No. 36846 (Change in Proposed Rule): Rule R590-171. Surplus Lines Procedures Rule

DAR File No.: 36846
Filed: 11/29/2012 08:25:13 AM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of this rule is to make corrections suggested during the comment period that just ended.

Summary of the rule or change:

The reference in Subsection R590-171-3(B)(b) to "R590-171-3(B)(a)(iii)(A), (B), and (C)" needs to be corrected to "Subsection R590-171-3(B)(a)(iii) (A), (B), and (D)" since (C) does not refer to a dollar amount as required in the text of Subsections R59-171-3(B)(a) and (b). In addition, the effective date in Subsection R590-171-3(b) should be 2015 and not 2018. This date change is made in order to conform to the federal Nonadmitted and Reinsurance Reform Act of 2010 (NRRA), as noted in the department's Bulletin 2011-4, Nonadmitted Insurance Reform. The date of the enactment of the NRRA was 07/21/2010 which makes the fifth January 1 after that date 01/01/2015. (DAR NOTE: This change in proposed rule has been filed to make additional changes to a proposed amendment that was published in the October 15, 2012, issue of the Utah State Bulletin, on page 74. Underlining in the rule below indicates text that has been added since the publication of the proposed rule mentioned above; strike-out indicates text that has been deleted. You must view the change in proposed rule and the proposed amendment together to understand all of the changes that will be enforceable should the agency make this rule effective.)

State statutory or constitutional authorization for this rule:

• Subsection 31A-15-103(11)
• Section 31A-2-201
• Subsection 31A-15-103(3)
• Section 31A-15-111

Anticipated cost or savings to:

the state budget:

Neither of the changes noted in the summary above will have a fiscal impact on the department or the state's budget. The correction in the code citation makes it conform to the language in the Subsections R590-171-3(B)(a) and (b). The correction in the date makes it conform to the date in the department's Bulletin 2011-4 that surplus lines insurers and producers are already aware of and complying with.

local governments:

This rule has no impact on local governments since it deals solely with the placement of nonadmitted insurance in Utah, which the department regulates.

small businesses:

The changes to this rule are technical and correct a code reference to conform with the language in Subsections R590-171-3(B)(a) and (b), and a date to conform with Bulletin 2011-4, which surplus lines producers are already aware of and complying with. Therefore, the changes will have no fiscal impact on producers of smaller agencies.

persons other than small businesses, businesses, or local governmental entities:

The changes to this rule are technical and correct a code reference to conform with the language in Subsections R590-171-3(B)(a) and (b), and a date to conform with Bulletin 2011-4, which surplus lines insurers are already aware of and complying with. Therefore, the changes will have no fiscal impact on these insurers or their consumers.

Compliance costs for affected persons:

The changes, which are technical, will have no fiscal impact impact on surplus lines insurers, producers or their consumers. The changes correlate the code citation with the language in Subsections R590-171-3(B)(a) and (b) and coordinate the date in Subsection R590-171-3 to the language in Bulletin 2011-4.

Comments by the department head on the fiscal impact the rule may have on businesses:

The changes to this rule will have no fiscal impact on Utah businesses.

Neal T. Gooch, Commissioner

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Insurance
Administration
Room 3110 STATE OFFICE BLDG
450 N MAIN ST
SALT LAKE CITY, UT 84114-1201

Direct questions regarding this rule to:

• Jilene Whitby at the above address, by phone at 801-538-3803, by FAX at 801-538-3829, or by Internet E-mail at [e-mail]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

01/14/2013

This rule may become effective on:

01/21/2013

Authorized by:

Neal Gooch, Commissioner

RULE TEXT

R590. Insurance, Administration.

R590-171. Surplus Lines Procedures Rule.

 

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R590-171-3. Definitions.

For the purpose of this rule the commissioner adopts the definitions as set forth in Section 31A-1-301 and in addition the following:

A. "Export list" means a list published by the commissioner of coverages and classes of insurance for which the commissioner has determined no general market exists with admitted insurers.

B.(a) "Exempt Commercial Purchaser" means any person purchasing commercial insurance from the surplus lines market that, at the time of placement, meets the following requirements:

(i) The person employs or retains a qualified risk manager to negotiate insurance coverage;

(ii) The person has paid aggregate nationwide commercial property and casualty insurance premiums in excess of $100,000 in the immediately preceding 12 months; and

(iii) The person meets at least one of the following criteria:

(A) The person possesses a net worth in excess of $20,000,000 as such amount is adjusted pursuant to Subsection (b);

(B) The person generates annual revenues in excess of $50,000,000 as such amount is adjusted pursuant to Subsection (b);

(C) The person employs more than 500 full-time or full-time equivalent employees per individual insured or is a member of an affiliated group employing more than 1,000 employees in the aggregate;

(D) The person is a not-for-profit organization or public entity generating annual budgeted expenditures of at least $30,000,000 as such amount is adjusted pursuant to Subsection (b); or

(E) The person is a municipality with a population in excess of 50,000 persons.

(b) Effective on January 1, [2018]2015, and each fifth January occurring thereafter, the amounts in R590-171-3.B (a)(iii)(A), (B), and [(C)](D) shall be adjusted to reflect the percentage change for such 5-year period in the Consumer Price index for all Urban Consumers published by the Bureau of Labor Statistics of the Department of Labor, 15 U.S.C. [§ ]8206(5).

C. "Producer" means an insurance agent, broker or surplus lines broker as defined in Section 31A-1-301-88.

D. "Surplus lines producer" means a licensee as defined in Section 31A-23a-106(2)(a)(viii) to place insurance with surplus lines insurers in accordance with Section 31A-15-103 and this rule.

E. "Surplus lines insurer" means a nonadmitted insurer that may place business, pursuant to Title 31A, Chapter 15, Part 1 and this rule, with a surplus lines producer.

F. "Surplus lines transaction" means the solicitation, negotiation, procurement or effectuation with a surplus lines insurer of an insurance contract or certificate of insurance. It also means any renewal, cancellation, endorsement, audit, or other adjustment to the insurance contract.

 

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KEY: insurance

Date of Enactment or Last Substantive Amendment: [2012]2013

Notice of Continuation: May 27, 2010

Authorizing, and Implemented or Interpreted Law: 31A-2-201; 31A-15-103; 31A-15-111

 

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