HOUSE AMENDED

THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY CORMAN, BROWNE, STACK, EARLL, RAFFERTY, BAKER, FERLO, GORDNER, O'PAKE, WILLIAMS, WAUGH, M. WHITE AND WASHINGTON, FEBRUARY 19, 2009

AS AMENDED ON SECOND CONSIDERATION, HOUSE OF REPRESENTATIVES, FEBRUARY 8, 2010   

AN ACT

Amending the act of May 17, 1921 (P.L.682, No.284), entitled "An

act relating to insurance; amending, revising, and

consolidating the law providing for the incorporation of

insurance companies, and the regulation, supervision, and

protection of home and foreign insurance companies, Lloyds

associations, reciprocal and inter-insurance exchanges, and

fire insurance rating bureaus, and the regulation and

supervision of insurance carried by such companies,

associations, and exchanges, including insurance carried by

the State Workmen's Insurance Fund; providing penalties; and

repealing existing laws," in general provisions relating to

<--

insurance companies, further providing for annual and other

reports; and providing for suitability of annuity

<--

transactions and for the regulation of health insurance

practices concerning parity and nondiscrimination; further

<--

providing for definitions, for acting for or aiding

nonadmitted insurers, for requirements for eligible surplus

lines insurers, for other nonadmitted insurers, for surplus

lines licensee's duty to notify insured, for declarations,

for surplus lines advisory organizations, for evidence of

insurance, for effect of payment to surplus lines licensee,

for licensing of surplus lines licensee, for surplus lines

licensee's acceptance of business from brokers, for records

of surplus lines licensees, for monthly reports, for surplus

lines tax, for tax on independently procured insurance, for

suspension, revocation or nonrenewal of surplus lines

licensee's license and for penalties; providing for

compliance; and, in children's health care, further providing

for expiration of certain provisions.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 320 of the act of May 17, 1921 (P.L.682,

No.284), known as The Insurance Company Law of 1921, amended

December 18, 1992 (P.L.1519, No.178) and February 17, 1994

(P.L.92, No.9), is amended to read:

Section 320.  Annual and Other Reports; Penalties.--(a)  (1)

Every stock and mutual insurance company, association, and

exchange, doing business in this Commonwealth, shall annually,

on or before the first day of March, file in the office of the

Insurance Commissioner and with the National Association of

Insurance Commissioners a statement which shall exhibit its

financial condition on the thirty-first day of December of the

previous year, and its business of that year and shall, within

thirty days after requested by the Insurance Commissioner, file

with the Insurance Commissioner and with the National

Association of Insurance Commissioners such additional statement

or statements concerning its affairs and financial condition as

the Insurance Commissioner may, in his discretion, require. The

Insurance Commissioner shall require each insurance company

association and exchange to report its financial condition on

the statement convention blanks, in such form as adopted by the

National Association of Insurance Commissioners and shall, upon

written request, furnish such blanks for their convenience; and

may make such changes, from time to time, in the form of the

same as shall seem best adapted to elicit from them a true

exhibit of their financial condition.

(2)  Unless otherwise provided by law, regulation or order of

the Insurance Commissioner, each insurance company, association

and exchange shall adhere to the annual or quarterly statement

instructions and the accounting practices and procedures manuals

prescribed by the National Association of Insurance

Commissioners. The Insurance Commissioner may require each

insurance company, association and exchange to file in the

office of the Insurance Commissioner and with the National

Association of Insurance Commissioners financial statements on

diskettes or other electronic information storage devices

acceptable to the Insurance Commissioner.

(b)  Insurance companies of foreign governments, doing

business in this Commonwealth, shall be required to return only

the business done in the United States, and the assets held by

and for them within the United States for the protection of

policyholders therein.

(c)  In the absence of actual malice, members of the National

Association of Insurance Commissioners, their duly authorized

committees, subcommittees and task forces, their delegates and

employes and all others charged with the responsibility of

collecting, reviewing, analyzing and disseminating the

information developed from the filing of the annual statement

convention blanks shall be acting as agents of the Insurance

Commissioner under the authority of this act and shall not be

subject to civil liability for libel, slander or any other cause

of action by virtue of their collection, review and analysis or

dissemination of the data and information collected from the

filings required hereunder.

(d)  [All financial analysis ratios and examination synopses

concerning insurance companies that are submitted to the

Insurance Department by the National Association of Insurance

Commissioners' Insurance Regulatory Information System are

confidential and may not be disclosed by the Insurance

Department. Work products developed by Insurance Department

staff in conducting financial analyses of financial statements

filed pursuant to this section are confidential and shall not be

disclosed by the Insurance Department.](1)  The following

documents, materials or information shall be confidential by law

and privileged and shall not be subject to subpoena, discovery,

the act of February 14, 2008 (P.L.6, No. 3), known as the

"Right-to-Know Law," or admissible in evidence in any private

civil action:

(i)  All documents, materials or other information prepared

or provided by an insurance company, association or exchange

solely in support of the statement of actuarial opinion filed

under this section, including actuarial reports, work papers or

actuarial opinion summaries and any other material solely

prepared by the insurance company, association or exchange for

the purpose of providing it to the Insurance Department in

connection with actuarial reports, work papers or actuarial

opinion summaries.

(ii)  All financial analysis ratios, analyst team reports and

other financial analytical results concerning insurance

companies, associations and exchanges that are provided to the

Insurance Department by the National Association of Insurance

Commissioners.

(iii)  All additional work products, documents, materials or

information produced by, obtained by or provided to the

Insurance Department in the course of conducting financial

analyses of financial statements filed under this section.

