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H. B. No. 122 As IntroducedAs Introduced
129th General Assembly | Regular Session | 2011-2012 |
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A BILL
To amend sections 3901.17, 3905.30, 3905.31, 3905.33,
3905.34, 3905.36, 3905.37, and 3905.38 and to
enact section 3905.331 of the Revised Code to
exempt state surplus lines insurance from
regulation in Ohio when Ohio is not the home state
of the insured and to make other changes to the
law regulating surplus lines insurance.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
Section 1. That sections 3901.17, 3905.30, 3905.31, 3905.33,
3905.34, 3905.36, 3905.37, and 3905.38 be amended and section
3905.331 of the Revised Code be enacted to read as follows:
Sec. 3901.17. (A) As used in this section:
(1) "Captive insurer" has the meaning defined in section
3905.36 of the Revised Code.
(2) "Insurer" includes, but is not limited to, any person
that is an affiliate of or affiliated with the insurer, as defined
in division (A) of section 3901.32 of the Revised Code, and any
person that is a subsidiary of the insurer as defined in division
(F) of section 3901.32 of the Revised Code.
(3) "Laws of this state relating to insurance" has the
meaning defined in division (A)(1) of section 3901.04 of the
Revised Code.
(4) "Person" has the meaning defined in division (A) of
section 3901.19 of the Revised Code.
(5) "Home state" has the same meaning as in section 3905.30
of the Revised Code.
(B) Any of the following acts in this state, effected by mail
or otherwise, by any foreign or alien insurer not authorized to
transact business within this state, any nonresident person acting
on behalf of an insurer, or any nonresident insurance agent
subjects the insurer, person, or agent to the exercise of personal
jurisdiction over the insurer, person, or agent to the extent
permitted by the constitutions of this state and of the United
States:
(1) Issuing or delivering contracts of insurance to residents
of this state or to corporations authorized to do business
therein;
(2) Making or proposing to make any insurance contracts;
(3) Soliciting, taking, or receiving any application for
insurance;
(4) Receiving or collecting any premium, commission,
membership fee, assessment, dues, or other consideration for any
insurance contract or any part thereof;
(5) Disseminating information as to coverage or rates,
forwarding applications, inspecting risks, fixing rates,
investigating or adjusting claims or losses, or transacting any
matters subsequent to effecting a contract of insurance and
arising out of it;
(6) Doing any kind of business recognized as constituting the
doing of an insurance business under Title XXXIX of the Revised
Code or subject to regulation by the superintendent of insurance
under the laws of this state relating to insurance.
Any such act shall be considered to be the doing of an
insurance business in this state by such insurer, person, or agent
and shall be its agreement that service of any lawful subpoena,
notice, order, or process is of the same legal force and validity
as personal service of the subpoena, notice, order, or process in
this state upon the insurer, person, or agent.
(C) Service of process in judicial proceedings shall be as
provided by the Rules of Civil Procedure. Service in or out of
this state of notice, orders, or subpoenas in administrative
proceedings before the superintendent shall be as provided in
section 3901.04 of the Revised Code.
(D) Service of any notice, order, subpoena, or process in any
such action, suit, or proceeding shall, in addition to the manner
provided in division (C) of this section, be valid if served upon
any person within this state who, in this state on behalf of such
insurer, person, or agent is or has been:
(1) Soliciting, procuring, effecting, or negotiating for
insurance;
(2) Making, issuing, or delivering any contract of insurance;
(3) Collecting or receiving any premium, membership fees,
assessment, dues, or other consideration for insurance;
(4) Disseminating information as to coverage or rates,
forwarding applications, inspecting risks, fixing rates,
investigating or adjusting claims or losses, or transacting any
matters subsequent to effecting a contract of insurance and
arising out of it.
(E) Nothing in this section shall limit or abridge the right
to serve any subpoena, order, process, notice, or demand upon any
insurer, person, or agent in any other manner permitted by law.
(F) Every person investigating or adjusting any loss or claim
under a policy of insurance not excepted under division (I) of
this section and issued by any such insurer and covering a subject
of insurance that was resident, located, or to be performed in
this state at the time of issuance shall immediately report the
policy to the superintendent.
