This is not the official budget document.

Budget Summary FY2012

Outside Section 106
Data Current as of:  7/11/2011




Previous Outside Section Next Outside Section

 

Surplus Lines Insurance

SECTION 106.   Said chapter 175 is hereby further amended by striking out section 168, as most recently amended by section 154 of chapter 240 of the acts of 2010, and inserting in place thereof the following section:-

Section 168. (a) As used in this section the following words shall, unless the context clearly requires otherwise, have the following meanings:-

"Home state", relative to an insured: (1) the state in which an insured maintains its principal place of business or, in the case of an individual, the individual's principal residence; or (2) if 100 per cent of the risk is located out of the state referred to in clause (1), the state to which the greatest percentage of the insured's taxable premium for that insurance contract is allocated.

"State", any state of the United States, the District of Columbia, the commonwealth of Puerto Rico, Guam, the Northern Mariana Islands, the Virgin Islands and American Samoa.

"Unauthorized company", an insurer not licensed to engage in the business of insurance in the commonwealth.

"Unauthorized insurance", any property and casualty insurance permitted to be placed with an unauthorized company eligible to accept such insurance.

(b) The commissioner may, upon the payment of the fee prescribed by section 14, issue to any suitable person aged 18 or older, a license to act as a special insurance broker to negotiate, continue or renew contracts of insurance against any of the hazards specified in section 47, except as specified in clause Fifteenth thereof, and except accident and health, workers' compensation, compulsory motor vehicle liability and life insurance on property or interests in the commonwealth with an unauthorized company upon the following conditions:

(i) The applicant for the license shall file with the commissioner a written application as prescribed by section 162L which shall be executed on oath by the applicant and kept on file by the commissioner. If the commissioner is satisfied that the applicant is trustworthy and competent, he shall issue the license, subject to suspension or revocation at the pleasure of the commissioner. The license shall expire 1 year from the date of issuance, unless sooner suspended or revoked.

(ii) The commissioner may, in the commissioner's discretion, renew the license for each succeeding year, upon the payment of the fee prescribed by section 14, without requiring the detailed information specified by section 162L.

(iii) Whenever the person named in such license shall procure any insurance in an unauthorized company for an insured whose home state is the commonwealth, he shall execute, and within 20 days thereafter, file with the commissioner an affidavit stating that the full amount of insurance required to protect the subject property or interest of said insured is not procurable, after a diligent effort has been made to do so, from among companies admitted to transact insurance in the commonwealth against the hazard or hazards involved, and that the amount of insurance procured in such unauthorized company is only the excess over the amount so procurable from such admitted companies. The affidavit shall have force and effect for 1 year from the date of issuance or expiration of the policy, whichever comes later.

(iv) Clause (iii) shall not apply to the procurement of a contract of insurance for an exempt commercial risk or policyholder as described in section 224, if the commercial risk or policyholder acknowledges in writing its understanding, that (1) the company from which insurance is procured is not admitted to transact insurance in the commonwealth and (2) in the event of the insolvency of the company, a loss shall not be paid by the Massachusetts Insurers Insolvency Fund under chapter 175D.

(c) Any insurance policy procured under this section shall contain the following disclosure notice to the policyholder: This policy is insured by a company which is not admitted to transact insurance in the commonwealth, is not supervised by the commissioner of insurance and, in the event of an insolvency of such company, a loss shall not be paid by the Massachusetts Insurers Insolvency Fund under chapter 175D. The commissioner may, by regulation, amend the foregoing disclosure notice. Each licensed special insurance broker shall maintain a copy of the acknowledgement for inspection by the commissioner with respect to all policies of insurance so procured by the licensee for exempt commercial risks or policyholders. Such licensed person shall not be required to file such affidavit if such an affidavit relative to the same property or interests has been filed within the preceding 12 months by any broker licensed under this section, nor to offer any portion of such insurance to any company not possessed of net cash assets of at least $200,000, nor to one which has within the preceding 12 months been in an impaired condition, nor shall such licensed person procure any such insurance on said property or interests from any unauthorized company unless:

(i)(A) such company is possessed of net cash assets of at least $300,000 computed on the basis fixed by sections 10 to 12, inclusive, and on the form prescribed by section 25; (B) such company has satisfied the commissioner that its officers and directors are of good repute and competent to manage an insurance company; (C) the management of the company is carrying out its insurance contracts in good faith; (D) such company has filed with the commissioner an examination report of the affairs of the company completed within the previous 3 years and made by the proper supervisory official of its home state; and (E) such company has made a deposit of not less than $400,000 with the state treasurer or with the proper board or officer of some other state of the United States in accordance with the terms and conditions hereinafter specified;

(ii) such company has filed a financial statement on a form satisfactory to the commissioner and conforms to and maintains the financial requirements specified in subparagraph (i) of paragraph (D) of subsection (1) of section 20A; or