(2)  The protections established under paragraph (1)(i) and

(iii) shall also apply to the materials, drafts or copies

thereof when in possession of the insurance company, association

or exchange if the materials or drafts were prepared solely for

the purpose of submitting the materials to the Insurance

Department. Any documents, materials or information that are

provided to the Insurance Department under paragraph (1)(i) or

(iii) and that would otherwise be available from original

sources shall not be construed as immune from discovery from the

original source and use in any private civil action merely

because they were provided to the Insurance Department. 

(3)  Neither the Insurance Commissioner nor any individual or

person who receives documents, materials or information while

acting under the authority of the Insurance Commissioner shall

be permitted or required to testify in any private civil action

concerning any confidential documents, materials or information

covered under this section.

(4)  No waiver of any applicable privilege or claim of

confidentiality in the documents, materials or information shall

occur as a result of disclosure to the Insurance Commissioner or

as a result of the Insurance Commissioner sharing information in

conformance with sections 201-A and 202-A of the act of May 17,

1921 (P.L. 789, No. 285), known as "The Insurance Department Act

of 1921."

(5)  The Insurance Commissioner may use the documents,

materials or other information obtained or created under this

section in furtherance of any regulatory or legal action brought

as part of the Insurance Commissioner’s official duties.

(e)  (1)  Any company, association, or exchange, which

neglects to make and file its annual statement, or other

statements that may be required, in the form or within the time

herein provided shall forfeit a sum not to exceed two hundred

dollars ($200) for each day during which such neglect continues,

and, upon notice by the commissioner, its authority to do new

business shall cease while such default continues.

(2)  For wilfully making a false annual or other statement

required by law, an insurance company, association or exchange,

and the persons making oath to or subscribing the same, shall

severally be punished by a fine of not less than one thousand

dollars ($1,000) nor more than ten thousand dollars ($10,000). A

person who wilfully makes oath to such false statement shall be

guilty of perjury.

(3)  The Insurance Commissioner may suspend, revoke or refuse

to renew the certificate of authority of any insurer failing to

file its annual statement when due.

Section 2.  The act is amended by adding an article articles 

<--

to read:

ARTICLE IV-B

SUITABILITY OF ANNUITY TRANSACTIONS

Section 401-B.  Definitions.

The following words and phrases when used in this article

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Annuity."  A fixed annuity or variable annuity that is

individually solicited, whether the product is classified as an

individual or group annuity.

"Commissioner."  The Insurance Commissioner of the

Commonwealth.

"General agent."  An insurance producer that provides

supervision on behalf of an insurer to an insurer's sales force

in a particular geographic region or territory.

"Independent agency."  A producer entity that does not

exclusively represent one insurance company.

"Insurance producer."  A person who sells, solicits or

negotiates contracts of insurance as defined in section 601-A of

the act of May 17, 1921 (P.L.789, No.285), known as The

Insurance Department Act of 1921.

"Insurer."  A life insurance company licensed or required to

be licensed under section 202 or a fraternal benefit society as

defined in section 2403.

"Recommendation."  Advice provided by an insurance producer,

or an insurer where no producer is involved, to an individual

consumer that results in a purchase or exchange of an annuity in

accordance with that advice.

Section 402-B.  Applicability and scope.

(a)  General rule.--This article shall apply to any

recommendation to purchase or exchange an annuity made to a

consumer by an insurance producer, or an insurer where no

producer is involved, that results in the purchase or exchange

recommended.

(b)  Exclusions.--Unless otherwise specifically included,

this article shall not apply to recommendations involving the

following:

(1)  Direct response solicitations where there is no

recommendation based on information collected from the

consumer pursuant to this article.

(2)  Annuity contracts used to fund:

(i)  An employee pension or welfare benefit plan that

is covered by the Employee Retirement Income Security Act

of 1974 (Public Law 93-406, 88 Stat. 829).

(ii)  A plan described by sections 401(a) or (k),

403(b), 408(k) or (p) of the Internal Revenue Code of

1986 (Public Law 99-514, 26 U.S.C. §§ 401(a) or (k),

403(b), 408(k) or (p)), when the plan, for purposes of

the Employee Retirement Income Security Act of 1974, is

established or maintained by an employer.

(iii)  A governmental or church plan defined in

section 414 of the Internal Revenue Code of 1986 or a

deferred compensation plan of a State or local government

or tax exempt organization under section 457 of the

Internal Revenue Code of 1986.

(iv)  A nonqualified deferred compensation

arrangement established or maintained by an employer or

plan sponsor.

(v)  Settlements of or assumptions of liabilities

associated with personal injury litigation or any dispute

or claim resolution process.

(vi)  Formal prepaid funeral contracts.

Section 403-B.  Duties of insurers and insurance producers.

(a)  General duties.--In making a recommendation to a

consumer for the purchase of an annuity or the exchange of an

annuity that results in another insurance transaction or series

of insurance transactions, the insurance producer, or the

insurer where no insurance producer is involved, shall have

reasonable grounds for believing that the recommendation is

suitable for the consumer on the basis of the facts disclosed by

the consumer as to the consumer's investments and other

insurance products and as to the consumer's financial situation

and needs.

(b)  Consumer information.--Prior to the execution of a

purchase or exchange of an annuity resulting from a

recommendation, an insurance producer, or an insurer where no

insurance producer is involved, shall make reasonable efforts to

obtain information concerning all of the following:

(1)  The consumer's financial status.

(2)  The consumer's tax status.

(3)  The consumer's investment objectives.

(4)  Other information used or considered to be

reasonable by the insurance producer, or the insurer where no

insurance producer is involved, in making recommendations to

the consumer.

(c)  Obligation limits.--

(1)  Neither an insurance producer nor an insurer where

no insurance producer is involved shall have any obligation

to a consumer under subsection (a) related to any

recommendation that is reasonable under all the circumstances

actually known to the insurer or insurance producer at the

time of the recommendation when a consumer:

(i)  Refuses to provide relevant information

requested by the insurer or insurance producer.

