PRIOR PRINTER'S NO. 1278

PRINTER'S NO.  1291

  

THE GENERAL ASSEMBLY OF PENNSYLVANIA

  

SENATE BILL

 

No.

1096

Session of

2011

  

  

INTRODUCED BY D. WHITE, STACK, ERICKSON AND RAFFERTY, JUNE 6, 2011

  

  

SENATOR D. WHITE, BANKING AND INSURANCE, AS AMENDED, JUNE 7, 2011   

  

  

  

AN ACT

  

1

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

2

act relating to insurance; amending, revising, and

3

consolidating the law providing for the incorporation of

4

insurance companies, and the regulation, supervision, and

5

protection of home and foreign insurance companies, Lloyds

6

associations, reciprocal and inter-insurance exchanges, and

7

fire insurance rating bureaus, and the regulation and

8

supervision of insurance carried by such companies,

9

associations, and exchanges, including insurance carried by

10

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

11

repealing existing laws," further providing for purpose, for

12

definitions, for acting for or aiding nonadmitted insurers,

13

for requirements for eligible surplus lines insurers, for

14

surplus lines licensee's duty to notify insured, for exempt

15

risks, for surplus lines advisory organizations, for

16

licensing of surplus lines licensee, for surplus lines

17

licensees may accept business from insurance producer, for

18

surplus lines tax, for tax on independently procured

19

insurance and for suspension, revocation or nonrenewal of

20

surplus lines licensee's license.

21

The General Assembly of the Commonwealth of Pennsylvania

22

hereby enacts as follows:

23

Section 1.  Section 1601 of the act of May 17, 1921 (P.L.682,

24

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

25

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

26

Section 1601.  Purpose and scope.--(a)  The purpose of this

 


1

article is to protect the public interest by:

2

(1)  Protecting persons seeking insurance in this

3

Commonwealth.

4

(2)  Permitting surplus lines insurance to be placed with

5

reputable and financially sound nonadmitted insurers and

6

exported from this Commonwealth pursuant to this article.

7

(3)  Establishing a system of regulation which will permit

8

orderly access to surplus lines insurance in this Commonwealth

9

and encouraging insurers to make new and innovative types of

10

insurance available to consumers in this Commonwealth.

11

(4)  Protecting revenues of this Commonwealth.

12

(b)  (1)  The provisions of this article, in so far as they

13

relate to the placement of surplus lines insurance and

14

independently procured insurance, shall apply when this

15

Commonwealth is the home state of the insured.

16

(2)  The provisions of this article, in so far as they relate

17

to the imposition of surplus lines and independently procured

18

premium tax and penalties for policies placed after June 30,

19

2011, shall apply when this Commonwealth is the home state of

20

the insured.

21

(3)  The provisions of this article, in so far as they relate

22

to the collection, reporting and remittance of surplus lines

23

insurance and independently procured insurance premium tax for

24

policies placed after June 30, 2011, shall apply when this

25

Commonwealth is the home state of the insured.

26

Section 2.  Sections 1602, 1603(c)(6), 1605(a) and 1608 of

27

the act, amended March 22, 2010 (P.L.147, No.14), are amended to

28

read:

29

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

30

following words and phrases shall have the meanings given to

- 2 -

 


1

them in this section:

2

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

3

business in this Commonwealth.

4

"Affiliate."  With respect to an insured, any entity that

5

controls, is controlled by or is under common control with the

6

insured.

7

"Affiliated group."  Any group of entities that are all

8

affiliated.

9

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

10

liability company, a limited liability partnership, a business

11

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

12

person.

13

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

14

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

15

ownership.

16

"Commissioner."  The Insurance Commissioner of the

17

Commonwealth.

18

"Control."  An entity has control over another entity if:

19

(1)  the entity directly or indirectly or acting through one

20

or more other persons owns, controls or has the power to vote

21

twenty-five per centum (25%) or more of any class of voting

22

securities of the other entity; or

23

(2)  the entity controls in any manner the election of a

24

majority of the directors or trustees of the other entity.

25

"Department."  The Insurance Department of the Commonwealth.

