CHAPTER 701d

SURPLUS LINES BROKERS

Table of Contents

Sec. 38a-740. Regulation by commissioner.

Sec. 38a-741. (Formerly Sec. 38-81). List of unavailable lines of insurance. Affidavit as to attempt to procure insurance from authorized insurers. Exception.

Sec. 38a-742. (Formerly Sec. 38-82). Record of policies procured from unauthorized insurers.

Sec. 38a-743. (Formerly Sec. 38-84). Payments by licensees on gross premiums charged for insurance and for nonadmitted insurance. Penalty. Federal preemption. Applicability. Agreement to allocate nonadmitted insurance premiums taxes.

Sec. 38a-744. (Formerly Sec. 38-85). Liability of licensee.

Sec. 38a-745. (Formerly Sec. 38-86a). Notice on policies issued by unauthorized issuers.

Secs. 38a-746 to 38a-749. Reserved


Sec. 38a-740. Regulation by commissioner. The commissioner may by regulation: (1) Establish such proper standards as he may deem necessary to guide surplus lines brokers procuring any such policy of insurance, as is permitted under subsection (a) of section 38a-794, from any such unauthorized insurer; (2) require any unauthorized insurer from which any surplus lines broker has procured or intends to procure any policy of insurance, as is permitted under subsection (a) of section 38a-794, to file with him such evidence and in such form as he may prescribe so as to enable him to establish the financial stability, qualifications and general suitability of such unauthorized insurer to issue any policy of insurance through any surplus lines broker, under section 38a-794; and (3) establish such reasonable filing fees as may be necessary to defray the cost to him of examining evidence filed with him by an unauthorized insurer either voluntarily or pursuant to the provisions of this section.

(P.A. 90-243, S. 36.)

Sec. 38a-741. (Formerly Sec. 38-81). List of unavailable lines of insurance. Affidavit as to attempt to procure insurance from authorized insurers. Exception. (a) The commissioner shall maintain on a current basis a list of those lines of insurance or their components for which coverages are believed by the commissioner to be generally unavailable from licensed insurers. The commissioner shall republish the list and make it available to all licensees every six months. Any person may request in writing that the commissioner add or remove a line of insurance or its component from the current list at the next publication of the list. The commissioner’s determinations of lines of insurance or their components to be added to or removed from the list shall not be subject to chapter 54 provided prior to making determinations, the commissioner shall provide opportunity for comments from interested persons.

(b) (1) When any policy of insurance is procured under the authority of such license providing a line of insurance or its component that does not, on the effective date of coverage, appear on the current published list, both the licensee and the insured shall execute affidavits setting forth facts showing that such licensee and such insured were unable after diligent effort to procure, from any authorized insurer or insurers, the full amount of insurance required to protect the interest of such insured, and further showing that the amount of insurance procured from an unauthorized insurer or insurers is only the excess over the amount so procurable from authorized insurers. Such licensee shall file such affidavits with the commissioner not later than forty-five days after such policies have been procured.

(2) The provisions of subdivision (1) of this subsection shall not apply to any policy of insurance procured under the authority of such license for an insured that is an exempt commercial purchaser, as defined in Section 527 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, P.L. 111-203, as amended from time to time, provided (A) the surplus lines broker has disclosed to such exempt commercial purchaser that such insurance may or may not be available from an authorized insurer, that may provide greater protection with more regulatory oversight, and (B) such exempt commercial purchaser has subsequently requested such broker, in writing, to procure such policy from an unauthorized insurer.

(1953, S. 2802d; 1957, P.A. 132, S. 1; 1969, P.A. 665, S. 20; P.A. 90-87, S. 3; P.A. 11-61, S. 36.)

History: 1969 act deleted provision which stated that insurance procurable under Sec. 38-117(g) or 38-188(g) shall not be deemed as insurance procurable from authorized insurers; P.A. 90-87 added new Subsec. (a) requiring the commissioner to keep a list of the lines of insurance or their components for which coverages are believed to be unavailable from licensed insurers and to republish and make available that list every six months, designated former section as Subsec. (b) and added provisions to Subsec. (b) requiring that if a policy is issued through an insurer who, on the effective date of coverage, does not appear on the current list, the insured and the licensee must show that a diligent effort was made to procure coverage and file an affidavit certifying that fact within 45 days, rather than 30 days, to the commissioner; Sec. 38-81 transferred to Sec. 38a-741 in 1991; P.A. 11-61 amended Subsec. (b) by designating existing provisions as Subdiv. (1), adding Subdiv. (2) re exception to affidavit requirement and making technical changes, effective June 21, 2011.