(ii)  Decides to enter into an insurance transaction

that is not based on a recommendation of the insurer or

insurance producer.

(iii)  Fails to provide complete or accurate

information.

(d)  Supervision of recommendations.--

(1)  An insurer shall assure that a system to supervise

recommendations that is reasonably designed to achieve

compliance with this article is established and maintained by

complying with paragraphs (3) and (4), or shall establish and

maintain such a system that includes at least the following:

(i)  Maintaining written procedures.

(ii)  Conducting periodic reviews of its records that

are reasonably designed to assist in detecting and

preventing violations of this article.

(2)  A general agent or independent agency shall adopt a

system established by an insurer to supervise recommendations

of its insurance producers that is reasonably designed to

achieve compliance with this article, or shall establish and

maintain a system that is reasonably designed to achieve

compliance with this article. The system must include at

least the following:

(i)  Maintaining written procedures.

(ii)  Conducting periodic reviews of records that are

reasonably designed to assist in detecting and preventing

violations of this article.

(3)  An insurer may contract with a third party,

including a general agent or independent agency, to establish

and maintain a system of supervision as required by paragraph

(1) with respect to insurance producers under contract with

or employed by the third party.

(4)  An insurer shall make reasonable inquiry to assure

that the third party contracting under paragraph (3) is

performing the functions required under paragraph (1) and

shall take such action as is reasonable under the

circumstances to enforce the contractual obligation to

perform the functions. An insurer may comply with its

obligation to make reasonable inquiry by doing both of the

following:

(i)  The insurer annually obtains, electronically or

otherwise,a certification from a third party senior

manager who has responsibility for the delegated

functions that the manager has a reasonable basis to

represent, and does represent, that the third party is

performing the required functions.

(ii)  The insurer, based on reasonable selection

criteria, periodically selects third parties contracting

under paragraph (3) for a review to determine whether the

third parties are performing the required functions. The

insurer shall perform procedures to conduct the review

that are reasonable under the circumstances.

(5)  An insurer that contracts with a third party under

paragraph (3) and that complies with the requirements to

supervise under paragraph (4) shall have fulfilled its

responsibilities under paragraph (1).

(6)  An insurer, general agent or independent agency is

not required to do either of the following:

(i)  Review or provide for review of all insurance

producer-solicited transactions.

(ii)  Include in its system of supervision an

insurance producer's recommendations to consumers of

products other than the annuities offered by the insurer,

general agent or independent agency.

(7)  A general agent or independent agency contracting

with an insurer pursuant to paragraph (3) shall promptly,

when requested by the insurer pursuant to paragraph (4), give

a certification as described in paragraph (4) or give a clear

statement that it is unable to meet the certification

criteria.

(8)  No person may provide a certification under

paragraph (4)(i) unless both the following conditions are

met:

(i)  The person is a senior manager with

responsibility for the delegated functions.

(ii)  The person has a reasonable basis for making

the certification.

(e)  Compliance with other rules.--Compliance with the

Financial Industry Regulatory Authority Conduct Rules pertaining

to suitability shall satisfy the requirements under this section

for the recommendation of annuities registered under the

Securities Act of 1933 (48 Stat. 74, 15 U.S.C. § 77a et seq.) or

rules and regulations adopted under the Securities Act of 1933.

Nothing in this subsection shall limit the commissioner's

ability to enforce the provisions of this article.

(f)  Internal audit and compliance procedures.--Nothing in

this article shall exempt an insurer from the internal audit and

compliance procedure requirements under section 405-A.

Section 404-B.  Mitigation of responsibility.

(a)  Corrective actions.--The commissioner may order:

(1)  An insurer to take reasonably appropriate corrective

action for any consumer harmed by the insurer's or by its

insurance producer's violation of this article.

(2)  An insurance producer to take reasonably appropriate

corrective action for any consumer harmed by the insurance

producer's violation of this article.

(3)  A general agent or independent agency that employs

or contracts with an insurance producer to sell or solicit

the sale of annuities to consumers, to take reasonably

appropriate corrective action for any consumer harmed by the

insurance producer's violation of this article.

(b)  Reduction of penalty.--Any applicable penalty permitted

under section 406-B may be reduced or eliminated if corrective

action for the consumer was taken promptly after a violation was

discovered.

Section 405-B.  Recordkeeping.

An insurer, general agent, independent agency and insurance

producer shall maintain or be able to make available to the

commissioner records of the information collected from the

consumer and other information used in making the

recommendations that were the basis for insurance transactions

for five years after the insurance transaction is completed by

the insurer. An insurer is permitted but shall not be required

to maintain documentation on behalf of an insurance producer.

Section 406-B.  Enforcement.

(a)  Penalties and remedies.--Upon a determination by hearing

that this article has been violated, the commissioner may pursue

one or more of the following courses of action:

(1)  Issue an order requiring the person in violation to

cease and desist from engaging in the violation.

(2)  Suspend or revoke or refuse to issue or renew the

certificate or license of the person in violation.

(3)  Impose a civil penalty of not more than $5,000 for

each violation.

(4)  Impose any other penalty or remedy deemed

appropriate by the commissioner, including restitution.

(b)  Other remedies.--The enforcement remedies imposed under

this section are in addition to any other remedies or penalties

that may be imposed by any other applicable statute, including

the act of July 22, 1974 (P.L.589, No.205), known as the Unfair

Insurance Practices Act. Violations of this article are deemed

and defined by the commissioner to be an unfair method of

competition and an unfair or deceptive act or practice pursuant

to the Unfair Insurance Practices Act.

Section 407-B.  Private cause of action.

Nothing in this article shall be construed to create or imply

a private cause of action for a violation of this article.