26

"Eligible surplus lines insurer."  A nonadmitted insurer with

27

which a surplus lines licensee may place surplus lines insurance

28

under section 1604.

29

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

30

nonadmitted insurer or an eligible surplus lines insurer in

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1

accordance with this article.

2

"Home state."

3

(1)  (i)  Except as provided under paragraph (2), with

<--

4

respect to an insured:

5

(A) (i)  the state in which an insured maintains its

<--

6

principal place of business or, in the case of an individual,

7

the individual's principal residence; or

8

(B) (ii)  if one hundred per centum (100%) of the insured

<--

9

risk is located out of the state referred to under clause (A) 

<--

10

subparagraph (i), the state to which the greatest percentage of

<--

11

the insured's taxable premium for that insurance contract is

12

allocated.

13

(ii) (2)  If more than one insured from an affiliated group

<--

14

are named insureds on a single nonadmitted insurance contract,

15

the term means the home state, as determined under subparagraph

<--

16

(i) paragraph (1), of the member of the affiliated group that

<--

17

has the largest percentage of premium attributed to it under the

18

insurance contract.

19

(2) (3)  This definition shall not apply to section 1615(g).

<--

20

"Independently procured insurance."  Any insurance [which a

21

resident of this Commonwealth directly negotiates with and

22

purchases, continues or renews from a nonadmitted insurer

23

without securing the services of an insurance producer or

24

surplus lines licensee] directly procured by an insured from a

25

nonadmitted insurer.

26

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

27

solicit or negotiate contracts of insurance with admitted

28

insurers.

29

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

30

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

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1

the department by admitted insurers.

2

"Nonadmitted insurer."  An insurer not authorized and not

3

licensed to do an insurance business in this Commonwealth. The

4

term includes insurance exchanges as authorized under the laws

5

of various states. The term does not include a risk retention

6

group.

7

"Person."  A natural person or business entity.

8

"Purchasing group."  An entity formed to purchase liability

9

insurance under the Risk Retention Amendments of 1986 (Public

10

Law 99-563, 100 Stat. 3170).

11

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

12

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

13

100 Stat. 3170).

14

"State."  Any state of the United States, the District of

15

Columbia, the Commonwealth of Puerto Rico, Guam, the Northern

16

Mariana Islands, the Virgin Islands and American Samoa.

17

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

18

of section 1605, means funds over and above liabilities and

19

capital of the company for the protection of its policyholders.

20

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

21

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

22

be placed through a surplus lines licensee with a nonadmitted

23

insurer eligible to accept such insurance, other than

24

reinsurance, wet marine and transportation insurance,

25

independently procured insurance, life insurance and annuities

26

and coverage obtained from risk retention groups under the Risk

27

Retention Amendments of 1986 (Public Law 99-563, 100 Stat.

28

3170).

29

"Surplus lines licensee."  A person licensed as a surplus

30

lines producer under section 1615 to place surplus lines

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1

insurance with nonadmitted insurers eligible to accept such

2

insurance.

3

"Type of insurance."  Coverage afforded under the particular

4

policy that is being placed.

5

"Wet marine and transportation insurance."  Any of the

6

following:

7

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

8

therein or with relation thereto.

9

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

10

and contracts of marine protection and indemnity insurance.

11

(3)  Insurance of freights and disbursements pertaining to a

12

subject of insurance coming within this definition.

13

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

14

the course of exportation from or importation into any country,

15

or in the course of transportation coastwise or on inland

16

waters, including transportation by land, water or air from

17

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

18

all risks or perils of navigation, transit or transportation,

19

and while being prepared for and while awaiting shipment, and

20

during any delays, transshipment or reshipment. Insurance of

21

personal property and interests therein shall not be considered

22

wet marine and transportation insurance if:

23

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

24

(ii)  the property has reached its final destination as

25

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

26

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

27

property.

28

(5)  Any insurance associated with transportation of property

29

listed under this definition.

30

"Writing producer."  The insurance producer which brings

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1

about or negotiates contracts of insurance directly on behalf of

2

the consumer seeking insurance.

