PRINTER'S NO.  1982

  

THE GENERAL ASSEMBLY OF PENNSYLVANIA

  

HOUSE BILL

 

No.

1601

Session of

2011

  

  

INTRODUCED BY GODSHALL, MICOZZIE, BOYD, FABRIZIO, KOTIK, PICKETT, QUINN AND SCHRODER, MAY 25, 2011

  

  

REFERRED TO COMMITTEE ON INSURANCE, MAY 25, 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

27

article is to protect the public interest by:

 


1

(1)  Protecting persons seeking insurance in this

2

Commonwealth.

3

(2)  Permitting surplus lines insurance to be placed with

4

reputable and financially sound nonadmitted insurers and

5

exported from this Commonwealth pursuant to this article.

6

(3)  Establishing a system of regulation which will permit

7

orderly access to surplus lines insurance in this Commonwealth

8

and encouraging insurers to make new and innovative types of

9

insurance available to consumers in this Commonwealth.

10

(4)  Protecting revenues of this Commonwealth.

11

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

12

relate to the placement of surplus lines insurance and

13

independently procured insurance, shall apply when this

14

Commonwealth is the home state of the insured.

15

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

16

to the imposition of surplus lines and independently procured

17

premium tax and penalties for policies placed after June 30,

18

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

19

the insured.

20

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

21

to the collection, reporting and remittance of surplus lines

22

insurance and independently procured insurance premium tax for

23

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

24

Commonwealth is the home state of the insured.

25

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

26

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

27

read:

28

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

29

following words and phrases shall have the meanings given to

30

them in this section:

- 2 -

 


1

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

2

business in this Commonwealth.

3

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

4

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

5

insured.

6

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

7

affiliated.

8

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

9

liability company, a limited liability partnership, a business

10

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

11

person.

12

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

13

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

14

ownership.

15

"Commissioner."  The Insurance Commissioner of the

16

Commonwealth.

17

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

18

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

19

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

20

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

21

securities of the other entity; or

22

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

23

majority of the directors or trustees of the other entity.

24

"Department."  The Insurance Department of the Commonwealth.

25

"Eligible surplus lines insurer."  A nonadmitted insurer with

26

which a surplus lines licensee may place surplus lines insurance

27

under section 1604.

28

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

29

nonadmitted insurer or an eligible surplus lines insurer in

30

accordance with this article.

- 3 -

 


1

"Home state."  Except as provided under section 1615(g), as

2

follows:

3

(1)  With respect to an insured:

4

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

5

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

6

individual's principal residence; or

7

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

8

located out of the state referred to under subparagraph (i), the

9

state to which the greatest percentage of the insured's taxable

10

premium for that insurance contract is allocated.

11

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

12

named insureds on a single nonadmitted insurance contract, the

13

term means the home state, as determined under paragraph (1), of

14

the member of the affiliated group that has the largest

15

percentage of premium attributed to it under the insurance

16

contract.

17

"Independently procured insurance."  Any insurance [which a

18

resident of this Commonwealth directly negotiates with and

19

purchases, continues or renews from a nonadmitted insurer

20

without securing the services of an insurance producer or

21

surplus lines licensee] directly procured by an insured from a

22

nonadmitted insurer.

23

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

24

solicit or negotiate contracts of insurance with admitted

25

insurers.

26

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

27

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

28

the department by admitted insurers.

29

"Nonadmitted insurer."  An insurer not authorized and not

30

licensed to do an insurance business in this Commonwealth. The

- 4 -

 


1

term includes insurance exchanges as authorized under the laws

2

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

3

group.

4

"Person."  A natural person or business entity.

5

"Purchasing group."  An entity formed to purchase liability

6

insurance under the Risk Retention Amendments of 1986 (Public

7

Law 99-563, 100 Stat. 3170).

8

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

9

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

10

100 Stat. 3170).

11

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

12

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

13

Mariana Islands, the Virgin Islands and American Samoa.