ARTICLE VI-B

<--

HEALTH INSURANCE COVERAGE PARITY

AND NONDISCRIMINATION

Section 601-B.  Short title of article.

This article shall be known and may be cited as the Health

Insurance Coverage Parity and Nondiscrimination Act.

Section 602-B.  Purpose.

It is necessary to maintain the Commonwealth's sovereignty

over the regulation of health insurance in this Commonwealth by

implementing the requirements of the Paul Wellstone and Pete

Domenici Mental Health Parity and Addiction Equity Act of 2008

(Public Law 110-343, 122 Stat. 3881), the Genetic Information

Nondiscrimination Act of 2008 (Public Law 110-233, 122 Stat.

881) and Michelle’s Law (Public Law 110-381, 122 Stat. 4081),

collectively contained in the Public Health Service Act (58

Stat. 682, 42 U.S.C. § 201 et seq.). The provisions of this

article are intended to meet these requirements while retaining

the Commonwealth's authority to regulate health insurance in

this Commonwealth, consistent with sections 2722 and 2761 of the

Public Health Service Act.

Section 603-B.  Definitions.

(a)  General rule.--The following words and phrases when used

in this article shall have the meanings given to them in this

section unless the context clearly indicates otherwise:

"Commissioner."  The Insurance Commissioner of the

Commonwealth.

"Department."  The Insurance Department of the Commonwealth.

"Federal acts."  The Federal laws known as the Paul Wellstone

and Pete Domenici Mental Health Parity and Addiction Equity Act

of 2008 (Public Law 110-343, 122 Stat. 3881), the Genetic

Information Nondiscrimination Act of 2008 (Public Law 110-233,

122 Stat. 881) and Michelle’s Law (Public Law 110-381, 122 Stat.

4081), collectively contained in the Public Health Service Act

(58 Stat. 682, 42 U.S.C. § 201 et seq.).

"Fraternal benefit society."  An entity holding a current

certificate of authority under Article XXIV.

"Health maintenance organization."  An entity holding a

current certificate of authority under the act of December 29,

1972 (P.L.1701, No.364), known as the Health Maintenance

Organization Act.

"Hospital plan corporation."  An entity holding a current

certificate of authority organized and operated under 40 Pa.C.S.

Ch. 61 (relating to hospital plan corporations).

"Insurer."  A foreign or domestic insurance company,

association or exchange, health maintenance organization,

hospital plan corporation, professional health services plan

corporation, fraternal benefit society or risk-assuming

preferred provider organization. The term shall not include a

group health plan as defined in section 2791 of the Public

Health Service Act (58 Stat. 682, 42 U.S.C. § 300gg-91).

"Preferred provider organization."  An entity holding a

current certificate of authority under section 630.

"Professional health services plan corporation."  An entity

holding a current certificate of authority under 40 Pa.C.S. Ch.

63 (relating to professional health services plan corporations).

This term shall not include dental service corporations or

optometric service corporations, as those terms are defined

under 40 Pa.C.S. § 6302(a) (relating to definitions).

(b)  Federal law.--The words, terms and definitions found in

the Federal acts, including those in section 2791 of the Public

Health Service Act (58 Stat. 682, 42 U.S.C. 300gg-91), are

adopted for purposes of implementing this article, except as

noted in this subsection. The term "health insurance issuer"

under section 2791(b)(2) of the Public Health Service Act shall

have the meaning provided under "insurer" in subsection (a).

Section 604-B.  Adoption of Federal acts.

Insurers shall comply with the Federal acts, as contained in

sections 2701, 2702, 2705, 2707, 2721, 2753 and 2754 of the

Public Health Service Act (58 Stat. 682, 42 U.S.C. §§ 300gg,

300gg-1, 300gg-5, 300gg-7, 300gg-21, 300gg-53 and 300gg-54).

Section 605-B.  Penalties.

(a)  General rule.--Upon satisfactory evidence of a violation

of this article by any insurer or other person, the commissioner

may, in the commissioner's discretion, pursue any one of the

following courses of action:

(1)  Suspend, revoke or refuse to renew the license of

the offending person.

(2)  Enter a cease and desist order.

(3)  Impose a civil penalty of not more than $5,000 for

each action in violation of this article.

(4)  Impose a civil penalty of not more than $10,000 for

each action in willful violation of this article.

(b)  Limitation.--Penalties imposed against a person under

this article and under section 5 of the act of June 25, 1997

(P.L.295, No.29), known as the Pennsylvania Health Care

Insurance Portability Act, shall not exceed $500,000 in the

aggregate during a single calendar year.

Section 606-B.  Regulations.

The department may promulgate such regulations as may be

necessary or appropriate to carry out this article.

Section 3.  Section 1602 of the act, amended or added

<--

December 18, 1992 (P.L.1519, No.178) and July 10, 2002 (P.L.749,

No.110), is amended to read:

Section 1602.  Definitions.--As used in this article the

following words and phrases shall have the meanings given to

them in this section:

"Admitted insurer."  An insurer licensed to do an insurance

business in this Commonwealth.

"Business entity."  A corporation, a partnership, a limited

liability company, a limited liability partnership, a business

trust or any other entity doing business other than as a natural

person.

"Capital."  The term, as used in the financial requirements

of section 1605, means funds paid for stock or other evidence of

ownership.

"Commissioner."  The Insurance Commissioner of the

Commonwealth.

"Department."  The Insurance Department of the Commonwealth.

"Eligible surplus lines insurer."  A nonadmitted insurer with

which a surplus lines licensee may place surplus lines insurance

under section 1604.

"Export."  To place surplus lines insurance with either a

nonadmitted insurer or an eligible surplus lines insurer in

accordance with this article.