(G) Each If this state is the home state of the insured, each
such insurer that does any of the acts set forth in division (B)
of this section in this state by mail or otherwise shall be
subject to a tax of five per cent on the gross premiums,
membership fees, assessments, dues, and other considerations
received on all contracts of insurance covering subjects of
insurance resident, located, or to be performed within this state.
Such insurer shall annually, on or before the first day of July,
pay such tax to the treasurer of state, as calculated on a form
prescribed by the treasurer of state. If the tax is not paid when
due, the tax shall be increased by a penalty of twenty-five per
cent. An interest charge computed as set forth in section 5725.221
of the Revised Code shall be made on the entire sum of the tax
plus penalty, which interest shall be computed from the date the
tax is due until it is paid. The treasurer of state shall
determine and report all claims for penalties and interest
accruing under this section to the attorney general for collection
the requirements of section 3905.36 of the Revised Code.
For purposes of this division, payment is considered made
when it is received by the treasurer of state, irrespective of any
United States postal service marking or other stamp or mark
indicating the date on which the payment may have been mailed.
(H) No contract of insurance effected in this state by mail
or otherwise by any such insurer is enforceable by the insurer.
(I) This section does not apply to:
(1) Insurance obtained pursuant to sections 3905.30 to
3905.36 of the Revised Code;
(2) The transaction of reinsurance by insurers;
(3) Transactions in this state involving a policy solicited,
written, and delivered outside this state covering only subjects
of insurance not resident, located, or to be performed in this
state at the time of issuance, provided such transactions are
subsequent to the issuance of the policy;
(4) Transactions in this state involving a policy of group
life or group accident and sickness insurance solicited, written,
and delivered outside this state;
(5)(4) Transactions involving contracts of insurance
independently procured through negotiations occurring entirely
outside this state which are reported to the superintendent and
with respect to which the tax provided by is paid in accordance
with section 3905.36 of the Revised Code is paid;
(6)(5) An attorney at law acting on behalf of the attorney's
clients in the adjustment of claims or losses;
(7) Except as provided in division (G) of this section, any
insurance company underwriter issuing contracts of insurance to
employer insureds or contracts of insurance issued to an employer
insured. For purposes of this section, an "employer insured" is an
insured to whom all of the following apply:
(a) The insured procures the insurance of any risk or risks
by use of the services of a full-time employee acting as an
insurance manager or buyer or the services of a regularly and
continuously qualified insurance consultant. As used in division
(I)(7)(a) of this section, a "regularly and continuously qualified
insurance consultant" does not include any person licensed under
Chapter 3905. of the Revised Code.
(b) The insured's aggregate annual premiums for insurance on
all risks total at least twenty-five thousand dollars; and
(c) The insured has at least twenty-five full-time employees.
(8)(6) Ocean marine insurance;
(9)(7) Transactions involving policies issued by a captive
insurer.
Sec. 3905.30. (A) As used in sections 3905.30 to 3905.38 of
the Revised Code:
(1)(a) Notwithstanding section 3905.01 of the Revised Code,
"home state" means the state in which an insured maintains its
principal place of business or, in the case of an individual, the
individual's principal residence except in the case of either of
the following:
(b) If one hundred per cent of the insured risk is located
out of the state in which an insured maintains its principal place
of business or principle residence as described in division
(A)(1)(a) of this section, "home state" means the state to which
the greatest percentage of the insured's taxable premium for that
insurance contract is allocated.
(c) If more than one insured from an affiliated group are
named insureds on a single unauthorized insurance contract, "home
state" means the state in which the member of the affiliated group
that has the largest percentage of premium attributed to it under
such insurance contract an insured maintains its principal place
of business.
(2) "Principal place of business" means the state where the
insured maintains the insured's headquarters and where the
insured's high-level officers direct, control, and coordinate the
business activities of the insured.
(B) The superintendent of insurance may issue a surplus line
lines broker's license to any natural person who is a resident of
this or any other state or to a business entity that is organized
under the laws of this or any other state. To be eligible for a
resident surplus line lines broker's license, a person must have
both a property license and a casualty license. To be eligible for
a nonresident surplus line lines broker's license, a person must
hold an active surplus line lines broker license in the person's
home state. A nonresident surplus line lines broker shall obtain a
nonresident license with a property and casualty line of authority
in this state if the broker is or will be personally performing
the due diligence requirements under section 3905.33 of the
Revised Code.