3

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

4

* *

5

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

6

* * *

7

(6)  Transactions subsequent to issuance of a policy [not

8

covering domestic risks at time of issuance and lawfully

9

solicited, written or delivered outside of this Commonwealth] in

10

which this Commonwealth becomes the home state.

11

* * *

12

Section 1605.  Requirements for Eligible Surplus Lines

13

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

14

coverage with a nonadmitted insurer unless, at the time of

15

placement, such nonadmitted insurer[:

16

(1)  Is of good repute and financial integrity.

17

(2)  Qualifies under any of the following subparagraphs:

18

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

19

times the minimum capital and surplus required to be fully

20

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

21

date of this article is granted to allow those nonadmitted

22

insurers which are eligible surplus lines insurers on the

23

effective date of this article to achieve this capital and

24

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

25

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

26

Insurer Domestication Law, it shall maintain in the United

27

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

28

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

29

that currently required by the National Association of Insurance

30

Commissioners' International Insurers Department or its

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1

successor for the protection of all of its policyholders in the

2

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

3

letters of credit or investments of substantially the same

4

character and quality as those which are eligible investments

5

for admitted insurers authorized to write like kinds of

6

insurance in this Commonwealth. Such trust fund will be in

7

addition to the capital and surplus required in this

8

subparagraph and shall have an expiration date which at no time

9

shall be less than five (5) years.

10

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

11

includes unincorporated individual insurers that maintains a

12

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

13

as security to the full amount thereof for all policyholders and

14

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

15

trust funds shall likewise comply with the terms and conditions

16

established in subparagraph (i) for alien insurers.

17

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

18

individual states that maintains capital and surplus or the

19

substantial equivalent thereof of not less than fifteen million

20

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

21

which maintain funds for the protection of all insurance

22

exchange policyholders, each individual syndicate shall maintain

23

minimum capital and surplus or the substantial equivalent

24

thereof of not less than one million five hundred thousand

25

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

26

not maintain funds for the protection of all insurance exchange

27

policyholders, each individual syndicate shall meet the minimum

28

capital and surplus requirements of subparagraph (i).

29

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

30

annual financial statement certified by such insurer, such

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1

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

2

date required for filing an annual financial statement in its

3

domiciliary jurisdiction and which is either:

4

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

5

the insurer; or

6

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

7

the jurisdiction of the insurer's domicile.

8

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

9

aggregate statement of all underwriting syndicates operating

10

during the period reported.] qualifies under one of the

11

following:

12

(1)  (i)  is authorized to write the type of insurance in its

13

domiciliary jurisdiction; and

14

(ii)  has capital and surplus or its equivalent under the

15

laws of its domiciliary jurisdiction which is greater than or

16

equal to fifteen million ($15,000,000) dollars. The requirement

17

of this subparagraph may be satisfied by an insurer's possessing

18

less than the minimum capital and surplus upon an affirmative

19

finding of acceptability by the commissioner. The finding shall

20

be based upon such factors as quality of management, capital and

21

surplus of any parent company, company underwriting profit and

22

investment income trends, market availability and company record

23

and reputation within the industry. In no event shall the

24

commissioner make an affirmative finding of acceptability when

25

the nonadmitted insurer's capital and surplus is less than four

26

million five hundred thousand ($4,500,000) dollars.

27

(2)  If domiciled outside the United States, is listed on the

28

Quarterly Listing of Alien Insurers maintained by the

29

International Insurers Department of the National Association of

30

Insurance Commissioners.

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1

* * *

2

Section 1608.  Surplus Lines Licensee's Duty to Notify

3

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

4

the surplus lines licensee shall present to the insured or to

5

the writing producer written notice that the insurance or a

6

portion thereof involves placement with nonadmitted insurers.

7

The surplus lines licensee shall, either directly or through the

8

writing producer, give notice to the insured that:

9

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

10

is not licensed by the [Pennsylvania Insurance Department] 

11

department and is subject to its limited regulation; and

12

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

13

lines insurer, losses will not be paid by the Pennsylvania

14

Property and Casualty Insurance Guaranty Association.