"Independently procured insurance."  Any insurance which a

resident of this Commonwealth directly negotiates with and

purchases, continues or renews from a nonadmitted insurer

without securing the services of an insurance [agent, broker]

producer or surplus lines licensee[, whether the agent or broker

holds a resident or nonresident license issued by the

department].

"Insurance producer."  A person that is licensed to sell,

solicit or negotiate contracts of insurance with admitted

insurers.

"Kind of insurance."  One of the types of insurance required

to be reported in the annual statement which must be filed with

the department by admitted insurers.

"Nonadmitted insurer."  An insurer not authorized and not

licensed to do an insurance business in this Commonwealth. The

term includes insurance exchanges as authorized under the laws

of various states.

"Person."  A natural person or business entity.

["Producing broker."  The broker dealing directly with the

party seeking insurance.]

"Purchasing group."  An entity formed to purchase liability

insurance under the Risk Retention Amendments of 1986 (Public

Law 99-563, 100 Stat. 3170).

"Risk retention group."  An insurer organized to do business

under the Risk Retention Amendments of 1986 (Public Law 99-563,

100 Stat. 3170).

"Surplus."  The term, as used in the financial requirements

of section 1605, means funds over and above liabilities and

capital of the company for the protection of its policyholders.

"Surplus lines insurance."  Any insurance of risks resident,

located or to be performed in this Commonwealth, permitted to be

placed through a surplus lines licensee with a nonadmitted

insurer eligible to accept such insurance, other than

reinsurance, wet marine and transportation insurance,

independently procured insurance, life [and health] insurance

and annuities and coverage obtained from risk retention groups

under the Risk Retention Amendments of 1986 (Public Law 99-563,

100 Stat. 3170).

"Surplus lines licensee."  [An individual, partnership or

corporation] A person licensed as a surplus lines producer under

section 1615 to place surplus lines insurance with nonadmitted

insurers eligible to accept such insurance.

"Wet marine and transportation insurance."  Any of the

following:

(1)  Insurance upon vessels, crafts or hulls and of interests

therein or with relation thereto.

(2)  Insurance of marine builder's risks, marine war risks

and contracts of marine protection and indemnity insurance.

(3)  Insurance of freights and disbursements pertaining to a

subject of insurance coming within this definition.

(4)  Insurance of personal property and interest therein, in

the course of exportation from or importation into any country,

or in the course of transportation coastwise or on inland

waters, including transportation by land, water or air from

point of origin to final destination, in connection with any and

all risks or perils of navigation, transit or transportation,

and while being prepared for and while awaiting shipment, and

during any delays, transshipment or reshipment. Insurance of

personal property and interests therein shall not be considered

wet marine and transportation insurance if:

(i)  the property has been transported solely by land;

(ii)  the property has reached its final destination as

specified in the bill of lading or other shipping document; or

(iii)  the insured no longer has an insurable interest in the

property.

(5)  Any insurance associated with transportation of property

listed under this definition.

"Writing producer."  The insurance producer which brings

about or negotiates contracts of insurance directly on behalf of

the consumer seeking insurance.

Section 4.  Section 1603 of the act, added December 18, 1992

(P.L.1519, No.178), is amended to read:

Section 1603.  Acting for or Aiding Nonadmitted Insurers.--

(a)  No person in this Commonwealth shall directly or indirectly

act as [agent] a producer for, or otherwise represent or aid on

behalf of another, any nonadmitted insurer in the solicitation,

negotiation, procurement or effectuation of insurance, or

renewals thereof, or forwarding of applications, or delivery of

policies or contracts or inspection of risks, or fixing of

rates, or investigation or adjustment of claims or losses, or

collection or forwarding of premiums, or in any other manner

represent or assist such insurer in the transaction of

insurance.

(b)  If the nonadmitted insurer is not an eligible surplus

lines insurer and fails to pay a claim or loss within the

provisions of the insurance contract, a person who assisted or

in any manner aided, directly or indirectly, in the procurement

of the insurance contract shall be liable to the insured for the

full amount payable under the provisions of the insurance

contract.

(c)  This section does not apply to any of the following:

(1)  Surplus lines insurance if it is effected and written

pursuant to this article.

(2)  Insurance effected with a nonadmitted insurer pursuant

to sections 1606 and 1610.

(3)  Transactions for which a certificate of authority to do

business is not required of an insurer under the insurance laws

of this Commonwealth.

(4)  Reinsurance.

(5)  Wet marine and transportation insurance.

(6)  Transactions subsequent to issuance of a policy not

covering domestic risks at time of issuance and lawfully

solicited, written or delivered outside of this Commonwealth.

(7)  Transactions involving risk retention groups chartered

and licensed outside of this Commonwealth.

Section 5.  Section 1605 of the act, amended July 10, 2002

(P.L.749, No.110), is amended to read:

Section 1605.  Requirements for Eligible Surplus Lines

Insurers.--(a)  No surplus lines licensee shall place any

coverage with a nonadmitted insurer unless, at the time of

placement, such nonadmitted insurer:

(1)  Is of good repute and financial integrity.

(2)  Qualifies under any of the following subparagraphs:

(i)  Has policyholder surplus equal to or greater than two

times the minimum capital and surplus required to be fully

licensed in this Commonwealth. Two (2) years from the effective

date of this article is granted to allow those nonadmitted

insurers which are eligible surplus lines insurers on the

effective date of this article to achieve this capital and

surplus requirement. If an alien insurer, as defined by the act

of December 10, 1974 (P.L.804, No.266), referred to as the Alien

Insurer Domestication Law, it shall maintain in the United

States an irrevocable trust fund in either a national bank or a

member of the Federal Reserve System, in an amount not less than

that currently required by the National Association of Insurance

Commissioners' International Insurers Department or its

successor for the protection of all of its policyholders in the

United States, and such trust fund consists of cash, securities,

letters of credit or investments of substantially the same

character and quality as those which are eligible investments

for admitted insurers authorized to write like kinds of

insurance in this Commonwealth. Such trust fund will be in

addition to the capital and surplus required in this

subparagraph and shall have an expiration date which at no time

shall be less than five (5) years.