(C) A surplus line lines broker's license permits the person
named in the license to negotiate for and obtain insurance, other
than life insurance, on property or persons in this state from
insurers not authorized to transact business in this state. Each
such license expires on the thirty-first day of January next after
the year in which it is issued, and may be then renewed.
Sec. 3905.31. (A) No person not licensed under section
3905.30 of the Revised Code shall take or receive any application
for such insurance upon property or persons in this state, or
receive or collect a premium or any part thereof for any
unauthorized insurance company, or attempt or assist in any such
act, or perform any act in this state concerning any policy or
contract of insurance of any unauthorized insurance company
provided that any duly licensed property and casualty agent may
place business with an agent licensed under section 3905.30 of the
Revised Code and may accept compensation therefor, if such
insurance is written in conformity with the insurance laws of this
state.
This
(B) This section does not apply to any selling, soliciting,
or negotiating of surplus lines insurance by a surplus lines
broker that takes place in an insured's home state if the home
state of the insured is a state other than this state.
(C) This section does not apply to those engaged in the act
of adjusting claims or losses in connection with any policy of
insurance written under the provisions of sections 3905.30 to
3905.35 of the Revised Code.
Sec. 3905.33. (A) No person licensed under section 3905.30
of the Revised Code shall solicit, procure an application for,
bind, issue, renew, or deliver a policy with any insurer that is
not eligible to write insurance on a surplus line an unauthorized
basis in this state.
To Unless the superintendent of insurance enters into a
multistate agreement or compact under division (E) of this
section, the superintendent may establish the eligibility of an
unauthorized insurer, the superintendent of insurance may request
by requesting copies of the insurer's most recent financial
statements; instruments such as domestic trust agreements, powers
of attorney, and investment management contracts; biographies of
the owners and managers of the insurer; and any other information
the superintendent believes may be helpful in determining an
insurer's suitability eligibility. The suitability eligibility of
each unauthorized insurer is subject to the continuous scrutiny
and discretion of the superintendent.
(B)(1) No insurance agent or surplus
line lines broker shall
solicit, procure, place, or renew any insurance with an
unauthorized insurer unless the an agent or surplus line lines
broker has complied with the due diligence requirements of this
section and is unable to procure the requested insurance from an
authorized insurer.
Due diligence requires the an agent or surplus line broker to
contact at least five of the authorized insurers the agent or
surplus line broker represents, or as many insurers as the agent
or surplus line broker represents, that customarily write the kind
of insurance required by the insured. Due diligence is presumed if
declinations are received from each authorized insurer contacted.
If any authorized insurer fails to respond within ten days after
the initial contact, the agent or surplus line broker may assume
the insurer has declined to accept the risk.
(2) Due diligence shall only be performed by an agent
licensed in this state that holds an active property and casualty
insurance license.
(3) An insurance agent or surplus line lines broker is exempt
from the due diligence requirements of this section if the agent
or surplus line broker is procuring insurance from a risk
purchasing group or risk retention group as provided in Chapter
3960. of the Revised Code.
(4) An insurance agent or surplus lines broker is exempt from
the due diligence requirements of this section if the agent or
surplus lines broker is seeking to procure or place unauthorized
insurance for a person that qualifies as an exempt commercial
purchaser under section 3905.331 of the Revised Code and both of
the following are true:
(a) The surplus lines broker procuring or placing the surplus
lines insurance has disclosed to the exempt commercial purchaser
that the insurance may or may not be available from the authorized
market that may provide greater protection with more regulatory
oversight.
(b) After receipt of the disclosure required under division
(B)(4)(a) of this section, the exempt commercial purchaser has
requested in writing that the insurance agent or broker procure or
place the insurance from an unauthorized insurer.
