he finds such higher amount to be reasonably necessary to protect the interests of the public and policyholders of this state.

(b)  In addition, the group shall maintain in trust a surplus in the amount of one hundred million dollars, which shall be available for the benefit of United States surplus lines policyholders of any member of the group.

(c)  The incorporated members of the group shall not be engaged in any business other than underwriting as a member of the group and shall be subject to the same level of solvency regulation and control by the group's domiciliary regulator as are the unincorporated members.

(d)  The trust funds shall be maintained in an irrevocable trust account in the United States in a qualified financial institution, consisting of cash, securities, letters of credit, or investments of substantially the same character and quality as those which are eligible investments for the capital and statutory reserves of authorized insurers to write like kinds of insurance in this state and, in addition, the trust required by Subparagraph (b) of this Paragraph shall satisfy the requirements of the standard trust agreement required for listing with the International Insurers Department of the National Association of Insurance Commissioners.

(3)  In the case of a group of incorporated alien insurers under common administration, which has continuously transacted an insurance business outside the United States for at least three years immediately prior to December 31, 1997, and which submits to this state's authority to examine its books and records and bears the expense of the examination:

(a)  The group shall maintain an aggregate policyholders' surplus of ten billion dollars.

(b)  The group shall maintain in trust a surplus in the amount of one hundred million dollars.  The surplus shall be available for the benefit of United States surplus lines policyholders of any member of the group.

(c)  Each insurer shall individually maintain capital and surplus of not less than twenty-five million dollars per company.

(d)  The trust funds shall satisfy the requirements of the Standard Trust Agreement requirement for listing with the International Insurers Department of the National Association of Insurance Commissioners and shall be maintained in an irrevocable trust account in the United States in a qualified financial institution, and shall consist of cash, securities, letters of credit, or investments of substantially the same character and quality as those which are eligible investments for the capital and statutory reserves of admitted insurers to write like kinds of insurance in this state.

(e)  Additionally, each member of the group shall make available to the commissioner an annual certification of the solvency of the member by the domiciliary regulator of the member and its independent public accountant.

(4)  Except for an exchange or plan complying with Subparagraph B(1)(e) or Paragraph B(2) or B(3) of this Section, an alien insurer shall satisfy the capital and surplus requirements of Subparagraphs B(1)(a) through (d) of this Section and shall have in force a trust fund of not less than the greater of:

(a)  Five million four hundred thousand dollars.

(b)  Thirty percent of the United States surplus lines gross liabilities, which does not include those types of insurance liabilities set forth in R.S. 22:1249.1(C)(4), not to exceed sixty million dollars, to be determined annually on the basis of accounting practices and procedures substantially equivalent to those promulgated by this state, as of December thirty-first next preceding the date of determination, where:

(i)  The liabilities are maintained in an irrevocable trust account in the United States in a qualified financial institution, on behalf of United States policyholders consisting of cash, securities, letters of credit, or other investments of substantially the same character and quality as those which are eligible investments pursuant to R.S. 22:844 et seq. for the capital and statutory reserves of admitted insurers to write like kinds of insurance in this state.  The trust fund, which shall be included in any calculation of capital and surplus or its equivalent, shall satisfy the requirements of the Standard Trust Agreement required for listing with the International Insurers Department of the National Association of Insurance Commissioners.

(ii)  The insurer may request approval from the commissioner to use the trust fund to pay valid surplus lines claims.  The balance of the trust fund shall never be less than the greater of five million four hundred thousand dollars or thirty percent of the current gross United States surplus lines liabilities of the insurer, excluding those types of liabilities set forth in R.S. 22:1249.1(C)(4).

(iii)  In calculating the trust fund amount required by this Paragraph, credit shall be given for surplus lines deposits separately required and maintained for a particular state or United States territory, not to exceed the amount of the loss and loss adjustment reserves of the insurer in the particular state or territory.

(5)  An alien insurer subject to the provisions of Paragraph (4) of this Subsection that meets the requirements to do a surplus lines business in this state on July 15, 1997, shall have two years from the date of enactment to meet the requirements of Paragraph (4), with the commissioner having the authority to adjust at any time, in response to inflation, the trust fund amounts required in Paragraph (4), as follows:

(a)  By December 31, 1998, the trust fund requirement shall be fifteen percent of surplus lines liabilities in the United States, excluding those types of liabilities set forth in R.S. 22:1249.1(C)(4), with a maximum of thirty million dollars.

