PA 17-125—sHB 7013
Insurance and Real Estate Committee
Finance, Revenue and Bonding Committee
AN ACT ESTABLISHING STANDARDS TO ALLOW THE INSURANCE COMMISSIONER TO DESIGNATE CERTAIN DOMESTIC INSURANCE COMPANIES AS DOMESTIC SURPLUS LINES INSURERS
SUMMARY: This act allows the insurance commissioner to designate a domestic insurance company as a “domestic surplus lines insurer” subject to certain conditions. To be so designated, the insurer must have a policyholder surplus of at least $15 million and be acting pursuant to a board of directors' resolution. Such a designation allows the insurer to market surplus lines insurance in Connecticut, which was not allowed under prior law. Surplus lines insurance, also referred to as nonadmitted insurance, provides coverage for high-risk needs that is not available in the traditional, licensed (i.e., admitted) market.
The act also makes technical and conforming changes.
EFFECTIVE DATE: July 1, 2017
DOMESTIC SURPLUS LINES INSURERS
Under the act, surplus lines insurance policies written by domestic surplus lines insurers are subject to a 4% gross premium tax but are exempt from the 1.75% premium tax applicable to domestic insurers generally. Additionally, the act specifies that Connecticut's financial and solvency requirements apply to domestic surplus lines insurers unless otherwise provided by law.
Under the act, domestic surplus lines insurers may only write policies in accordance with state surplus lines laws and from state-licensed surplus lines brokers. They may also write surplus lines policies in other jurisdictions where eligible.
The act specifies that a domestic surplus lines insurer is an unauthorized or nonadmitted insurer under state law and for purposes of the 2010 federal Nonadmitted and Reinsurance Reform Act (15 U.S.C. § 8206), which requires states to adopt uniform requirements and procedures for allocating and collecting premium taxes on nonadmitted insurance policies.
Under the act, surplus lines insurance issued in the state by a domestic surplus lines insurer is not covered by the Connecticut Insurance Guaranty Association Act. (The guaranty association protects insurance consumers from financial loss if an insurance company becomes insolvent.) The act also specifies that domestic surplus lines insurance is exempt from requirements for rates, rating plans, policy forms, cancellation, and nonrenewal to the same extent as surplus lines insurance issued by an insurer domiciled in another state.