(C) An Except when exempt from due diligence requirements
under division (B) of this section, an insurance agent who
procures or places insurance through a surplus line lines broker
shall obtain an affidavit from the insured acknowledging that the
insurance policy is to be placed with a company or insurer not
authorized to do business in this state and acknowledging that, in
the event of the insolvency of the insurer, the insured is not
entitled to any benefits or proceeds from the Ohio insurance
guaranty association. The affidavit must be on a form prescribed
by the superintendent. The agent shall submit the original
originally executed affidavit to the surplus line lines broker
within thirty days after the effective date of the policy. If no
other agent is involved, the surplus line lines broker shall
obtain the affidavit from the insured.
The surplus line lines broker shall keep maintain the
original originally executed affidavit or a copy of the affidavit,
and the originating agent shall keep a copy of the affidavit, for
at least five years after the effective date of the policy to
which the affidavit pertains. A copy of the affidavit shall be
given to the insured at the time the insurance is bound or a
policy is delivered.
(D) The superintendent may adopt rules in accordance with
Chapter 119. of the Revised Code to carry out the purposes of
sections 3905.30 to 3905.38 of the Revised Code.
(E) For the purpose of carrying out the "Nonadmitted and
Reinsurance Reform Act of 2010," 15 U.S.C. 8201 et seq., 124 Stat.
1589, or any successor or replacement law, the superintendent may
enter into a multi-state agreement or compact for determining
eligibility for placement of unauthorized insurance and for
payment, reporting, collection, and allocation of the tax on
unauthorized insurance. The multi-state agreement or compact also
may include eligibility for placement of unauthorized insurance
and payment, reporting, collection, and allocation of the tax on
unauthorized insurance for risks that are not multi-state, and for
independently procured insurance in the unauthorized market.
Sec. 3905.331. (A) A person purchasing commercial insurance
qualifies as an exempt commercial purchaser if, at the time of
placement, the exempt commercial purchaser satisfies all of the
following requirements:
(1) The person employs or retains a qualified risk manager to
negotiate insurance coverage.
(2) The person has paid aggregate nationwide commercial
property and casualty insurance premiums in excess of one hundred
thousand dollars in the immediately preceding twelve months.
(3) The person satisfies at least one of the following
criteria:
(a) The person possesses a net worth in excess of twenty
million dollars, as adjusted pursuant to division (B) of this
section.
(b) The person generates annual revenues in excess of fifty
million dollars, as adjusted pursuant to division (B) of this
section.
(c) The person employs more than five hundred full-time or
full-time equivalent employees per individual insured or is a
member of an affiliated group employing more than one thousand
employees in the aggregate.
(d) The person is a not-for-profit organization or public
entity generating annual budgeted expenditures of at least thirty
million dollars, as adjusted pursuant to division (B) of this
section.
(e) The person is a municipality with a population in excess
of fifty thousand persons.
(B) Effective on January 1, 2015, and every five years
thereafter, the superintendent of insurance shall adjust the
dollar amounts in division (A) of this section to reflect the
percentage change for that five-year period in the consumer price
index for all urban consumers published by the bureau of labor
statistics of the United States department of labor.
(C) A qualified risk manager employed or retained to
negotiate insurance by an exempt commercial purchaser under this
section shall satisfy all of the following requirements:
(1) The person is an employee of, or third-party consultant
retained by, the commercial policyholder.
(2) The person provides skilled services in loss prevention,
loss reduction, or risk and insurance coverage analysis and the
purchase of insurance.
(3) The person satisfies one of the following:
(a) The person has obtained a bachelor's degree or a higher
degree from an accredited college or university in risk
management, business administration, finance, economics, or any
other field determined by a state insurance commissioner or other
state regulatory official or entity to demonstrate minimum
competence in risk management, and either has three years of
experience in risk financing, claims administration, loss
prevention and insurance analysis, or purchasing commercial lines
of insurance or has one of the following designations:
(i) A designation as a chartered property and casualty
underwriter issued by the American institute for CPCU/insurance of
America;
(ii) A designation as an associate in risk management issued
by the American institute for CPCU/insurance institute of America;
(iii) A designation as certified risk manager issued by the
national alliance for insurance education and research;
(iv) A designation as a RIMS fellow issued by the global risk
management institute;
(v) Any other designation, certification, or license
determined by the superintendent to demonstrate minimum competency
in risk management.
