Chapter 11 - Surplus Lines And Insurance In Unauthorized Insurers
CHAPTER 11 - SURPLUS LINES AND INSURANCE IN UNAUTHORIZEDINSURERS
26-11-101. Short title.
Thischapter constitutes and may be cited as the "Surplus Line Law".
26-11-102. Inapplicability of Surplus Line Law.
(a) This chapter does not apply to reinsurance or to thefollowing insurances when placed by licensed agents or surplus line brokers ofthis state:
(i) Wet marine and transportation insurance;
(ii) Insurance on subjects located, resident or to be performedwholly outside of this state, or on vehicles or aircraft owned and principallygaraged outside this state;
(iii) Insurance on operations of railroads engaged intransportation in interstate commerce and their property used in thoseoperations;
(iv) Insurance on aircraft owned or operated by manufacturers ofaircraft, or on aircraft operated in commercial interstate flight, or cargo ofthat aircraft, or against liability, other than worker's compensation andemployer's liability, arising out of the ownership, maintenance or use of thataircraft.
26-11-103. Definitions.
(a) As used in this chapter:
(i) "Broker" means a surplus line broker licensed assuch under this chapter;
(ii) "Export" means to place in an unauthorizedinsurer under this surplus line law insurance covering a subject of insuranceresident, located or to be performed in Wyoming;
(iii) "Recognized financial institution" means aninstitution that is organized or licensed under the laws of the United Statesor any state and is insured by the federal deposit insurance corporation.
26-11-104. Conditions for export.
(a) If certain insurance coverages cannot be procured fromauthorized insurers, those coverages, designated in this chapter as"surplus lines", may be procured from unauthorized insurers, subjectto the following conditions:
(i) The insurance shall be procured through a licensed surplusline broker;
(ii) The full amount of insurance required is not procurable,after diligent effort has been made to do so, from among the insurersauthorized to transact and actually writing that kind and class of insurance inthis state, and the amount of insurance exported shall be only the excess overthe amount procurable from authorized insurers;
(iii) The insurance shall not be exported for the purpose ofsecuring advantages either as to:
(A) A lower premium rate than would be accepted by anauthorized insurer; or
(B) Terms of the insurance contract.
26-11-105. Broker's affidavit.
Atthe time of effecting any surplus line insurance the broker shall execute anaffidavit in a form the commissioner prescribes or accepts, setting forth factsfrom which it can be determined whether the insurance is eligible for exportunder W.S. 26-11-104. The broker shall file this affidavit with thecommissioner within thirty (30) days after the insurance is effected.
26-11-106. Open lines for export.
(a) The commissioner, by order, may declare eligible for exportgenerally and without compliance with W.S. 26-11-104(a)(i) and 26-11-105, anyclass of insurance coverage or risk for which he finds, after a hearing ofwhich notice is given to each insurer authorized to transact those classes inthis state, that there is not a reasonable or adequate market among authorizedinsurers either as to acceptance of the risk, contract terms, premium orpremium rate. The order shall continue in effect during the existence of theconditions upon which predicated, but subject to the commissioner's earliertermination.
(b) The broker shall file with or as directed by thecommissioner a memorandum as to each coverage he places in an unauthorizedinsurer, in such form and context as the commissioner requires for theidentification of the coverage and determination of the tax payable to thestate relative thereto.
(c) The broker, or a licensed agent of the authorized insureror a broker, may also place with authorized insurers any insurance coveragemade eligible for export generally under subsection (a) of this section andwithout regard to rate or form filings which may otherwise be applicable to theauthorized insurer. As to coverages placed in an authorized insurer, thepremium tax thereon shall be reported and paid by the insurer as requiredgenerally under W.S. 26-4-103.
26-11-107. Requirements for eligible surplus line insurers; publicationof eligible insurers.
(a) No broker shall knowingly place surplus line insurance withan insurer that is unsound financially or that is ineligible under thissection. The broker shall ascertain the financial condition of the unauthorizedinsurer, to the extent that the financial condition is shown by the insurer'srecent financial statements filed with public authority or published, or asotherwise known to the broker, before placing insurance with that insurer.