(b)  By December 31, 1999, the trust fund requirements shall be thirty percent of surplus lines liabilities in the United States, excluding those types of liabilities set forth in R.S. 22:1249.1(C)(4), with a maximum of sixty million dollars.

(6)  In addition to all of the other requirements of this Section, an insurer not domiciled in the United States or its territories shall be listed by the International Insurers Department of the National Association of Insurance Commissioners.  The commissioner may waive the requirement in this Paragraph or the requirements of Subparagraph B(4)(b) of this Section upon an affirmative finding of acceptability by the commissioner if the commissioner is satisfied that the placement of insurance with the insurer is necessary and will not be detrimental to the public and the policyholder.  In determining whether business may be placed with the insurer, the commissioner may consider such factors as:

(a)  The interests of the public and policyholders.

(b)  The length of time the insurer has been authorized in its domiciliary jurisdiction and elsewhere.

(c)  Unavailability of particular coverages from authorized insurers or unauthorized insurers meeting the requirements of this Section.

(d)  The size of the company as calculated by its assets, capital and surplus, reserves, premium writings, insurance in force or other appropriate criteria; the kinds of business the company writes, its net exposure and the extent to which the business of the company is diversified among several lines of insurance and geographic locations.

(e)  The past and projected trend in the size of the company's capital and surplus of the company considering such factors as premium growth, operating history, loss and expense ratios, or other appropriate criteria.

(7)  Has caused to be provided to the commissioner a copy of its current annual statement certified by the insurer and an actuarial opinion as to the adequacy of, and methodology used to determine, the loss reserves of the insurer.  The statement shall be provided at the same time it is provided to the insurer's domicile, but in no event more than eight months after the close of the period reported upon, and shall be certified as a true and correct copy by an accounting or auditing firm licensed in the jurisdiction of the insurer's domicile and certified by a senior officer of the unauthorized insurer as a true and correct copy of the statement filed with the regulatory authority in the domicile of the unauthorized insurer.  In the case of an insurance exchange qualifying under Subparagraph B(1)(e) of this Section, the statement may be an aggregate combined statement of all underwriting syndicates operating during the period reported.

C.  Repealed by Acts 1997, No. 1340, §2, eff. July 15, 1997.

D.  In addition to any other statements or reports required by this Chapter, the commissioner of insurance may request from any licensee full and complete information respecting the financial stability, reputation and integrity of any unauthorized insurer with whom any such licensee has dealt, or proposes to deal, in the transaction of insurance business.  The licensee shall promptly furnish in written or printed form so much of the information requested as he can produce.  The commissioner of insurance, if he believes it to be in the public interest, may order such licensee in writing to place no further insurance business on Louisiana risks through such unauthorized company.

E-G.  Repealed by Acts 1997, No. 1340, §2, eff. July 15, 1997.

H.(1)  Notwithstanding any law to the contrary, no person shall act in this state as agent for or broker to any unauthorized insurer which has not been approved by the Department of Insurance in accordance with this Section and R.S. 22:1262.1, unless the following criteria are met:

(a)  The insurance is limited to commercial property and liability, including commercial marine.

(b)  The insurance coverage is excess coverage and the attachment point is at least twenty five million dollars for property and ten million dollars for liability or such other amount as the Department of Insurance in its discretion shall require.

(c)  Approval from the Department of Insurance is required for each policy.

(d)  The insured has been informed in writing by the agent or broker that the insurer has not been approved by the Department of Insurance.

(2)  The commissioner by regulation or directive, may require that the insured meet minimum financial requirements and may require certification from the agent or broker that the insurer meets the financial and any other requirements promulgated by the Department of Insurance for insurance coverage by an unauthorized insurer which has not been approved by the Department of Insurance under this Section and R.S. 22:1262.1.

Acts 1958, No. 125.  Amended by Acts 1960, No. 148, §1; Acts 1966, No. 175, §1; Acts 1972, No. 239, §1; Acts 1979, No. 196, §1; Acts 1981, No. 856, §1; Acts 1983, No. 714, §1; Acts 1993, No. 902, §1; Acts 1995, No. 819, §1; Acts 1996, 1st Ex. Sess., No. 71, §1, eff. May 10, 1996; Acts 1997, No. 1340, §§1, 2, eff. July 15, 1997; Acts 1999, No. 868, §1.

*As appears in enrolled bill