(b) The person has at least seven years of experience in risk
financing, claims administration, loss prevention, risk and
insurance coverage analysis, or purchasing commercial lines of
insurance; and has any one of the designations specified in
division (B)(3)(a) of this section;
(c) The person has at least ten years of experience in risk
financing, claims administration, loss prevention, risk and
insurance coverage analysis, or purchasing commercial lines of
insurance;
(d) The person has a graduate degree from an accredited
college or university in risk management, business administration,
finance, economics, or any other field determined by the
superintendent to demonstrate minimum competence in risk
management.
Sec. 3905.34. Each person licensed under section 3905.30 of
the Revised Code shall keep a separate account of the business
done under the person's license. On or before the thirty-first day
of
January March or when required under a multi-state agreement or
compact entered into by the superintendent of insurance as
authorized by division (E) of section 3905.33 of the Revised Code,
each surplus line lines broker shall file with the superintendent
of insurance the portion of that account that details of the
business done during the preceding calendar year in the format
prescribed by the superintendent. The account must show the amount
of such insurance, the name of the insured, a brief description of
the type of insurance, the location of the property, the gross
premium charged, the name of the insurer, the date of the policy
and term thereof, and a report in the same detail of all such
policies canceled and the gross return premiums thereon.
Sec. 3905.36. (A) Except as provided in divisions (B) and
(C) of this section, every Every insured association, company,
corporation, or other person that enters, directly or indirectly,
into any agreements independent procurement or direct placement
agreement with any insurance company, association, individual,
firm, underwriter, or Lloyd's, not authorized to do business in
this state, whereby the insured shall procure, continue, or renew
contracts of insurance covering subjects of insurance resident,
located, or to be performed within this state, with such
unauthorized insurance company, association, individual, firm,
underwriter, or Lloyd's, for which insurance there is a gross
premium, membership fee, assessment, dues, or other consideration
charged or collected, shall file the details of the transaction
annually, on or before the thirty-first day of March, return to
the superintendent of insurance a statement under oath showing the
name and address of the insured, name and address of the insurer,
subject of the insurance, general description of the coverage, and
amount of gross premium, fee, assessment, dues, or other
consideration for such insurance for the preceding calendar year
and shall at the same time pay to the treasurer of state a tax of
five per cent of such gross premium, fee, assessment, dues, or
other consideration, after a deduction for return premium, if any,
as calculated on a form in the prescribed by the treasurer of
state. All format or in compliance with any requirements of a
multi-state agreement or compact entered into by the
superintendent pursuant to division (E) of section 3905.33 of the
Revised Code. An insurer may submit the required details of the
transaction and remit the tax payment on behalf of an insured.
All taxes collected under this section by the treasurer of
state shall be paid into the general revenue fund. If the tax is
not paid when due, the tax shall be increased by a penalty of
twenty-five per cent. An interest charge computed as set forth in
section 5725.221 of the Revised Code shall be made on the entire
sum of the tax plus penalty, which interest shall be computed from
the date the tax is due until it is paid. For purposes of this
section, payment is considered made when it is received by the
treasurer of state, irrespective of any United States postal
service marking or other stamp or mark indicating the date on
which the payment may have been mailed.
The superintendent of insurance, in the superintendent's sole
discretion, may waive the twenty-five per cent penalty and
interest charge thereon for a first-time, inadvertent nonpayment
of the tax when due if the nonpayment is reported immediately upon
discovery and the outstanding tax is thereafter immediately paid
to the superintendent.
(B) This section does not apply to:
(1) Transactions in this state involving a policy solicited,
written, and delivered outside this state covering only subjects
of insurance not resident, located, or to be performed in this
state at the time of issuance, provided such transactions are
subsequent to the issuance of the policy An insured otherwise
exempt from the payment of premium or franchise taxes under state
or federal law;
(2) Attorneys-at-law acting on behalf of their clients in the
adjustment of claims or losses;
(3) Transactions involving policies issued by a captive
insurer. For this purpose, a "captive insurer" means any of the
following:
(a) An insurer owned by one or more individuals or
organizations, whose exclusive purpose is to insure risks of one
or more of the parent organizations or individual owners and risks
of one or more affiliates of the parent organizations or
individual owners;
(b) In the case of groups and associations, insurers owned by
the group or association whose exclusive purpose is to insure
risks of members of the group or association and affiliates of the
members;
(c) Other types of insurers, licensed and operated in
accordance with the captive insurance laws of their jurisdictions
of domicile and operated in a manner so as to self-insure risks of
their owners and insureds.