(b) The broker shall insure only in an insurer which meets thefollowing requirements:
(i) Is authorized to transact insurance of the kind involved inat least one (1) state of the United States and has unimpaired capital orsurplus, or both, or an effective trust fund amounting to at least threemillion five hundred thousand dollars ($3,500,000.00);
(ii) If an alien insurer not authorized to transact insurance inat least one (1) state of the United States either:
(A) Has an established and effective trust fund of at leastthree million five hundred thousand dollars ($3,500,000.00) within the UnitedStates administered by a recognized financial institution and held for thebenefit of all its policyholders in the United States; or
(B) Is listed by the nonadmitted insurers information office ofthe national association of insurance commissioners; or
(iii) Is in compliance with either paragraph (i) or (ii) and isnot ineligible as a surplus line insurer by the commissioner's order receivedby or known to the broker.
(c) The commissioner may issue an order of ineligibility if hefinds or has reason to believe that the insurer:
(i) Does not meet the requirements of this section;
(ii) Has without just cause refused to pay claims arising underits contracts in the United States; or
(iii) Has otherwise conducted its affairs in such manner as toresult in or threaten injury or loss to the insuring public of the UnitedStates.
(d) The commissioner from time to time may publish a list ofall surplus lines insurers he deems eligible currently and shall mail a copy ofthe list to each broker at his office last of record with the commissioner.This subsection does not obligate the commissioner to determine the actualfinancial condition or claims practices of any unauthorized insurer. The statusof eligibility, if granted by the commissioner, indicates only that the insurerappears to be sound financially and to have satisfactory claims practices, andthat the commissioner has no credible evidence to the contrary. While any suchlist is in effect the broker shall restrict to the insurers listed all surplusline business he places.
26-11-108. Certificate as evidence of surplus line insurance.
(a) Upon placing a surplus line coverage, the broker shallpromptly issue and deliver to the insured evidence of the insurance consistingeither of the policy as issued by the insurer, or, if the policy is not thenavailable, the surplus line broker's certificate. The certificate shall beexecuted by the broker and shall show the description and location of thesubject of the insurance, coverage, conditions and term of the insurance, the premiumand rate charged, taxes collected from the insured and the name and address ofthe insured and insurer. If more than one (1) insurer assumes the direct risk,the certificate shall state the name and address of each insurer and theproportion of the entire direct risk each assumes.
(b) No broker shall issue any certificate or any cover note orpurport to insure or represent that insurance will be or has been granted byany unauthorized insurer, unless he has:
(i) The insurer's prior written authority for the insurance;
(ii) Received information from the insurer in the regular courseof business that the insurance has been granted; or
(iii) Received an insurance policy specifying the insurer hasactually issued the insurance and delivered it to the insured.
(c) If after the issuance and delivery of any certificate thereis any change as to the insurer's identity, or the proportion of the directrisk an insurer assumes as stated in the broker's original certificate, or inany other material respect as to the insurance evidenced by the certificate,the broker shall promptly issue and deliver to the insured a substitutecertificate accurately showing the current status of the coverage and theinsurers responsible thereunder.
(d) If a policy issued by the insurer is not available uponplacement of the insurance and the broker has issued and delivered hiscertificate as provided in this section, upon the insured's request therefor,the broker, as soon as reasonably possible, shall procure from the insurer itspolicy evidencing the insurance and deliver the policy to the insured inreplacement of the broker's certificate.
(e) Any surplus line broker who knowingly or negligently issuesa false certificate of insurance, or who fails promptly to notify the insuredof any material change with respect to the insurance by delivery to the insuredof a substitute certificate as provided in subsection (c) of this section, uponconviction, is subject to the penalty provided by W.S. 26-1-107 or to any greaterapplicable penalty otherwise provided by law.
26-11-109. Endorsement of contract.
