SURPLUS LINE BROKER LICENSE CHANGES

The OIC adopted the long expected changes to out of state testing. The changes are to be effective August 2, 2008. Please see the rule change at:

http://www.insurance.wa.gov/laws_regs/dynamic/rules_new.asp

The wording as adopted was not changed from the interim wording developed earlier in the year.

If you have any questions, please let us hear from you.

Update on Legislative Changes

GOODBYE -- OUT OF STATE TESTING REQUIREMENTS

HELLO -- NEW PROPOSAL TO REGULATIONS

This year and next year there are a number of changes effecting surplus lines. Two items are in process at the moment. One is the dropping of the non-resident testing requirement for the surplus lines test. The other is blending the changes necessitated by the new Producer Licensing Bill that is effective in July 2009.


1. The complete text of the proposed change to the testing requirements can be found on the OIC Laws/Regulations web page (See Pending Rule R 2008-04). Link to the web page is

http://www.insurance.wa.gov/laws_regs/dynamic/rules_pending.asp

The SLA has been active in discussing the concept of the change as well as the wording. Be aware the testing change is not the only change being proposed. Other areas in WAC 284-15 are under revision. I suggest you review the revisions.

At this time we have two areas we continue to discuss. In WAC-284-15-020 we are requesting the word “deemed” be retained and the substitute word “presumed” is deleted. The second area is of more significance. We feel WAC 284-15-080 should be removed in entirety when the Producer license is fully implemented. Our view is there is no need for this section when all individuals have a producer license. At this time we are looking for concurrence from the OIC.

On June 12th there is a hearing on this matter. Let us know your views.

2. The second item is tied into the producer bill. The producer bill that was passed in 2007 required change to the surplus line portion of the regulations as many other areas of the code. To make these changes a producer technical bill was proposed. This was proposed to be a 2008 legislative item.

You may remember we opposed areas of the proposed producer technical bill. You can see our views in our blog. We were concerned with the format proposed and general inclusion in areas that did not seen appropriate. After discussions the OIC agreed to take the surplus lines sections out of the technical bill. The technical bill was presented to the legislature and passed in 2008 without our inclusion. We are now starting on the format and wording for a bill to go to the 2009 legislature dealing with surplus lines and change brought by the producer bill. Those discussions are just starting. More details will be coming.

Producer Licensing Technical Follow-Up Bill

Since the last posting, the technical bill "cleaning up" the previously passed producer licensing bill has moved from a "technical bill draft" to a "Z-draft" and now to a "bill" in the legislature as Senate Bill 6591.

This bill was requested by the OIC and makes technical corrections and some policy changes associated with insurance agents and brokers becoming insurance producer in July 2009. We at the SLA did have concerns that the first technical bill draft involved the surplus line brokers in a very broad manner and in a code structure that wasn’t logical. For details, see the previous postings.

The new bill has effectively removed the surplus line brokers from the bill. Now the only references to surplus lines are in areas that need technical wording clarifications to correlate to the new producer licensing bill. We are happy that the initial approach was not adopted.

This does not mean it ends here. It simply means the review and technical changes to the code concerning surplus lines are moving to later this year. You will recall that the new producer bill does not go into effect until July 2009 so there is time to review the surplus lines code as it relates to the producer bill.

Discussion items for surplus lines in the Z-draft were bonding, disclosure, and applicability of the producer vs. surplus line broker license along with other areas. These areas are to be part of the review later in the year.

One area that should be noted in the current producer bill as it stands now and will undoubtedly continue after the passage of SB 6591 is the definition of producer. This definition of producer as written includes the surplus line broker. This has been a discussion point since the inception of the producer bill. That is the surplus line broker should be excluded and dealt with in 48.15. It is our understanding that the OIC has and continues to agree that the surplus line broker should be excluded from the definition of producer. This hasn't been done yet. It should not be an issue but it needs to be done and not forgotten.

It is important to emphasize this definition of producer. It has been acknowledged twice, but has not been fixed. The first producer bill was viewed as not applying to the surplus line broker as 48.15 was the governing body and the needed clarifications weren’t pushed. The bill was passed and people felt 48.15 would take precedence. The new technical bill attempted to address the inclusion as a producer by placing specific entries in the technical bill where surplus line broker should apply. Over 100 times. This broad based inclusion was then seen as inappropriate surplus line broker verbiage and was withdrawn from the technical bill. However, that leaves the producer definition intact with its inclusion of surplus line broker. That is fine for now as July 2009 is some time away but this issue needs to be fixed prior to 2009.

This year we will work with the OIC on integrating the technical changes from the previously passed producer bill.

You can track Senate Bill 6591 at:



http://apps.leg.wa.gov/billinfo/summary.aspx?bill=6591