(4) Professional or medical liability insurance procured by a
hospital organized under Chapter 3701. of the Revised Code;
(5) Insurance with an initial policy period of more than
three years and that is procured to cover known events related to
environmental remediation that occurred prior to the effective
date of that insurance;
(6) Insurance procured on behalf of an entity that
manufactures, packages, and sells, as more than fifty per cent of
the entity's business, pharmaceutical products for human use where
the production, packaging, and sale of such products are subject
to regulation by an agency of the United States;
(7) A political subdivision or any combination or consortium
of two or more political subdivisions.
(C) In transactions that are subject to sections 3905.30 to
3905.35 of the Revised Code, each Each person licensed under
section 3905.30 of the Revised Code shall pay to the treasurer of
state, on or before the thirty-first day of March of each year,
five per cent of the balance of the gross premiums charged for
insurance placed or procured under the license after a deduction
for return premiums, as reported on a form in the prescribed by
the treasurer of state format or in compliance with any
requirements of a multi-state agreement or compact entered into by
the superintendent pursuant to division (E) of section 3905.33 of
the Revised Code. The tax shall be collected from the insured by
the surplus
line lines broker who placed or procured the policy
of insurance at the time the policy is delivered to the insured.
No license issued under section 3905.30 of the Revised Code shall
be renewed until payment is made. If the tax is not paid when due,
the tax shall be increased by a penalty of twenty-five per cent.
An interest charge computed as set forth in section 5725.221 of
the Revised Code shall be made on the entire sum of the tax plus
penalty, which interest shall be computed from the date the tax is
due until it is paid. For purposes of this section, payment is
considered made when it is received by the treasurer of state,
irrespective of any United States postal service marking or other
stamp or mark indicating the date on which the payment may have
been mailed.
The superintendent, in the superintendent's sole discretion,
may waive the twenty-five per cent penalty and interest charge
thereon for a first-time, inadvertent nonpayment of the tax when
due if the nonpayment is reported immediately upon discovery and
the outstanding tax is thereafter immediately paid to the
superintendent.
(D) As used in this section:
(1) "Political subdivision" means any county; municipal
corporation; township; township police district; township fire
district; joint fire district; joint ambulance district; joint
emergency medical services district; fire and ambulance district;
joint recreation district; township waste disposal district;
township road district; community college district; technical
college district; detention facility district; a district
organized under section 2151.65 of the Revised Code; a combined
district organized under sections 2151.65 and 2152.41 of the
Revised Code; a joint-county alcohol, drug addiction, and mental
health service district; a drainage improvement district created
under section 6131.52 of the Revised Code; a union cemetery
district; a county school financing district; a city, local,
exempted village, cooperative education, or joint vocational
school district; or a regional student education district created
under section 3313.83 of the Revised Code, any public division,
district, commission, authority, department, board, officer, or
institution of any one or more of those subdivisions, that is
entirely or substantially supported by public tax moneys.
(2) "Municipal corporation" means all municipal corporations,
including those that have adopted a charter under Article XVIII,
Ohio Constitution.
Sec. 3905.37. No person, company, association, or
corporation shall fail to make the report required in section
3905.36 of the Revised Code and to furnish all the information
that is required by the treasurer of state to determine the amount
due under that section.
Sec. 3905.38. (A) Sections 3905.30 to 3905.37 of the Revised
Code do not apply in any case where this state is not the home
state of the insured.
(B) Sections 3905.36 to 3905.38, inclusive, of the Revised
Code do not extend to private citizens, firms, or corporations,
residents of this state, who seek to provide indemnity among
themselves, from fire loss or other casualty, by exchange of
private contracts for protection only and not for profit, nor
apply to life or accident and sickness insurance. Sections 3905.30
through 3905.37, inclusive, of the Revised Code do not apply to
ocean marine insurance when placed by licensed agents of this
state.
Section 2. That existing sections 3901.17, 3905.30, 3905.31,
3905.33, 3905.34, 3905.36, 3905.37, and 3905.38 of the Revised
Code are hereby repealed.
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