14

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

15

of section 1605, means funds over and above liabilities and

16

capital of the company for the protection of its policyholders.

17

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

18

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

19

be placed through a surplus lines licensee with a nonadmitted

20

insurer eligible to accept such insurance, other than

21

reinsurance, wet marine and transportation insurance,

22

independently procured insurance, life insurance and annuities

23

and coverage obtained from risk retention groups under the Risk

24

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

25

3170).

26

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

27

lines producer under section 1615 to place surplus lines

28

insurance with nonadmitted insurers eligible to accept such

29

insurance.

30

"Type of insurance."  Coverage afforded under the particular

- 5 -

 


1

policy that is being placed.

2

"Wet marine and transportation insurance."  Any of the

3

following:

4

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

5

therein or with relation thereto.

6

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

7

and contracts of marine protection and indemnity insurance.

8

(3)  Insurance of freights and disbursements pertaining to a

9

subject of insurance coming within this definition.

10

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

11

the course of exportation from or importation into any country,

12

or in the course of transportation coastwise or on inland

13

waters, including transportation by land, water or air from

14

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

15

all risks or perils of navigation, transit or transportation,

16

and while being prepared for and while awaiting shipment, and

17

during any delays, transshipment or reshipment. Insurance of

18

personal property and interests therein shall not be considered

19

wet marine and transportation insurance if:

20

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

21

(ii)  the property has reached its final destination as

22

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

23

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

24

property.

25

(5)  Any insurance associated with transportation of property

26

listed under this definition.

27

"Writing producer."  The insurance producer which brings

28

about or negotiates contracts of insurance directly on behalf of

29

the consumer seeking insurance.

30

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

- 6 -

 


1

* *

2

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

3

* * *

4

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

5

covering domestic risks at time of issuance and lawfully

6

solicited, written or delivered outside of this Commonwealth] in

7

which this Commonwealth becomes the home state.

8

* * *

9

Section 1605.  Requirements for Eligible Surplus Lines

10

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

11

coverage with a nonadmitted insurer unless, at the time of

12

placement, such nonadmitted insurer[:

13

(1)  Is of good repute and financial integrity.

14

(2)  Qualifies under any of the following subparagraphs:

15

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

16

times the minimum capital and surplus required to be fully

17

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

18

date of this article is granted to allow those nonadmitted

19

insurers which are eligible surplus lines insurers on the

20

effective date of this article to achieve this capital and

21

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

22

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

23

Insurer Domestication Law, it shall maintain in the United

24

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

25

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

26

that currently required by the National Association of Insurance

27

Commissioners' International Insurers Department or its

28

successor for the protection of all of its policyholders in the

29

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

30

letters of credit or investments of substantially the same

- 7 -

 


1

character and quality as those which are eligible investments

2

for admitted insurers authorized to write like kinds of

3

insurance in this Commonwealth. Such trust fund will be in

4

addition to the capital and surplus required in this

5

subparagraph and shall have an expiration date which at no time

6

shall be less than five (5) years.

7

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

8

includes unincorporated individual insurers that maintains a

9

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

10

as security to the full amount thereof for all policyholders and

11

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

12

trust funds shall likewise comply with the terms and conditions

13

established in subparagraph (i) for alien insurers.

14

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

15

individual states that maintains capital and surplus or the

16

substantial equivalent thereof of not less than fifteen million

17

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

18

which maintain funds for the protection of all insurance

19

exchange policyholders, each individual syndicate shall maintain

20

minimum capital and surplus or the substantial equivalent

21

thereof of not less than one million five hundred thousand

22

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

23

not maintain funds for the protection of all insurance exchange

24

policyholders, each individual syndicate shall meet the minimum

25

capital and surplus requirements of subparagraph (i).

26

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

27

annual financial statement certified by such insurer, such

28

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

29

date required for filing an annual financial statement in its

30

domiciliary jurisdiction and which is either:

- 8 -

 


1

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

2

the insurer; or

3

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

4

the jurisdiction of the insurer's domicile.

