Modernized Surplus Lines Regs Expected to Make Filing Easier

New surplus lines regulations went into effect in Texas on Dec. 12, 2000, the result of a request by the Surplus Lines Stamping Office of Texas. The changes mark the first update to the regulations in more than 10 years and are expected to make filing and more convenient for agents.

“The changes started with a request from the stamping office to accept electronic filings,” said Lee Jones, spokesperson for the Texas Department of Insurance. “They looked at the rest of the rules and realized it needed some cleaning up and some modernization.”

Phil Ballinger, director of the SLSOT said a study of the requirements found a less than 1 percent need for filing a complete copy of surplus lines policies, and a tag incident rate of less than 5 percent.

“I saw the need for changes because the filing requirements seemed unnecessarily burdensome,” Ballinger said. “There was a real imbalance between the state’s need for this information and the cost to the agents and the additional work at the stamping office. It was a cost/benefit analysis pure and simple.”

The stamping office also believes that advancing technology should be utilized by agents “where feasible and practicable” according to Ballinger. And while the stamping office is “not quite there yet,” agents should be able to file electronically, something the old regulations did not adequately provide for.

In response, SLSOT has formed an Electronic Filing Advisory Committee, which will consist of selected agents and technology staff. The committee will meet early in 2001 with a goal of initiating an electronic filing project at the conclusion of SLSOT’s current system upgrades, which should be completed in August.

The changes, Ballinger said, are “definitely an upgrade and reflect reality” more closely than the previous requirements did. Under the changes, agents are no longer required to report a complete copy of surplus lines policies, though agents wishing to do so may certainly continue. Those portions of a policy that are now required to be filed include:

• A declarations page;
• A listing of all participating insurers (plus their respective percentages of participation, totaling 100 percent);
• All coverage parts and schedules (if containing policy-specific information);
• Extended coverage exclusions;
• All premium-bearing documents and or endorsements;
• Any other parts as may be required by the Stamping Office to process the policy.

Also, agents must file certain non-premium endorsements, including:

• Policy number changes;
• Named insurer changes;
• Date changes;
• Security changes/corrections.

Also, both premium and non-premium cancellations and reinstatements must be filed.

The changes also provide for surplus lines agents to post a $50,000 surety bond as proof of solvency. The rule change eliminated the previous alternative of $100,000 in proven, unencumbered assets. The changes also provide for the commissioner to waive the bond requirement, in whole or in part, if necessary to conform to the requirements of the Gramm-Leach-Bliley Act.

Agents will also be required under the changes to report allocated non-Texas premium. If a policy includes exposures both in and out of Texas, or if a portion of the premium is tax exempt, the changes require an agent to report the allocated distribution of the premium to the stamping office. This reporting will not be required, however, until the stamping office computer system is online.

Rosemarie Marshall, president of the Texas Surplus Lines Association, said the group is “basically happy” with the changes. “As an association, we are pleased with the changes that have been made,” she said, though she sees no real immediate effects on agents.

The changes also specify in greater detail the information that insurers must provide to the Texas Department of Insurance and SLSOT when they apply for surplus lines eligibility and every year thereafter. For a complete review of the changes, visit www.slsot.org.

Topics Texas Agencies Legislation Excess Surplus