(iii) such company is an eligible alien unauthorized insurer, as defined in section 168A; provided, however, that such deposit shall be made in exclusive trust for the benefit and security of all its policyholders in the United States, including obligees of bonds executed by such company as surety, and when made with the state treasurer may be made in the securities and subject to the limitations specified in sections 63 and 66, or in cash or in such other securities as the commissioner may approve; provided further, that bonds need not be accepted by the state treasurer unless in registered form and of denominations satisfactory to him, and shall not be returned to the company until it has ceased to transact business in the commonwealth, or until the commissioner is satisfied that the company is under no obligation to such policyholders or obligees in the United States for whose benefit such deposit was made, or until the treasurer has given his written consent to such return; provided further, that the commissioner may, in any case, authorize in writing the return to the company of any excess of any deposit made under this section over the amount required thereby, if he is satisfied that such return shall not be prejudicial to the interests of such policyholders or obligees.

(d) Each person so licensed shall keep a separate account of the business done under the license, a certified copy of which account he shall forthwith file with the commissioner, showing the exact amount of such insurance placed for each person whose home state is the commonwealth, the gross premium charged thereon, the companies in which the same is placed, the date of the policies and the term thereof, and a report in the same detail of all such policies cancelled, with the gross return premiums thereon. Each person so licensed shall file a sworn statement with the state treasurer every January providing the gross premiums charged for insurance procured or placed and the gross return premiums on such insurance cancelled under such license during the year ending on December 31 last preceding. At the time of filing such statement, each person licensed as a special insurance broker shall pay to the commonwealth a fee, less such return premiums so reported, as follows:

(1) if the insurance covers properties, risks or exposures located or to be performed in the commonwealth and not in any other state, an amount equal to 4 per cent of such gross premiums;

(2) if the insurance covers properties, risks or exposures located or to be performed both in and outside of the commonwealth: (i) an amount equal to 4 per cent of such gross premiums allocated to the commonwealth; plus (ii) an amount equal to the portion of the premiums allocated to other states or territories on the basis of the tax rates and fees applicable to properties, risks or exposures located or to be performed outside of the commonwealth; and

(3) to the extent that other states where portions of the insured properties, risks or exposures are located have failed to enter into a compact or reciprocal allocation procedure with the commonwealth, the net premium tax collected shall be retained by the commonwealth.

(e) Notwithstanding subsections (b), (c) and (d), the commissioner may enter into a cooperative agreement, reciprocal agreement or compact with another state or states in order to: facilitate the collection, allocation and disbursement of insurance premium fees and taxes attributable to the placement of unauthorized insurance; provide for uniform methods of allocation and reporting among unauthorized insurance risk classifications; and share information among states related to unauthorized insurance premium fees and taxes. The commissioner may also enter into other cooperative agreements with surplus lines stamping offices and other similar entities located in other states related to the capturing and processing of insurance premium and tax data. The commissioner may participate in any clearinghouse established pursuant to any such agreement or agreements for the purpose of collecting and disbursing to reciprocal states any funds collected pursuant to clause (3) of subsection (d) applicable to properties, risks or exposures located or to be performed outside of the commonwealth. In determining whether to enter in to such agreements or compacts, the commissioner may consider: (i) the efficiencies to be achieved in the reporting, payment, collection, allocation and disbursement of insurance premium fees and taxes attributable to the placement of unauthorized insurance; (ii) the amount of revenue to be generated through participation in any such agreements or compacts; and (iii) any other material factor relevant to the reporting, payment, collection, allocation or disbursement of insurance premium fees and taxes attributable to the placement of unauthorized insurance, as determined by the commissioner. Prior to entering into such an agreement or compact, the commissioner shall provide public notice and an opportunity for comment thereon.

(f) A person licensed under this section who negotiates, continues or renews any such contracts of insurance in any unauthorized company and who neglects to make and file the affidavit and statements required by this section, or who willfully makes a false affidavit or statement, or who negotiates, continues or renews any such contracts of insurance after the revocation or during the suspension of his license, shall forfeit his license if not previously revoked and be punished by a fine of not less than $100 nor more than $500 or by imprisonment in the house of correction for not more than 1 year, or by both such fine and imprisonment.

(g) Nothing in this section shall be deemed to amend or modify any of the provisions of, or any of the exemptions specified in, section 160.

(h) A license to act as a special insurance broker may, upon the payment of the fees prescribed by section 14, be issued to any association, as defined in section 1 of chapter 182, for the purpose of acting as a special insurance broker, subject to the conditions specified in section 172A. The commissioner may, upon the payment of the fees prescribed by section 14, issue to a partnership, a license to act as a special insurance broker subject to the conditions specified in section 173. A license to act as a special insurance broker may, upon the payment of the fees prescribed by section 14, be issued to any corporation, subject to the conditions specified in section 174.

(i) The commissioner may promulgate regulations as necessary to implement this section.