5

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

6

aggregate statement of all underwriting syndicates operating

7

during the period reported.] qualifies under one of the

8

following:

9

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

10

domiciliary jurisdiction; and

11

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

12

laws of its domiciliary jurisdiction which is greater than or

13

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

14

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

15

less than the minimum capital and surplus upon an affirmative

16

finding of acceptability by the commissioner. The finding shall

17

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

18

surplus of any parent company, company underwriting profit and

19

investment income trends, market availability and company record

20

and reputation within the industry. In no event shall the

21

commissioner make an affirmative finding of acceptability when

22

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

23

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

24

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

25

Quarterly Listing of Alien Insurers maintained by the

26

International Insurers Department of the National Association of

27

Insurance Commissioners.

28

* * *

29

Section 1608.  Surplus Lines Licensee's Duty to Notify

30

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

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1

the surplus lines licensee shall present to the insured or to

2

the writing producer written notice that the insurance or a

3

portion thereof involves placement with nonadmitted insurers.

4

The surplus lines licensee shall, either directly or through the

5

writing producer, give notice to the insured that:

6

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

7

is not licensed by the [Pennsylvania Insurance Department]

8

department and is subject to its limited regulation; and

9

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

10

lines insurer, losses will not be paid by the Pennsylvania

11

Property and Casualty Insurance Guaranty Association.

12

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

13

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

14

by adding subsections to read:

15

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

16

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

17

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

18

of section 1606 are not applicable to placements of insurance

19

with nonadmitted insurers for risks of an insured which meets at

20

least three of the following requirements:

21

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

22

contracts for services from a qualified risk management service.

23

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

24

million ($100,000,000) dollars.

25

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

26

fifty (250) full-time employes.

27

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

28

($100,000,000) dollars.

29

(5)  The insured has insurance premiums for property and

30

casualty insurance, excluding employe benefits, in excess of two

- 10 -

 


1

hundred fifty thousand ($250,000) dollars.

2

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

3

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

4

Commonwealth and the portion of the total risk ascribable to

5

states other than this Commonwealth exceeds fifty per centum

6

(50%).]

7

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

8

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

9

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

10

to placements of insurance with nonadmitted insurers for an

11

exempt commercial purchaser if:

12

(1)  the surplus lines licensee procuring or placing the

13

surplus lines insurance has disclosed to the exempt commercial

14

purchaser that the insurance may be available from the admitted

15

market that may provide greater protection with more regulatory

16

oversight; and

17

(2)  the exempt commercial purchaser has subsequently

18

requested in writing the surplus lines licensee to procure or

19

place the insurance from a nonadmitted insurer.

20

* * *

21

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

22

section shall have the meanings given to them in this subsection

23

unless the context clearly indicates otherwise:

24

"Exempt commercial purchaser."  Any person purchasing

25

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

26

following requirements:

27

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

28

to negotiate insurance coverage.

29

(2)  The person has paid aggregate nationwide commercial

30

property and casualty insurance premiums in excess of one

- 11 -

 


1

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

2

twelve (12) months.

3

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

4

criteria:

5

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

6

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

7

clause (ii).

8

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

9

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

10

(ii).

11

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

12

time or full-time equivalent employees per individual insured or

13

is a member of an affiliated group employing more than one

14

thousand (1,000) employees in the aggregate.

15

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

16

entity generating annual budgeted expenditures of at least

17

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

18

subparagraph (ii).

19

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

20

of fifty thousand (50,000) persons.

21

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

22

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

23

adjusted to reflect the percentage change for the five-year

24

period in the Consumer Price Index for All Urban Consumers

25

published by the Bureau of Labor Statistics of the Department of

26

Labor and Industry.

27

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

28

commercial insurance, a person who meets all of the following

29

requirements:

30

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

- 12 -

 


1

retained by, the commercial policyholder.