(ii)  Is any Lloyd's or other similar group of insurers which

includes unincorporated individual insurers that maintains a

trust fund of not less than fifty million ($50,000,000) dollars

as security to the full amount thereof for all policyholders and

creditors in the United States of each member of the group. Such

trust funds shall likewise comply with the terms and conditions

established in subparagraph (i) for alien insurers.

(iii)  Is an insurance exchange created by the laws of

individual states that maintains capital and surplus or the

substantial equivalent thereof of not less than fifteen million

($15,000,000) dollars in the aggregate. For insurance exchanges

which maintain funds for the protection of all insurance

exchange policyholders, each individual syndicate shall maintain

minimum capital and surplus or the substantial equivalent

thereof of not less than one million five hundred thousand

($1,500,000) dollars. In the event the insurance exchange does

not maintain funds for the protection of all insurance exchange

policyholders, each individual syndicate shall meet the minimum

capital and surplus requirements of subparagraph (i).

(3)  Has provided to the department a copy of its current

annual financial statement certified by such insurer, such

statement to be provided no more than thirty (30) days after the

date required for filing an annual financial statement in its

domiciliary jurisdiction and which is either:

(i)  certified by the regulatory authority in the domicile of

the insurer; or

(ii)  certified by an accounting or auditing firm licensed in

the jurisdiction of the insurer's domicile.

In the case of an insurance exchange, the statement may be an

aggregate statement of all underwriting syndicates operating

during the period reported.

(b)  In addition to meeting the requirements in subsection

(a), a nonadmitted insurer shall be an eligible surplus lines

insurer if it appears on the most recent list of eligible

surplus lines insurers published by the department from time to

time but at least [semiannually] annually. Nothing in this

section shall require the department to place or maintain the

name of any nonadmitted insurer on the list of eligible surplus

lines insurers.

Section 6.  Section 1606 of the act, added December 18, 1992

(P.L.1519, No.178), is amended to read:

Section 1606.  Other Nonadmitted Insurers.--Only that

portion, not to exceed twenty-five per centum (25%), of any risk

eligible for export for which the full amount of coverage is not

procurable from either admitted insurers or eligible surplus

lines insurers may be placed with any other nonadmitted insurer

which does not appear on the list of eligible surplus lines

insurers published by the department pursuant to section 1605(b)

but nonetheless meets the requirements set forth in section

1605(a) and any regulations of the department. The surplus lines

licensee [seeking to provide] providing coverage through a

nonadmitted insurer which is not an eligible surplus lines

insurer shall make a filing specifying the amount and percentage

of each risk along with a full explanation of why the risk could

not be placed with admitted or eligible surplus lines insurers

and naming the nonadmitted insurer with which placement [is

intended] was made. At the time of presenting a quotation to the

insured, the surplus lines licensee shall present to the insured

or to the [producing broker] writing producer written notice

that a portion of the insurance will be placed with such

nonadmitted insurer.

Section 7.  Sections 1608 and 1609 of the act, amended July

10, 2002 (P.L.749, No.110), are amended to read:

Section 1608.  Surplus Lines Licensee's Duty to Notify

Insured.--At the time of presenting a quotation to the insured,

the surplus lines licensee shall present to the insured or to

the [producing broker] writing producer written notice that the

insurance or a portion thereof involves placement with

nonadmitted insurers. The surplus lines licensee shall, either

directly or through the [producing broker] writing producer,

give notice to the insured that:

(1)  the insurer with which the licensee places the insurance

is not licensed by the Pennsylvania Insurance Department and is

subject to its limited regulation; and

(2)  in the event of the insolvency of an eligible surplus

lines insurer, losses will not be paid by the Pennsylvania

Property and Casualty Insurance Guaranty Association.

Section 1609.  Declarations.--(a)  In the case of each

placement of insurance in accordance with this article:

(1)  Within thirty (30) days after the surplus lines licensee

has placed insurance with an eligible surplus lines insurer, the

[producing broker] writing producer must execute and forward to

the surplus lines licensee a written statement, in a form

prescribed by the department, declaring that:

(i)  A diligent effort to procure the desired coverage from

admitted insurers was made.

(ii)  The insured was expressly advised in writing prior to

placement of the insurance that:

(A)  the insurer with whom the insurance is to be placed is

not admitted to transact business in this Commonwealth and is

subject to limited regulation by the department; and

(B)  in the event of the insolvency of the insurer, losses

will not be paid by the Pennsylvania Property and Casualty

Insurance Guaranty Association.

This written declaration shall be open to public inspection.

(2)  Within forty-five (45) days after insurance has been

placed in an eligible surplus lines insurer, the surplus lines

licensee shall file with the department a written declaration of

his lack of knowledge of how the coverage could have been

procured from admitted insurers. The surplus lines licensee

shall simultaneously file the written declaration of the

[producing broker] writing producer, as set forth in paragraph

(1).

(3)  In a particular transaction where the [producing broker]

writing producer and surplus lines licensee are one in the same

entity, [he] the writing producer or surplus lines licensee 

shall execute both declarations.

(b)  Subsection (a) shall not apply to any insurance which

has been placed continuously with an eligible surplus lines

insurer for a period of at least three (3) consecutive years

immediately preceding the current placement. However, within

forty-five (45) days after insurance has been placed with an

eligible surplus lines insurer, the surplus lines licensee shall

file with the department his written declaration on a form

prescribed by the department.