Sec. 38a-742. (Formerly Sec. 38-82). Record of policies procured from unauthorized insurers. The licensee shall keep a complete and separate record of all policies procured from unauthorized insurers under such license. Such records shall be open to the examination of the commissioner at all reasonable times and shall show: (1) The exact amount of each kind of insurance permitted under sections 38a-741 to 38a-744, inclusive, and 38a-794 that has been procured for each insured; (2) the gross premiums charged by the insurers for each kind of insurance permitted under section 38a-794; (3) the amount of each kind of premiums of insurance permitted by section 38a-794 which were returned to each insured; (4) the name of the insurer or insurers which issued each of such policies; (5) the effective dates of such policies; (6) the terms for which they were issued.

(1953, S. 2803d; P.A. 01-113, S. 34, 42.)

History: Sec. 38-82 transferred to Sec. 38a-742 in 1991 (Revisor’s note: In 1995 the reference to Sec. “38a-377” was deleted editorially by the Revisors to reflect the repeal of that section by public act 93-297, S. 28); P.A. 01-113 deleted reference to Sec. 38a-795, made a technical change and redesignated Subdivs. (a) to (f) as Subdivs. (1) to (6), effective September 1, 2002.

Sec. 38a-743. (Formerly Sec. 38-84). Payments by licensees on gross premiums charged for insurance and for nonadmitted insurance. Penalty. Federal preemption. Applicability. Agreement to allocate nonadmitted insurance premiums taxes. (a) Every person, firm, association or corporation licensed pursuant to the provisions of sections 38a-741 to 38a-744, inclusive, and 38a-794 shall pay to the commissioner on May first of each year a sum equal to four per cent of the gross premiums charged the insureds by the insurers during the period from January first to March thirty-first of that year, and on August first of each year a sum equal to four per cent of the gross premiums charged the insured by the insurers during the period from April first to June thirtieth of that year, on November first of each year a sum equal to four per cent of the gross premiums charged the insureds by the insurers during the period from July first to September thirtieth of that year and on February first of each year a sum equal to four per cent of the gross premiums charged the insureds by the insurers during the period from October first to December thirty-first of the preceding year, for insurance procured by such licensee pursuant to such license, less the amount of such premiums returned to such insureds, except that the premium tax shall not apply to any policy issued to the state of Connecticut or any agency of the state or to any policy issued to any town, or agency of such town or special taxing district when such town, agency or department thereof or special taxing district appears in the policy as the named insured and as such is responsible for the payment of premiums shown on such policy. Each licensee shall also file on May first, August first, November first, and February first a return, in the form described by the commissioner, showing such information as the commissioner deems necessary. The provisions of this subsection shall not apply to nonadmitted insurance, as defined in subsection (b) of this section, that is procured, continued or renewed on or after July 1, 2011.

(b) For purposes of this subsection and subsections (c) to (g), inclusive, of this section:

(1) “Home state” means home state, as defined in Section 527 of the Nonadmitted and Reinsurance Reform Act of 2010;

(2) “Licensee” means a person, firm, association or corporation that is licensed pursuant to the provisions of sections 38a-741 to 38a-744, inclusive, and 38a-794 and that is a surplus lines broker, as defined in Section 527 of the Nonadmitted and Reinsurance Reform Act of 2010;

(3) “Nonadmitted and Reinsurance Reform Act of 2010” means Sections 511 to 542, inclusive, of the Dodd-Frank Wall Street Reform and Consumer Protection Act, P.L. 111-203, as amended from time to time;

(4) “Nonadmitted insurance” means nonadmitted insurance, as defined in Section 527 of the Nonadmitted and Reinsurance Reform Act of 2010; and

(5) “Nonadmitted insurer” means a nonadmitted insurer, as defined in Section 527 of the Nonadmitted and Reinsurance Reform Act of 2010.

(c) (1) With respect to nonadmitted insurance, where such coverage is procured, continued or renewed for an insured by a licensee on or after July 1, 2011, and where this state is an insured’s home state, such licensee shall pay a tax equal to the sum of four per cent of the gross premiums charged such insureds by nonadmitted insurers, irrespective of the fact that the insurance policy may cover properties, risks or exposures located or to be performed both within and without this state.