2

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

3

loss reduction or risk and insurance coverage analysis and

4

purchase of insurance.

5

(3)  The person:

6

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

7

accredited college or university in risk management, business

8

administration, finance, economics or any other field determined

9

by the commissioner to demonstrate minimum competence in risk

10

management; and

11

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

12

financing, claims administration, loss prevention, risk and

13

insurance analysis or purchasing commercial lines of insurance;

14

or 

15

(II)  has:

16

(a)  a designation as a Chartered Property and Casualty

17

Underwriter issued by the American Institute for Chartered

18

Property and Casualty Underwriter/Insurance Institute of

19

America;

20

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

21

by the American Institute for Chartered Property and Casualty

22

Underwriter/Insurance Institute of America;

23

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

24

National Alliance for Insurance Education & Research;

25

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

26

Management Institute; or

27

(e)  any other designation, certification or license

28

determined by the commissioner to demonstrate minimum competency

29

in risk management;

30

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

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1

financing, claims administration, loss prevention, risk and

2

insurance coverage analysis or purchasing commercial lines of

3

insurance; and

4

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

5

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

6

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

7

financing, claims administration, loss prevention, risk and

8

insurance coverage analysis or purchasing commercial lines of

9

insurance; or

10

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

11

university in risk management, business administration, finance,

12

economics or any other field determined by the commissioner to

13

demonstrate minimum competence in risk management.

14

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

15

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

16

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

17

(f)  The advisory organization may submit reports and make

18

recommendations to the department regarding the financial

19

condition of any eligible surplus lines insurer. These reports

20

and recommendations shall not be considered to be public

21

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

22

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

23

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

24

eligible surplus lines insurers, the advisory organization or

25

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

26

department or authorized representatives of the department for

27

statements and any reports or recommendations made by them in

28

good faith under this section.

29

* * *

30

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

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1

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

2

adding subsections to read:

3

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

4

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

5

insurance producer licensed by the department shall transact

6

surplus lines insurance with any nonadmitted insurer unless the

7

insurance producer possesses a valid surplus lines producer's 

8

license issued by the department.

9

* * *

10

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

11

Association of Insurance Commissioners or its affiliates in a

12

centralized insurance producer registry for the purpose of

13

submitting or obtaining information on insurance producers,

14

surplus lines producers and other licensees, including licensing

15

history, lines of authority and regulatory actions.

16

* * *

17

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

18

an insurance producer or surplus lines producer shall be as

19

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

20

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

21

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

22

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

23

Section 1616.  Surplus Lines Licensees May Accept Business

24

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

25

may originate surplus lines insurance or accept such insurance

26

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

27

of insurance involved, and the surplus lines licensee may

28

compensate the insurance producer.

29

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

30

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

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1

for insurance which is placed with either an eligible surplus

2

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

3

nonadmitted insurer in accordance with this article, such taxes

4

to be based on the gross premiums charged less any return

5

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

6

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

7

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

8

the insured.

9

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

10

producer shall pay directly or indirectly such tax or any

11

portion thereof, either as an inducement to the insured to

12

purchase the insurance or for any other reason.

13

(c)  The surplus lines licensee shall collect from the

14

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

15

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

16

evidence of insurance or at such time thereafter as is

17

reasonably consistent with normal credit terms customary in the

18

business. Each surplus lines licensee shall, on or before

19

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

20

report of all transactions involving the placement of insurance

21

with either an eligible surplus lines insurer or other

22

nonadmitted insurers during the previous calendar year. The

23

report shall set forth the name of the insured, identification

24

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

25

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

26

this section. The remittance for the taxes due shall accompany

27

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

28

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

29

shall be filed with the department by the surplus lines

30

licensee. A surplus lines licensee that is a business entity

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1

licensee which files the annual premium tax return with the

2

Department of Revenue shall include in its return the premium

3

taxes generated during the year subject to reporting by all

4

licensees associated with said business entity during the

5

reporting period.]

