SB 46 — Insurance Department insurers required to be licensed, unauthorized insurers, exceptions for surplus line brokers, further provided for, authority for membership in the Surplus Line Insurance Multi-State Compliance Compact Act repealed.

SB46 INTRODUCEDENROLLED SB46 N4Y3TJ8-1N4Y3TJ8-2 By Senator Shelnutt RFD:

06-Feb-24 Page 0 N4Y3TJ8-1SB46 02/02/2024Enrolled FCEnrolled, (L)maAn 2024-293Act, 23 45 SYNOPSIS:Relating to the Department of Insurance;

Under existing law, a person may not act as an agent for an insurance company unless the agent is licensed.

The law allows an exception for surplus line brokers who issue policies under certain conditions when policies may not be available for certain coverages.

This bill would update the laws relating to surplus line brokers to adopt revisions to the Nonadmitted Insurance Model Act by the National Association of Insurance Commissioners (NAIC).

This bill would also adopt the federal exemption requirement for diligent search efforts, allow surplus line brokers to file reports on placed coverage quarterly rather than on a 30 day rolling basis, ensure nonresident surplus line brokers comply with the same requirements as resident surplus line brokers, codify broker fees while requiring disclosure in the policy for consumer protection, eliminate zero premium reporting, adopt the federal definition of home state, and repeal the Surplus Lines Insurance Multi-State Compliance Compact Act in this state.

Page 1 SB46 INTRODUCED A BILL TO BE ENTITLED AN ACT Relating to the Department of Insurance;

Page 21 SB46 INTRODUCEDEnrolled (b) This section shall not apply to:

(c) This section shall not be deemed to render invalid, as between the parties thereto, any insurance contract entered into in violation of this sectionNo insurance contract entered into in violation of this section shall preclude the insured from enforcing his or her rights under the contract in accordance with the terms and provisions of the contract and the laws of this state to the same degree those rights would have been enforceable had the contract been lawfully procured." "§27-10-2 Page 32 SB46 INTRODUCEDEnrolled (a) Any person who in this state willfully represents or aids an unauthorized insurer in violation of Section 27-10-1 shall, in addition to any other applicable penalty, shall be liable for the full amount of any loss sustained by the insured under any such contract and for the amount of any premium taxes which may be payable under Section 27-10-35 by reason of such contract.

(b) Any independent adjuster who, directly or indirectly, enters into an investigation investigates or adjustment of any loss arising under a contract of an 95 insurance or annuity contract issued by an unauthorized insurer and covering at time of issuance a subject of insurance resident, located or to be performed in this state shall be liable for the full amount of any loss suffered by the insured under such contract.

"§27-10-20 If certain insurance coverages cannot be procured on Page 43 SB46 INTRODUCEDEnrolled terms acceptable to the insureds from authorized insurers, such coverages, designated "surplus lines," may be procured from unauthorized insurers subject to the terms and conditions of either subdivisions (1) or (2) of this section:

The full amount of insurance required must not be procurable, after diligent effort has been made to do so, from among the insurers authorized to transact and actually transacting that kind and class of insurance in this state or 95 has been procured to the full extent such insurers are willing to insure;

Whose aggregate annual premiums for insurance on all risks other than workmen's compensation and group insurance Page 54 SB46 INTRODUCEDEnrolled total at least twenty-five thousand dollars ($25,000.00);

"This contract is registered and delivered as a surplus line coverage under the Alabama Surplus Line Insurance Law." "§27-10-23 Insurance contracts procured as "surplus line" coverages from unauthorized insurers in accordance with this article shall be fully valid and enforceable as to all parties Page 65 SB46 INTRODUCEDEnrolled and shall be given acceptance and recognition recognized in all matters and respects to the same effect and extent as like contracts issued by authorized insurers." "§27-10-24 (a) Any person, while licensed as a resident insurance producer in this state for the property and casualty lines of authority and who is deemed by the commissioner to have had sufficient sufficiently experience experienced in the insurance business to be competent for the purpose may be licensed as a surplus line broker for the same types and kinds of insurance that he or she as a resident producer is currently licensed to handle as follows:

The amount of the bond may be increased if deemed necessary by the commissioner, considering the amount of surplus lines tax paid in previous Page 76 SB46 INTRODUCEDEnrolled years.

Service upon the commissioner as Page 87 SB46 INTRODUCEDEnrolled such attorney shall constitute effective legal service upon the nonresident.

By having a notice of service and a copy of the summons and complaint, or other process, served upon the nonresident defendant, if found within the State of Alabama, Page 98 SB46 INTRODUCEDEnrolled by any officer duly qualified to serve legal process within the State of Alabama or, if the nonresident defendant is found to be outside of the State of Alabama, by a sheriff, deputy sheriff, or United States marshal or deputy United States marshal, or any duly constituted officer qualified to serve like process in the state or the jurisdiction where the nonresident defendant is found.

Page 109 SB46 INTRODUCEDEnrolled (b) Notwithstanding Section 27-12-17(b), a reasonable fee for each policy may be charged by the filing surplus lines broker for each policy placed in lawful compliance with Section 27-10-20.

(2) With anAn alien insurer not authorized to transact insurance in at least one state of the United States, or an unauthorized insurer listed on the Quarterly Listing of Alien Insurers maintained by the International Insurers Department of the National Association of Insurance Commissioners and unless the insurer shall have established an effective trust Page 1110 SB46 INTRODUCEDEnrolled fund of at least two million five hundred thousand dollars ($2,500,000) within the United States administered by a recognized financial institution and held for the benefit of all its policyholders or policyholders and creditors in the United States, and with capital or surplus, or both, amounting to at least fifteen million dollars ($15,000,000).

Has conducted its affairs in a manner as to result in the avoidance of payment of tax as required by Sections Page 1211 SB46 INTRODUCEDEnrolled 27-10-31 and 27-10-35.

The commissioner may adopt reasonable rules for the implementation and administration of this section." "§27-10-30 (a) Each surplus line broker shall, on or before the first day of March of each year, file with the commissioner a Page 1312 SB46 INTRODUCEDEnrolled verified statement of all surplus line insurance transacted by him or her during the preceding calendar year.

(b) The tax under the provisions of this section shall be subject to deduction of the full amount of all expenses of Page 1413 SB46 INTRODUCEDEnrolled examination of the surplus line broker by the commissioner in the same manner as that allowed for domestic insurers for examination expenses under the provisions of subdivision (5) of subsection (c) of Section 27-4A-3.

Page 1514 SB46 Enrolled ________________________________________________ President and Presiding Officer of the Senate ________________________________________________ Speaker of the House of Representatives SB46 Senate 27-Feb-24 I hereby certify that the within Act originated in and passed the Senate.

Patrick Harris, Secretary.

House of Representatives Passed:

02-Apr-24 By:

Senator Shelnutt Page 15