Section 8.  Sections 1611, 1612 and 1614 of the act, added

December 18, 1992 (P.L.1519, No.178), are amended to read:

Section 1611.  Surplus Lines Advisory Organizations.--(a)  A

surplus lines advisory organization of surplus lines licensees

may be formed to:

(1)  Facilitate and encourage compliance by [its members]

surplus lines licensees with the laws of this Commonwealth and

the rules and regulations of the department relative to surplus

lines insurance.

(2)  Provide means for the examination, which shall remain

confidential, of all surplus lines coverages written by [its

members] surplus lines licensees to determine whether such

coverages comply with such laws and regulations.

(3)  Communicate with organizations of admitted insurers with

respect to the proper use of the surplus lines market.

(4)  Receive and disseminate to [its members] surplus lines

licensees information relative to surplus lines insurance.

(b)  The functions of the organization shall in no way

supplant or delegate current regulatory authority of the

department to administer the provisions of this article.

(c)  [Each such] An advisory organization shall file with the

department for approval:

(1)  A copy of its constitution, its articles of agreement or

association or its certificate of incorporation.

(2)  A copy of its bylaws, rules and regulations governing

its activities.

[(3)  A current list of its members.]

(4)  The name and address of a resident of this Commonwealth

upon whom notices or orders of the department or processes

issued at its direction may be served.

(5)  An agreement that the department may examine such

advisory organization in accordance with the provisions of this

section.

(d)  The department [shall, at least once every four (4)

years] may, as necessary, make or cause to be made an

examination of each such advisory organization. The reasonable

cost of any such examination shall be paid by the advisory

organization upon presentation to it by the department of a

detailed account of each cost. The officers, directors, 

managers, agents and employes of such advisory organization may

be examined at any time, under oath, and shall exhibit all

books, records, accounts, documents or agreements governing its

method of operation. The department shall furnish two copies of

the examination report to the advisory organization examined and

shall notify such organization that it may, within twenty (20)

days thereof, request a hearing on the report or on any facts or

recommendations therein. If the department finds such advisory

organization or any member thereof to be in violation of this

article, it may issue a cease and desist order requiring the

discontinuance of such violation and may impose any other

penalties as set forth in this article.

(e)  The department may contract with a surplus lines

advisory organization to render advice and assistance in

carrying out the purposes of this article. The services

performed by the advisory organization pursuant to such contract

may be funded by a stamping fee assessed on each surplus lines

policyholder whose policy is submitted to the advisory

organization. The stamping fee shall be established by the board

of governors of the advisory organization, from time to time,

and shall be subject to approval by the department.

(f)  The advisory organization may submit reports and make

recommendations to the department regarding the financial

condition of any eligible surplus lines insurer. These reports

and recommendations shall not be considered to be public

information or subject to any Federal or State freedom of

information law. There shall be no liability on the part of nor

shall any cause of action of any nature be sustained against

eligible surplus lines insurers, the advisory organization or

its members, agents, employes, officers or directors or the

department or authorized representatives of the department for

statements and any reports or recommendations made by them in

good faith under this section.

(g)  By order of the department, a surplus lines licensee may

be compelled to [join an advisory organization] attend

educational seminars as a condition of continued licensure under

this article.

Section 1612.  Evidence of Insurance.--(a)  Upon placing

surplus lines insurance, the surplus lines licensee shall

deliver to the insured or the [producing broker] writing

producer the contract of insurance. If the contract of insurance

is not immediately available, a cover note, binder or other

evidence of insurance shall be delivered by the surplus lines

licensee to the insured or the [producing broker] writing

producer and shall, at a minimum, show the description and

location of the subject of insurance, coverages, including any

material limitations other than those in standard forms, the

premium and rate charged and taxes to be collected from the

insured, the name and address of the insured and the eligible

surplus lines insurer and other nonadmitted insurer involved

under section 1606 and proportion of the risk assumed by each,

and the name of the surplus lines licensee.

(b)  No surplus lines licensee shall bind or provide evidence

of insurance unless he has authority from the eligible surplus

lines insurer or other nonadmitted insurer to bind the risk or

has received information from the insurer in the regular course

of business that it has assumed the risk.

(c)  If, after delivery of any such evidence of insurance,

there is any change in the identity of the eligible surplus

lines insurer, or the proportion of the risk assumed by any

nonadmitted insurer, or any other material change in coverage as

stated in the surplus lines licensee's original evidence of

insurance, or any other material change as to the insurance

coverage so evidenced, the surplus lines licensee shall promptly

issue and deliver to the insured or to the original [producing

broker] writing producer an appropriate substitute for or

endorsement of the original document accurately showing the

current status of the coverage and the insurer responsible

thereunder.

(d)  Every evidence of insurance negotiated, placed or

procured under the provisions of this article issued by the

surplus lines licensee shall bear the name of the licensee and

the following legend in 10-point type: "The insurer which has

issued this insurance is not licensed by the Pennsylvania

Insurance Department and is subject to limited regulation. This

insurance is NOT covered by the Pennsylvania Property and

Casualty Insurance Guaranty Association."

Section 1614.  Effect of Payment to Surplus Lines Licensee.--

A payment of premium to the [producing broker] writing producer 

or to a surplus lines licensee acting for a person other than

himself in negotiating, continuing or reviewing any contract of

insurance under this article shall be deemed to be payment to

the insurer, whatever conditions or stipulations may be inserted

in the contract notwithstanding.

Section 9.  Section 1615 of the act, amended July 10, 2002

(P.L.749, No.110), is amended to read:

Section 1615.  Licensing of Surplus Lines Licensee.--(a)  No

[agent or broker] insurance producer licensed by the department

shall transact surplus lines insurance with any nonadmitted

insurer unless [such agent or broker] the insurance producer 

possesses a valid surplus lines [agent's] producer's license

issued by the department.