6

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

7

involves subjects of insurance resident, located or to be

8

performed in one or more states other than this Commonwealth,

9

then the premium taxes provided for in this section shall be

10

levied:

11

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

12

portion of the premium reasonably ascribable to that portion of

13

the risk situated in this Commonwealth.

14

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

15

premium charged less any return premiums where this Commonwealth

16

is the home state of the insured.

17

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

18

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

19

transacted from the placement of insurance with either an

20

eligible surplus lines insurer or other nonadmitted insurers

21

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

22

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

23

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

24

surplus lines licensee.

25

(2)  The report described under this subsection shall set

26

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

27

required by the department, identification of the insurer, the

28

type of insurance, gross premiums charged less any return

29

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

30

any other information as required by the Department of Revenue.  

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1

A surplus lines licensee that is a business entity licensee

2

which files the annual premium tax return with the Department of

3

Revenue shall include in its return the premium taxes generated

4

during the year subject to reporting by all licensees associated

5

with said business entity during the reporting period. The

6

report shall be made on forms prescribed by the Department of

7

Revenue.

8

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

9

report described under this subsection. Neither the surplus

10

lines licensee nor the writing producer shall pay directly or

11

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

12

inducement to the insured to purchase the insurance or for any

13

other reason. The surplus lines licensee shall collect from the

14

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

15

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

16

evidence of insurance or at the time thereafter as is reasonably

17

consistent with normal credit terms customary in the business.

18

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

19

report required under this subsection on or before the due date

20

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

21

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

22

1971."

23

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

24

risk retention group which is an eligible surplus lines insurer,

25

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

26

premiums charged for risks resident, located or to be performed

27

in this Commonwealth. The risk retention group shall be

28

responsible for the payment of the taxes levied in this article

29

in accordance with procedures set forth in Article XV.

30

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

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1

imposed by this article, including the granting of extensions of

2

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

3

and prosecute a petition for [resettlement] assessment, a

4

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

5

for refund and the imposition of interest and penalties, shall

6

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

7

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

8

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

9

corporate net income tax.

10

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

11

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

12

insured whose home state is this Commonwealth who independently

13

procures insurance [on a subject of insurance resident, located

14

or to be performed in this Commonwealth] from a nonadmitted

15

insurer or continues or renews such independently procured

16

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

17

date when such insurance was independently procured, continued

18

or renewed, report such transaction on forms prescribed by the

19

Department of Revenue. This report shall set forth the

20

information required of surplus lines licensees as required in

21

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

22

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

23

the independently procured insurance covers risks resident,

24

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

25

Commonwealth, the premium taxes shall be prorated in accordance

26

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

27

be filed with the department by the insured.]

28

(2)  If the independently procured insurance covers risks

29

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

30

than this Commonwealth, the premium taxes shall be payable as

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1

computed in accordance with section 1621(a).

2

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

3

last day of the month in which the insurance was independently

4

procured, continued or renewed, report the transaction on the

5

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

6

The report shall set forth the information required of surplus

7

lines licensees as required in any report described under

8

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

9

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

10

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

11

its request.

12

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

13

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

14

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

15

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

16

Section 1623.  Suspension, Revocation or Nonrenewal of

17

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

18

revoke or refuse to renew the license of a surplus lines

19

licensee after notice and a hearing, as provided under the

20

applicable provision of the laws of this Commonwealth, upon any

21

one or more of the following grounds:

22

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

23

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

24

is granted by the department.

25

(4)  Failure to make and file required reports.

26

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

27

lines premiums.

28

(7)  Failure to remit premiums due insurers or return

29

premiums due insureds in the normal course of business and

30

within reasonable time limits.

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1

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

2

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

3

license could be denied, revoked or suspended or refused upon

4

renewal.

5

Section 7.  This act shall take effect immediately.

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