THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY STACK, FONTANA, LOGAN AND COSTA, MARCH 2, 2009

REFERRED TO BANKING AND INSURANCE, MARCH 2, 2009  

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," 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 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; and providing for compliance.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 1602 of the act of May 17, 1921 (P.L.682,

No.284), known as The Insurance Company Law of 1921, 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 2.  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 3.  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 4.  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 5.  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 6.  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 the membership division of an advisory

organization and 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 7.  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 8.  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 9.  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

insured.

(10)  Identity of the [producing broker] writing producer,

any confirming correspondence from the insurer or its

representative and the application.

(11)  A copy of the written notice required by section [1408]

1608.

(b)  The record of each contract shall be kept open at all

reasonable times to examination by the department without notice

for a period of not less than five (5) years following

termination of the contract.

(c)  If the surplus lines licensee is a natural person who is

associated with a business entity which is a valid surplus lines

licensee, the business entity with which the licensee is

associated shall retain the records which are required by this

section to be kept by each surplus lines licensee.

Section 10.  Sections 1620, 1621 and 1622 of the act, added

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

Section 1620.  Monthly Reports.--Within thirty (30) days

following the end of each month, each surplus lines licensee

shall file with the department, on forms prescribed by the

department, a verified report [in duplicate] of all surplus

lines insurance transacted during the preceding month.

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

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

for insurance which is placed with either an eligible surplus

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

nonadmitted insurer in accordance with this article, such taxes

to be based on the gross premiums charged less any return

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

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

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

the insured.

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

broker] writing producer shall pay directly or indirectly such

tax or any portion thereof, either as an inducement to the

insured to purchase the insurance or for any other reason.

(c)  The surplus lines licensee shall collect from the

insured or the [producing broker] writing producer the amount of

the tax at the time of delivery of the initial policy, cover

note or other evidence of insurance or at such time thereafter

as is reasonably consistent with normal credit terms customary

in the business. Each surplus lines licensee shall, on or before

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

report of all transactions involving the placement of insurance

with either an eligible surplus lines insurer or other

nonadmitted insurers during the previous calendar year. The

report shall set forth the name of the insured, identification

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

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

this section. The remittance for the taxes due shall accompany

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

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

shall be filed with the [commissioner] department by the surplus

lines licensee. A surplus lines licensee that is a business

entity licensee which files the annual premium tax return with

the Department of Revenue shall include in its return the

premium taxes generated during the year subject to reporting by

all licensees associated with said business entity during the

reporting period.

(d)  In the event that a placement of insurance involves

subjects of insurance resident, located or to be performed in

one or more states other than this Commonwealth, then the

premium taxes provided for in this section shall be levied only

on that portion of the premium reasonably ascribable to that

portion of the risk situated in this Commonwealth.

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

risk retention group which is an eligible surplus lines insurer,

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

premiums charged for risks resident, located or to be performed

in this Commonwealth. The risk retention group shall be

responsible for the payment of the taxes levied in this article

in accordance with procedures set forth in Article XV.

(f)  The settlement and resettlement of taxes imposed by this

article, including the granting of extensions of time to file

reports and the rights of the taxpayers to present and prosecute

a petition for resettlement, a petition for review or an appeal

to court or to file a petition for refund and the imposition of

interest and penalties, shall be governed by the provisions of

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

Code of 1971," as approved in the case of capital stock and

franchise taxes.

Section 1622.  Tax on Independently Procured Insurance.--The

tax provided by section 1621(a) is imposed upon an insured who

independently procures insurance on a subject of insurance

resident, located or to be performed in this Commonwealth from a

nonadmitted insurer or continues or renews such independently

procured insurance. The insured shall, within thirty (30) days

after the date when such insurance was independently procured,

continued or renewed, report such transaction on forms

prescribed by the Department of Revenue. This report shall set

forth the information required of surplus lines licensees as

required in section 1621(c). The tax of three per centum (3%)

shall be paid on the date the report is due as provided in this

section. If the independently procured insurance covers risks

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

than this Commonwealth, the premium taxes shall be prorated in

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

report shall be filed with the [commissioner] department by the

insured.

Section 11.  Section 1623 of the act, amended July 10, 2002

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

Section 1623.  Suspension, Revocation or Nonrenewal of

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

revoke or refuse to renew the license of a surplus lines

licensee after notice and a hearing, as provided under the

applicable provision of the laws of this Commonwealth, upon any

one or more of the following grounds:

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

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

is granted by the department.

(4)  Failure to make and file required reports.

(5)  Failure to transmit required tax on surplus lines

premiums.

(7)  Failure to remit premiums due insurers or return

premiums due insureds in the normal course of business and

within reasonable time limits.

(8)  Violation of any provision of this article.

(9)  For any other cause for which an insurance [agent's or

broker's] producer's license could be denied, revoked or

suspended or refused upon renewal.

Section 12.  Section 1625 of the act, added December 18, 1992

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

Section 1625.  Penalties.--(a)  Any surplus lines licensee

who, in this Commonwealth, represents or aids a nonadmitted

insurer in violation of this article commits a misdemeanor of

the third degree and shall, upon conviction, be sentenced to pay

a fine of not more than [one thousand ($1,000)] two thousand

($2,000) dollars.

(b)  In addition to any other penalty provided for in

subsection (a) or otherwise provided by law, including any

suspension, revocation or refusal to renew a license, any

person[, firm, association or corporation] violating any

provision of this article shall be liable to a civil penalty not

exceeding [one thousand ($1,000)] two thousand ($2,000) dollars

for the first offense and not exceeding [two thousand ($2,000)]

four thousand ($4,000) dollars for each succeeding offense.

(c)  The penalties in this section are not exclusive

remedies. Penalties may also be assessed under the act of July

22, 1974 (P.L.589, No.205), known as the "Unfair Insurance

Practices Act," and any other applicable statute.

Section 13.  The act is amended by adding a section to read:

Section 1626.  Compliance.--Nothing in this act shall relieve

a surplus lines licensee involved in any transaction from

compliance with this act or its predecessor acts.

Section 14.  This act shall take effect in 60 days.