15

Section 3.  Section 1610(a) of the act, added December 18,

16

1992 (P.L.1519, No.178), is amended and the section is amended

17

by adding subsections to read:

18

Section 1610.  Exempt Risks.--[(a)  The diligent search

19

requirements of section 1604(2), the reporting requirements of

20

section 1609(a) and the twenty-five per centum (25%) limitation

21

of section 1606 are not applicable to placements of insurance

22

with nonadmitted insurers for risks of an insured which meets at

23

least three of the following requirements:

24

(1)  The insured employs a full-time risk manager or

25

contracts for services from a qualified risk management service.

26

(2)  The insured has gross sales in excess of one hundred

27

million ($100,000,000) dollars.

28

(3)  The insured regularly employs in excess of two hundred

29

fifty (250) full-time employes.

30

(4)  The insured has assets in excess of one hundred million

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1

($100,000,000) dollars.

2

(5)  The insured has insurance premiums for property and

3

casualty insurance, excluding employe benefits, in excess of two

4

hundred fifty thousand ($250,000) dollars.

5

(6)  The insured is seeking insurance for risks resident,

6

located or to be performed in one or more states other than this

7

Commonwealth and the portion of the total risk ascribable to

8

states other than this Commonwealth exceeds fifty per centum

9

(50%).]

10

(a.1)  The diligent search requirements of section 1604(2),

11

the reporting requirements of section 1609(a) and the twenty-

12

five per centum (25%) limitation of section 1606 shall not apply

13

to placements of insurance with nonadmitted insurers for an

14

exempt commercial purchaser if:

15

(1)  the surplus lines licensee procuring or placing the

16

surplus lines insurance has disclosed to the exempt commercial

17

purchaser that the insurance may be available from the admitted

18

market that may provide greater protection with more regulatory

19

oversight; and

20

(2)  the exempt commercial purchaser has subsequently

21

requested in writing the surplus lines licensee to procure or

22

place the insurance from a nonadmitted insurer.

23

* * *

24

(c)  The following words and phrases when used in this

25

section shall have the meanings given to them in this subsection

26

unless the context clearly indicates otherwise:

27

"Exempt commercial purchaser."  Any person purchasing

28

commercial insurance that, at the time of placement, meets the

29

following requirements:

30

(1)  The person employs or retains a qualified risk manager

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1

to negotiate insurance coverage.

2

(2)  The person has paid aggregate nationwide commercial

3

property and casualty insurance premiums in excess of one

4

hundred thousand ($100,000) dollars in the immediately preceding

5

twelve (12) months.

6

(3)  (i)  The person meets at least one of the following

7

criteria:

8

(A)  The person possesses a net worth in excess of twenty

9

million ($20,000,000) dollars, as adjusted under subparagraph

10

(ii).

11

(B)  The person generates annual revenues in excess of fifty

12

million ($50,000,000) dollars, as adjusted under subparagraph

13

(ii).

14

(C)  The person employs more than five hundred (500) full-

15

time or full-time equivalent employees per individual insured or

16

is a member of an affiliated group employing more than one

17

thousand (1,000) employees in the aggregate.

18

(D)  The person is a not-for-profit organization or public

19

entity generating annual budgeted expenditures of at least

20

thirty million ($30,000,000) dollars, as adjusted under

21

subparagraph (ii).

22

(E)  The person is a municipality with a population in excess

23

of fifty thousand (50,000) persons.

24

(ii)  Beginning January 1, 2015 and every five years

25

thereafter, the amounts under clauses (A), (B) and (D) shall be

26

adjusted to reflect the percentage change for the five-year

27

period in the Consumer Price Index for All Urban Consumers

28

published by the Bureau of Labor Statistics of the Department of

29

Labor and Industry.

30

"Qualified risk manager."  With respect to a policyholder of

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1

commercial insurance, a person who meets all of the following

2

requirements:

3

(1)  The person is an employee of, or third-party consultant

4

retained by, the commercial policyholder.