(b)  The department shall issue a surplus lines [agent's]

producer's license to any resident [or nonresident] of this

Commonwealth or to a nonresident who is a qualified holder of a

current Pennsylvania property and casualty [broker's] insurance

producer's license, but only when the [broker] insurance

producer has complied with the following:

(1)  Remitted the surplus lines producer license fee to the

department.

(2)  Submitted a properly completed surplus lines producer 

license application on a form supplied by the department.

(3)  Passed a qualifying examination approved by the

department, except that all holders of a license prior to the

effective date of this article shall be deemed to have passed

such an examination.

(c)  [Corporations and partnerships shall be eligible to be

resident or nonresident surplus lines licensees, upon the

following conditions:

(1)  The corporation or partnership licensee shall list all

employes, including at least one active officer or partner, who

have satisfied the requirements of this article to become

surplus lines licensees.

(2)  Only those employes holding a certificate of eligibility

may transact surplus lines insurance.] Business entities that

are licensed as Pennsylvania insurance producers shall be

eligible to be surplus lines licensees, if the business entities

do all of the following:

(1)  Designate one or more officers or partners licensed

under this article to be responsible for compliance with all

reporting and recordkeeping required by this article.

(2)  Provide to the department a list of all surplus lines

licensees associated with and placing surplus lines business

through the business entity. The business entity shall provide

to the department an updated list of licensees within five (5)

business days of a change in association of any licensee. The

list shall be available at all times for inspection by the

department.

(c.1)  A nonresident person whose home state issues surplus

lines licenses to residents of Pennsylvania on the same basis

and who is licensed in Pennsylvania as a property and casualty

producer may be licensed as a surplus lines producer if the

person does all of the following:

(1)  Is currently licensed as a surplus lines producer and is

in good standing in its home state.

(2)  Has submitted a complete application for a surplus lines

license and has paid the required fees.

(3)  Has submitted or transmitted to the department the

application for a surplus lines license submitted in its home

state or a completed uniform application that complies with

section 610-A of the act of May 17, 1921 (P.L.789, No.285),

known as "The Insurance Department Act of 1921."

(4)  Has complied with all of the provisions of Article VI-A

of "The Insurance Department Act of 1921."

(d)  Each surplus lines license shall [expire on the last day

of February of each year and shall be renewed before March 1 of

each year upon payment of the annual fee, in compliance with

other provisions of this section. Any surplus lines licensee who

fails to apply for renewal of a license before expiration of the

current license shall pay a penalty of two times the license fee

and be subject to other penalties as provided by law before his

license will be renewed.] be:

(1)  Issued as follows:

(i)  Only in the name of the individual applicant or business

entity. A licensee doing business under a fictitious name other

than the name appearing on the license shall be required to

notify the department in writing prior to use of the fictitious

name for the department's consent to use of the name.

(ii)  In paper or electronic form.

(iii)  For a period not to exceed two (2) years. The

following shall apply:

(A)  The surplus lines license of a natural person shall

expire on the last day of the birth month of the licensee. The

initial license cycle may vary to coincide with the expiration

cycle of the birth month.

(B)  The surplus lines license of a business entity shall

expire on the last day of the month in which the license was

originally issued.

(2)  Nontransferable.

(e)  A nonrefundable two hundred dollar ($200) fee shall

accompany an application or renewal for a surplus lines license,

unless modified by the department by regulation.

(f)  The following shall apply:

(1)  A surplus lines licensee that allows the licensee's

license to lapse by failing to timely renew the license or by

failing to pay the fee required by this act may, within one year

of the license renewal date, request the department to reinstate

the license. Persons requesting reinstatement shall pay a fee of

two times the fee required by this act and may be subject to

other penalties as provided by law before the license will be

renewed.

(2)  Persons requesting reinstatement of a lapsed license

shall submit a completed renewal form and the fee required by

this act.

(3)  The department shall reinstate a license under this

subsection retroactively, with the reinstatement effective on

the date the license lapsed, if the department receives a

request for reinstatement together with a completed renewal

application and payment of the lapsed license fee within sixty

(60) days after the license lapsed.

(4)  The department shall reinstate a license under this

subsection prospectively, with reinstatement effective on the

date that the license is reinstated, if the department receives

a request for reinstatement of a lapsed license more than sixty

(60) days after the license lapsed but within one year after the

license lapsed.

(5)  If a person applies for reinstatement more than one year

after the lapse date, the person must reapply for the license

under this act.

Section 10.  Section 1616 of the act, added December 18, 1992

(P.L.1519, No.178), is amended to read:

Section 1616.  Surplus Lines Licensees May Accept Business

from [Brokers] Insurance Producer.--A surplus lines licensee may

originate surplus lines insurance or accept such insurance from

[any broker] an insurance producer duly licensed as to the kind

or kinds of insurance involved, and the surplus lines licensee

may compensate [such broker therefor] the insurance producer.

Section 11.  Section 1619 of the act, amended July 10, 2002

(P.L.749, No.110), is amended to read:

Section 1619.  Records of Surplus Lines Licensee.--(a)  Each

surplus lines licensee shall keep in its office a full and true

record of each surplus lines insurance contract placed by or

through it, including a copy of the policy, certificate, cover

note or other evidence of insurance, showing such of the

following items as may be applicable:

(1)  Amount of the insurance and perils insured.

(2)  Brief description of the risk insured and its location.

(3)  Gross premium charged.

(4)  Any return premium paid.

(5)  Rate of premium charged for each risk insured.

(6)  Effective date and terms of the contract.

(7)  Name and address of the insured.

(8)  Name and address of the eligible surplus lines insurer

and any nonadmitted insured involved pursuant to section 1606.

(9)  Amount of tax and other sums to be collected from the