(2) (A) For the period beginning on July 1, 2011, and ending September 30, 2011, each licensee shall pay to the Insurance Commissioner, on or before November 15, 2011, in accordance with procedures established and on forms provided by said commissioner, a tax on nonadmitted insurance equal to the sum of four per cent of the gross premiums charged insureds by nonadmitted insurers during such period.

(B) For the period beginning on October 1, 2011, and ending December 31, 2011, each licensee shall pay to the Insurance Commissioner, on or before February 15, 2012, in accordance with procedures established and on forms provided by said commissioner, a tax on nonadmitted insurance equal to the sum of four per cent of the gross premiums charged insureds by nonadmitted insurers during such period.

(3) For calendar years beginning on or after January 1, 2012, each licensee shall pay to the Insurance Commissioner, in accordance with procedures established and on forms provided by said commissioner, (A) on or before May fifteenth of each year in which nonadmitted insurance was procured, continued or renewed, a tax on such insurance equal to the sum of four per cent of the gross premiums charged insureds by nonadmitted insurers during the period from January first to March thirty-first of that year; (B) on or before August fifteenth of each year in which nonadmitted insurance was procured, continued or renewed, a tax on such insurance equal to the sum of four per cent of the gross premiums charged insureds by nonadmitted insurers during the period from April first to June thirtieth of that year; (C) on or before November fifteenth of each year in which nonadmitted insurance was procured, continued or renewed, a tax on such insurance equal to the sum of four per cent of the gross premiums charged insureds by nonadmitted insurers during the period from July first to September thirtieth of that year; and (D) on or before February fifteenth of each year succeeding a year in which nonadmitted insurance was procured, continued or renewed, a tax on such insurance equal to the sum of four per cent of the gross premiums charged insureds by nonadmitted insurers during the period from October first to December thirty-first of the preceding year.

(4) In the event of cancellation and rewriting of any nonadmitted insurance contract, the premium for purposes of this subsection shall be the premium in excess of the unearned premium of the cancelled insurance contract.

(5) If, pursuant to subsection (g) of this section, the Insurance Commissioner enters into a cooperative or reciprocal agreement with another state or states, and if the provisions set forth in such agreement are different from provisions prescribed by this subsection, then the provisions set forth in such agreement shall prevail.

(d) Upon failure of any person to pay the premium tax due the commissioner on its due date, there shall be added thereto a penalty and interest, which interest shall be at the rate of one per cent per month or fraction of a month which elapses from the due date of such premium tax to the date of payment, and which penalty shall be in the amount of ten per cent of the whole or such part of the principal of the premium tax as is unpaid.

(e) This section shall be construed in such a manner as to avoid preemption under the Nonadmitted and Reinsurance Reform Act of 2010.

(f) This section shall not apply to any policy issued to the state of Connecticut or any agency of the state, or to any policy issued to any Connecticut town, or agency of such town or special taxing district when such town, agency or department thereof or special taxing district appears in the policy as the named insured and as such is responsible for the payment of premiums shown on such policy.

(g) (1) The Insurance Commissioner may enter into a cooperative or reciprocal agreement with another state or states to allocate among the states the nonadmitted insurance premiums taxes paid to an insured’s home state, as provided by Section 521 of the Nonadmitted and Reinsurance Reform Act of 2010.

(2) The agreement that the Insurance Commissioner is authorized to enter into under this subsection shall include, but shall not be limited to, the National Association of Insurance Commissioners’ Nonadmitted Insurance Multistate Agreement.

(3) The agreement that the Insurance Commissioner is authorized to enter into under this subsection may provide that, where this state is an insured’s home state and where the nonadmitted insurance covers properties, risks or exposures located or to be performed both within and without this state, (A) the sum payable by a licensee to this state under this section shall be computed based on that portion of the gross premiums allocated to this state, based on a standardized premium allocation adopted by the states under such agreement, multiplied by four per cent, (B) the sum payable by the licensee to another state shall be computed based on that portion of the gross premiums allocated to such state, based on a standardized premium allocation adopted by the states under such agreement, multiplied by such state’s tax rate, and (C) to the extent that another state where properties, risks or exposures are located has failed to enter into an agreement with this state, the portion of the gross premiums otherwise allocable to such other state shall be allocated to this state.

(4) The agreement that the Insurance Commissioner is authorized to enter into under this subsection may provide for (A) record-keeping requirements, (B) audit procedures, (C) exchange of information, (D) collection of taxes not paid by licensees within the time required under subsection (c) of this section, (E) disbursements of funds to other states that are parties to such agreement, and (F) any additional provisions that will facilitate the administration of the agreement.