5

(2)  The person provides skilled services in loss prevention,

6

loss reduction or risk and insurance coverage analysis and

7

purchase of insurance.

8

(3)  The person:

9

(i)  (A)  has a bachelor's degree or higher from an

10

accredited college or university in risk management, business

11

administration, finance, economics or any other field determined

12

by the commissioner to demonstrate minimum competence in risk

13

management; and

14

(B)  (I)  has three (3) years of experience in risk

15

financing, claims administration, loss prevention, risk and

16

insurance analysis or purchasing commercial lines of insurance;

17

or 

18

(II)  has:

19

(a)  a designation as a Chartered Property and Casualty

20

Underwriter issued by the American Institute for Chartered

21

Property and Casualty Underwriter/Insurance Institute of

22

America;

23

(b)  a designation as an Associate in Risk Management issued

24

by the American Institute for Chartered Property and Casualty

25

Underwriter/Insurance Institute of America;

26

(c)  a designation as Certified Risk Manager issued by the

27

National Alliance for Insurance Education & Research;

28

(d)  a designation as a RIMS Fellow issued by the Global Risk

29

Management Institute; or

30

(e)  any other designation, certification or license

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1

determined by the commissioner to demonstrate minimum competency

2

in risk management;

3

(ii)  (A)  has at least seven (7) years of experience in risk

4

financing, claims administration, loss prevention, risk and

5

insurance coverage analysis or purchasing commercial lines of

6

insurance; and

7

(B)  has any one of the designations specified under clauses

8

(a), (b), (c), (d) and (e);

9

(iii)  has at least ten (10) years of experience in risk

10

financing, claims administration, loss prevention, risk and

11

insurance coverage analysis or purchasing commercial lines of

12

insurance; or

13

(iv)  has a graduate degree from an accredited college or

14

university in risk management, business administration, finance,

15

economics or any other field determined by the commissioner to

16

demonstrate minimum competence in risk management.

17

Section 4.  Section 1611(f) of the act, amended March 22,

18

2010 (P.L.147, No.14), is amended to read:

19

Section 1611.  Surplus Lines Advisory Organizations.--* * *

20

(f)  The advisory organization may submit reports and make

21

recommendations to the department regarding the financial

22

condition of any eligible surplus lines insurer. These reports

23

and recommendations shall not be considered to be public

24

information or subject to any Federal or [State] state freedom

25

of information law. There shall be no liability on the part of

26

nor shall any cause of action of any nature be sustained against

27

eligible surplus lines insurers, the advisory organization or

28

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

29

department or authorized representatives of the department for

30

statements and any reports or recommendations made by them in

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1

good faith under this section.

2

* * *

3

Section 5.  Section 1615(a) of the act, amended March 22,

4

2010 (P.L.147, No.14), is amended and the section is amended by

5

adding subsections to read:

6

Section 1615.  Licensing of Surplus Lines Licensee.--(a)

7

[No] For insureds whose home state is this Commonwealth, no

8

insurance producer licensed by the department shall transact

9

surplus lines insurance with any nonadmitted insurer unless the

10

insurance producer possesses a valid surplus lines producer's 

11

license issued by the department.

12

* * *

13

(c.2)  The commissioner may participate with the National

14

Association of Insurance Commissioners or its affiliates in a

15

centralized insurance producer registry for the purpose of

16

submitting or obtaining information on insurance producers,

17

surplus lines producers and other licensees, including licensing

18

history, lines of authority and regulatory actions.

19

* * *

20

(g)  As used in subsection (c.1), the term "home state" for

21

an insurance producer or surplus lines producer shall be as

22

defined as in section 601-A of the act of May 17, 1921 (P.L.789,

23

No.285), known as "The Insurance Department Act of 1921."

24

Section 6.  Sections 1616, 1621, 1622 and 1623 of the act,

25

amended March 22, 2010 (P.L.147, No.14), are amended to read:

26

Section 1616.  Surplus Lines Licensees May Accept Business

27

from Insurance [Producer] Producers.--A surplus lines licensee

28

may originate surplus lines insurance or accept such insurance

29

from an insurance producer duly licensed as to the kind or kinds

30

of insurance involved, and the surplus lines licensee may

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1

compensate the insurance producer.