Anyinsurance contract procured and delivered as a surplus line coverage pursuantto this chapter shall have stamped upon it, initialed by or bearing the name ofthe surplus line broker who procured it, the following: "This insurancecontract is issued pursuant to the Wyoming Insurance Laws by an insurer neitherlicensed by nor under the jurisdiction of the Wyoming InsuranceDepartment."
26-11-110. Enforceability and validity of surplus line insurance.
Insurancecontracts procured as surplus line coverage from unauthorized insurers inaccordance with this chapter are fully valid and enforceable as to all partiesand shall be given recognition in all matters and respects to the same effectas like contracts issued by authorized insurers.
26-11-111. Liability of insurer as to losses and unearned premiums;applicability of section to insurers.
(a) As to a surplus line risk which is assumed by anunauthorized insurer pursuant to this chapter, and if the premium thereon isreceived by the surplus line broker who placed the insurance, in all questionsthereafter arising under the coverage as between the insurer and the insuredthe insurer is deemed to have received the premium due to it for that coverage.The insurer is liable to the insured for losses covered by the insurance andfor unearned premiums which are payable to the insured upon cancellation of theinsurance, whether or not the broker is indebted to the insurer with respect tothe insurance or for any other cause.
(b) Each unauthorized insurer assuming a surplus line riskunder this chapter subjects itself to the terms of this section.
26-11-112. Surplus line broker's license; authority for issuance; application;fee; applicable law.
(a) Any person may be licensed as a surplus line broker if:
(i) He is licensed as a property and casualty agent;
(ii) The commissioner deems him to be competent and trustworthywith respect to the handling of surplus lines; and
(iii) He maintains an office at a designated location known toand accessible by the commissioner.
(b) Application for the license shall be made to thecommissioner on forms he designates and furnishes.
(c) The license fee shall be as specified in W.S. 26-4-101.
(d) The license and licensee are subject to chapter 9 of thiscode as provided in W.S. 26-9-201.
26-11-113. Surplus line broker's license; suspension or revocation;grounds; procedure.
(a) The commissioner may suspend or revoke any surplus linebroker's license:
(i) If the broker:
(A) Fails to file his annual statement or to remit the taxrequired by this code;
(B) Fails to maintain an office accessible to the commissioner;
(C) Fails to keep the records, or to allow the commissioner toexamine his records, as required by this law; or
(D) Repealed by Laws 2001, Ch. 201, 5.
(E) Knowingly or negligently places a surplus line coverage inan insurer that is in unsound financial condition in violation of W.S. 26-11-107.
(ii) For any other applicable cause for which a general linesagent's license may be suspended or revoked.
(b) The procedures provided by chapter 9 of this code forsuspension or revocation of licenses apply to suspension or revocation of a surplusline broker's license.
(c) Upon suspending or revoking the broker's surplus linelicense, the commissioner shall also suspend or revoke all other licenses of oras to the same individual under this code.
(d) No broker whose license is suspended or revoked shall againbe licensed until any fines or delinquent taxes he owes are paid, or, in caseof revocation, until after expiration of one (1) year from the date revocationis final.
26-11-114. Surplus line broker's bond.
Priorto issuance of a license as a surplus line broker, the applicant shall filewith the commissioner and thereafter for as long as the license remains ineffect shall keep in force a bond in favor of the state of Wyoming in the penalsum of ten thousand dollars ($10,000.00), with an authorized corporate suretythe commissioner approves, conditioned that he will conduct business under thelicense in accordance with this chapter and that he will promptly remit thetaxes provided by W.S. 26-11-118. The aggregate liability of the surety for anyclaims on the bond shall not exceed the penal sum of the bond. The bond shallnot be terminated unless not less than thirty (30) days prior written noticethereof is given to the licensee and filed with the commissioner.
26-11-115. Broker may accept and place business from agents.
Alicensed surplus line broker may accept and place surplus line business for anyinsurance agent licensed in this state for the kind of insurance involved andmay compensate the agent therefor.
26-11-116. Records of broker; contents; examination.