(5) Notwithstanding any provision of section 12-15, the Insurance Commissioner may, under the terms of the agreement entered into under this subsection, disclose information relating to surplus lines brokers or nonadmitted insurance permitted to be placed through surplus lines brokers to any official of another state that is a party to such agreement whose official duties require such disclosure.

(6) The Insurance Commissioner may enter into cooperative agreements with processing entities located in this state or other states related to the capturing and processing of nonadmitted insurance premiums and nonadmitted insurance premiums tax data. Notwithstanding any provision of section 12-15, the Insurance Commissioner may, under the terms of any such cooperative agreement, disclose information relating to surplus lines brokers or nonadmitted insurance permitted to be placed through surplus lines brokers to any official of the processing entity whose duties require such disclosure.

(1953, 1955, S. 2805d; P.A. 76-305; P.A. 83-367, S. 1, 2; P.A. 90-87, S. 4; P.A. 96-75, S. 1, 2; P.A. 01-113, S. 35, 42; P.A. 11-61, S. 34; P.A. 12-145, S. 27.)

History: P.A. 76-305 added exception re policies issued to state and its agencies or towns and their agencies; P.A. 83-367 required semiannual, rather than annual, payments and returns and added Subsec. (b) concerning penalties for late payment; P.A. 90-87 amended Subsec. (a) to require quarterly, rather than semiannual, payments and returns and amended Subsec. (b) re penalties for late payments if not made on the due date, where previously a thirty-day grace period was allowed; Sec. 38-84 transferred to Sec. 38a-743 in 1991; P.A. 96-75 amended exception to add policies issued to special taxing districts, effective July 1, 1996, and applicable to payments due on or after that date; P.A. 01-113 amended Subsec. (a) to delete reference to Sec. 38a-795, effective September 1, 2002; P.A. 11-61 amended Subsec. (a) by adding provision re nonadmitted insurance, added Subsecs. (b) and (c) re payments by licensees for nonadmitted insurance, redesignated existing Subsec. (b) as Subsec. (d), added Subsec. (e) re construction of section, added Subsec. (f) re applicability, added Subsec. (g) re agreement to allocate nonadmitted insurance premiums taxes paid, and made technical changes, effective June 21, 2011, and applicable to nonadmitted insurance coverage procured, continued or renewed on or after July 1, 2011; P.A. 12-145 amended Subsecs. (a) and (b)(2) to delete references to Sec. 38a-777, effective June 15, 2012.

Annotation to former section 38-84:

Cited. 208 C. 505.

Sec. 38a-744. (Formerly Sec. 38-85). Liability of licensee. Any licensee acting in conformance with sections 38a-741 to 38a-744, inclusive, and 38a-794 shall not be subject to personal liability as set forth in section 38a-714.

(1953, S. 2806d; P.A. 01-113, S. 36, 42; P.A. 12-145, S. 28.)

History: Sec. 38-85 transferred to Sec. 38a-744 in 1991; P.A. 01-113 deleted reference to Sec. 38a-795, effective September 1, 2002; P.A. 12-145 deleted reference to Sec. 38a-777, effective June 15, 2012.

Sec. 38a-745. (Formerly Sec. 38-86a). Notice on policies issued by unauthorized issuers. Each insurance policy issued pursuant to sections 38a-741 to 38a-744, inclusive, and 38a-794 by a surplus lines insurer shall bear on its cover, in not less than twelve-point boldface type in capital letters, the following:

NOTICE

THIS IS A SURPLUS LINES POLICY AND IS NOT PROTECTED BY THE CONNECTICUT INSURANCE GUARANTY ASSOCIATION.

(P.A. 87-175, S. 3, 4; P.A. 90-243, S. 37; P.A. 01-113, S. 37, 42; P.A. 08-129, S. 1; P.A. 12-145, S. 29.)

History: P.A. 90-243 made a technical correction; Sec. 38-86a transferred to Sec. 38a-745 in 1991; P.A. 01-113 deleted reference to Sec. 38a-795, effective September 1, 2002; P.A. 08-129 amended notice required to appear on cover of insurance policy issued by surplus lines insurers; P.A. 12-145 deleted reference to Sec. 38a-777, effective June 15, 2012.

Secs. 38a-746 to 38a-749. Reserved for future use.