2

Section 1621.  Surplus Lines Tax.--(a)  (1)  There is hereby

3

levied a tax of three per centum (3%) on all premiums charged

4

for insurance which is placed with either an eligible surplus

5

lines insurer, other than a risk retention group, or other

6

nonadmitted insurer in accordance with this article, such taxes

7

to be based on the gross premiums charged less any return

8

premiums. This tax shall be in addition to the full amount of

9

the gross premium charged by the insurer for the insurance. The

10

tax on any unearned portion of the premium shall be returned to

11

the insured.

12

[(b)  Neither the surplus lines licensee nor the writing

13

producer shall pay directly or indirectly such tax or any

14

portion thereof, either as an inducement to the insured to

15

purchase the insurance or for any other reason.

16

(c)  The surplus lines licensee shall collect from the

17

insured or the writing producer the amount of the tax at the

18

time of delivery of the initial policy, cover note or other

19

evidence of insurance or at such time thereafter as is

20

reasonably consistent with normal credit terms customary in the

21

business. Each surplus lines licensee shall, on or before

22

January 31 of each year, file with the Department of Revenue a

23

report of all transactions involving the placement of insurance

24

with either an eligible surplus lines insurer or other

25

nonadmitted insurers during the previous calendar year. The

26

report shall set forth the name of the insured, identification

27

of the insurer, the type of insurance, gross premiums charged

28

less any return premiums allowed and the tax due as provided in

29

this section. The remittance for the taxes due shall accompany

30

this report. Such report shall be made on forms prescribed and

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1

furnished by the Department of Revenue. A copy of the report

2

shall be filed with the department by the surplus lines

3

licensee. A surplus lines licensee that is a business entity

4

licensee which files the annual premium tax return with the

5

Department of Revenue shall include in its return the premium

6

taxes generated during the year subject to reporting by all

7

licensees associated with said business entity during the

8

reporting period.]

9

[(d)] (2)  In the event that a placement of insurance

10

involves subjects of insurance resident, located or to be

11

performed in one or more states other than this Commonwealth,

12

then the premium taxes provided for in this section shall be

13

levied:

14

(i)  For policies placed before July 1, 2011, only on that

15

portion of the premium reasonably ascribable to that portion of

16

the risk situated in this Commonwealth.

17

(ii)  For policies placed after June 30, 2011, upon the gross

18

premium charged less any return premiums where this Commonwealth

19

is the home state of the insured.

20

(d.1)  (1)  Each surplus lines licensee shall, on or before

21

January 31 of each year, file a report of all premiums

22

transacted from the placement of insurance with either an

23

eligible surplus lines insurer or other nonadmitted insurers

24

during the previous calendar year. The report shall be filed as

25

prescribed by the Department of Revenue with any payment. A full

26

copy of the report shall be filed with the department by the

27

surplus lines licensee.

28

(2)  The report described under this subsection shall set

29

forth the name of the insured, the home state of the insured, if

30

required by the department, identification of the insurer, the

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1

type of insurance, gross premiums charged less any return

2

premiums allowed, the tax due as provided in this section and

3

any other information as required by the Department of Revenue.

4

A surplus lines licensee that is a business entity licensee

5

which files the annual premium tax return with the Department of

6

Revenue shall include in its return the premium taxes generated

7

during the year subject to reporting by all licensees associated

8

with said business entity during the reporting period. The

9

report shall be made on forms prescribed by the Department of

10

Revenue.

11

(3)  The remittance for the taxes due shall accompany the

12

report described under this subsection. Neither the surplus

13

lines licensee nor the writing producer shall pay directly or

14

indirectly the tax or any portion of the tax, either as an

15

inducement to the insured to purchase the insurance or for any

16

other reason. The surplus lines licensee shall collect from the

17

insured or the writing producer the amount of the tax at the

18

time of delivery of the initial policy, cover note or other

19

evidence of insurance or at the time thereafter as is reasonably

20

consistent with normal credit terms customary in the business.