(a) Each broker shall keep in his office a full and true recordof each surplus line coverage he procures, including a copy of each dailyreport, if any, a copy of each certificate of insurance he issues and any of thefollowing applicable items:
(i) Amount of the insurance;
(ii) Gross premium charged;
(iii) Return premium paid, if any;
(iv) Rate of premium charged upon the several items of property;
(v) Effective date of contract and the terms thereof;
(vi) Name and address of each insurer on the direct risk and theproportion of the entire risk assumed by each insurer if less than the entirerisk;
(vii) Name and address of the insured;
(viii) Brief general description of the property or risk insuredand where located or to be performed; and
(ix) Any other information the commissioner requires.
(b) The record shall be open to examination by the commissionerat all times within five (5) years after issuance of the coverage to which itrelates.
26-11-117. Annual statement; contents.
(a) Each broker, annually, on or before March 1, shall filewith the commissioner a verified statement of all surplus line insurance hetransacted during the preceding calendar year.
(b) The statement shall be on forms the commissioner prescribesand furnishes and shall show:
(i) Gross amount of each kind of insurance transacted;
(ii) Aggregate gross premiums charged;
(iii) Aggregate of returned premiums paid to insureds;
(iv) Aggregate of net premiums; and
(v) Additional information the commissioner requires.
26-11-118. Tax on surplus lines.
(a) Annually, on or before March 1, each broker shall remit tothe commissioner a tax at the rate of three percent (3%) on the premiums, lessthe amount of return premium on cancelled policies, including sums collected tocover federal and state taxes on surplus line insurance, subject to tax,transacted with unauthorized insurers during the preceding calendar year asshown by his annual statement filed with the commissioner.
(b) If a surplus line policy covers risks or exposures onlypartially in this state, the tax payable shall be computed upon the proportionof the premium which is properly allocable to the risks or exposures located inthis state.
26-11-119. Failure to file statement or remit tax; penalty.
Ifany broker fails to file his annual statement, or fails to remit the taxprovided by W.S. 26-11-118, prior to April 1 after the tax is due, and if inthe commissioner's opinion the failure is without just cause, the broker isliable for a twenty-five dollar ($25.00) fine for each day of delinquencycommencing with April 1. The tax may be collected by distraint, or the tax andfine may be recovered by an action the commissioner institutes in any court ofcompetent jurisdiction.
26-11-120. Service of process against surplus line insurer.
(a) An unauthorized insurer shall be sued, upon any cause ofaction arising in this state under any contract it issues as a surplus linecontract pursuant to this chapter, in the district court of the county in whichthe cause of action arises.
(b) Legal process against the insurer in any action specifiedin subsection (a) of this section may be served upon the commissioner asprovided in W.S. 26-3-122. The commissioner shall immediately mail a copy ofthe process served to the person the insurer designates in the policy for thatpurpose, by prepaid registered or certified mail with return receipt requested.After service of process upon the commissioner in accordance with this section,the court has jurisdiction in personam of the insurer.
(c) An unauthorized insurer issuing a policy is deemed to haveauthorized service of process against it in the manner and to the effectprovided in this section. The policy shall contain a provision stating thesubstance of this section and designating the person to whom the commissionershall mail process as provided in subsection (b) of this section.
26-11-121. Rules and regulations.
(a) The commissioner shall make or may approve and adoptreasonable rules and regulations, consistent with this chapter, for any of thefollowing purposes:
(i) Carrying out of this chapter;
(ii) Establishment of procedures through which eligibility ofparticular proposed coverages for export is determined; and
(iii) Establishment, procedures and operations of any voluntaryorganization of brokers or others designed to assist those brokers to complywith this chapter.
(b) The rules and regulations are subject to the procedures andcarry the penalty provided by W.S. 26-2-110.
26-11-122. Disclosure to commissioner of insurance placed withunauthorized insurer.
Anyperson for whom insurance is placed with an unauthorized insurer, upon thecommissioner's order, shall produce for his examination all policies and otherdocuments evidencing the insurance and shall disclose to the commissioner theamount of gross premiums paid or agreed to be paid for the insurance. If theperson refuses to obey the commissioner's order, he is subject to the penaltiesprovided by W.S. 26-1-107 for each refusal.