21

(4)  A penalty shall be imposed for failure to file the

22

report required under this subsection on or before the due date

23

in accordance with the rules of section 403(d) of the act of

24

March 4, 1971 (P.L.6, No.2), known as the "Tax Reform Code of

25

1971."

26

(e)  With respect to insurance placed with or issued by a

27

risk retention group which is an eligible surplus lines insurer,

28

there is hereby levied a tax of two per centum (2%) on all

29

premiums charged for risks resident, located or to be performed

30

in this Commonwealth. The risk retention group shall be

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1

responsible for the payment of the taxes levied in this article

2

in accordance with procedures set forth in Article XV.

3

(f)  The [settlement and resettlement] assessment of taxes

4

imposed by this article, including the granting of extensions of

5

time to file reports and the rights of the taxpayers to present

6

and prosecute a petition for [resettlement] assessment, a

7

petition for review or an appeal to court or to file a petition

8

for refund and the imposition of interest and penalties, shall

9

be governed by the provisions of the act of March 4, 1971

10

(P.L.6, No.2), known as the "Tax Reform Code of 1971," as

11

approved in the case of [capital stock and franchise taxes] 

12

corporate net income tax.

13

Section 1622.  Tax on Independently Procured Insurance.--(a)

14

(1)  The tax provided by section 1621(a) is imposed upon an

15

insured whose home state is this Commonwealth who independently

16

procures insurance [on a subject of insurance resident, located

17

or to be performed in this Commonwealth] from a nonadmitted

18

insurer or continues or renews such independently procured

19

insurance. [The insured shall, within thirty (30) days after the

20

date when such insurance was independently procured, continued

21

or renewed, report such transaction on forms prescribed by the

22

Department of Revenue. This report shall set forth the

23

information required of surplus lines licensees as required in

24

section 1621(c). The tax of three per centum (3%) shall be paid

25

on the date the report is due as provided in this section. If

26

the independently procured insurance covers risks resident,

27

located or to be performed in one or more states other than this

28

Commonwealth, the premium taxes shall be prorated in accordance

29

with provisions in section 1621(d). A copy of such report shall

30

be filed with the department by the insured.]

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1

(2)  If the independently procured insurance covers risks

2

resident, located or to be performed in one or more states other

3

than this Commonwealth, the premium taxes shall be payable as

4

computed in accordance with section 1621(a).

5

(b)  The insured shall, within thirty (30) days after the

6

last day of the month in which the insurance was independently

7

procured, continued or renewed, report the transaction on the

8

forms and in the manner prescribed by the Department of Revenue.

9

The report shall set forth the information required of surplus

10

lines licensees as required in any report described under

11

section 1621. The tax of three per centum (3%) shall be paid on

12

the date the report is due as provided under this section. The

13

insured shall file a copy of the report with the department upon

14

its request.

15

(c)  A penalty shall be imposed for failure to file the

16

report required under this section on or before the due date in

17

accordance with the rules of section 403(d) of the act of March

18

4, 1971 (P.L.6, No.2), known as the "Tax Reform Code of 1971."

19

Section 1623.  Suspension, Revocation or Nonrenewal of

20

Surplus Lines Licensee's License.--The department may suspend,

21

revoke or refuse to renew the license of a surplus lines

22

licensee after notice and a hearing, as provided under the

23

applicable provision of the laws of this Commonwealth, upon any

24

one or more of the following grounds:

25

(3)  Closing of the surplus lines licensee's office for a

26

period of more than thirty (30) business days, unless permission

27

is granted by the department.

28

(4)  Failure to make and file required reports.

29

(5)  Failure to collect or transmit required tax on surplus

30

lines premiums.

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1

(7)  Failure to remit premiums due insurers or return

2

premiums due insureds in the normal course of business and

3

within reasonable time limits.

4

(8)  Violation of any provision of this [article] act.

5

(9)  For any other cause for which an insurance producer's 

6

license could be denied, revoked or suspended or refused upon

7

renewal.

8

Section 7.  This act shall take effect immediately.

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