ARC 4781C
INSURANCE DIVISION[191]
Adopted and Filed
Rule making related to surplus lines insurers and rules review updates
The Insurance Division hereby amends Chapter 21, “Requirements for Surplus Lines, Risk Retention Groups and Purchasing Groups,” Iowa Administrative Code.
Legal Authority for Rule Making
This rule making is adopted under the authority provided in Iowa Code sections 515E.14 and 515I.15.
State or Federal Law Implemented
This rule making implements, in whole or in part, Iowa Code chapter 515E and chapter 515I as amended by 2019 Iowa Acts, Senate File 558.
Purpose and Summary
This rule making is amending Chapter 21 as part of the Division’s five-year review of rules and to implement the changes in 2019 Iowa Acts, Senate File 558, which allows domestic surplus lines insurers to be eligible surplus lines insurers.
Public Comment and Changes to Rule Making
Notice of Intended Action for this rule making was published in the Iowa Administrative Bulletin on August 28, 2019, as ARC 4622C. A public hearing was held on September 23, 2019, at 10 a.m.	at the Division’s offices, Fourth Floor, Two Ruan Center, 601 Locust Street, Des Moines, Iowa. No one attended the public hearing.
One comment was received regarding the reference in rule 191—21.5(515I) to the Uniform Certificate of Authority Application. The Division has revised rule 191—21.5(515I) to remove this reference. In addition, subrule 21.5(1) was changed to clarify that the Division’s general waiver provisions apply. The catchwords for subrule 21.2(1) were changed to more accurately describe the content of the subrule, and a reference to 2019 Iowa Acts, Senate File 558, in rule 191—21.1(515I) has been removed because this legislation has been codified in Iowa Code chapter 515I.
Adoption of Rule Making
This rule making was adopted by Douglas M. Ommen, Iowa Insurance Commissioner, on October 30, 2019.
Fiscal Impact
This rule making has no fiscal impact to the State of Iowa.
Jobs Impact
After analysis and review of this rule making, no impact on jobs has been found.
Waivers
The Division’s general waiver provisions of 191—Chapter 4 apply to these rules.
Review by Administrative Rules Review Committee
The Administrative Rules Review Committee, a bipartisan legislative committee which oversees rule making by executive branch agencies, may, on its own motion or on written request by any individual or group, review this rule making at its regular monthly meeting or at a special meeting. The Committee’s meetings are open to the public, and interested persons may be heard as provided in Iowa Code section 17A.8(6).
Effective Date
This rule making will become effective on December 25, 2019.
The following rule-making action is adopted:
	Amend 191—Chapter 21 as follows:
CHAPTER 21
REQUIREMENTS FOR SURPLUS LINES,
RISK RETENTION GROUPS AND PURCHASING GROUPS
[Prior to 10/22/86, Insurance Department[510]]
191—21.1(515E,515I) Definitions. In addition to the definitions provided in Iowa Code chapters 515E and 515I, the following definitions shall apply to this chapter, unless the context clearly requires otherwise:
“Division” means the Iowa insurance division, supervised by the commissioner pursuant to Iowa Code section 505.8, in the division’s performance of the duties of the commissioner under Iowa Code chapters 515E and 515I.
“Division’s Web site website” means the Web site website of the Iowa insurance division, www.iid.iowa.gov iid.iowa.gov.
“Place” or “places” means obtaining insurance for an insured with a specific insurer.
191—21.2(515I) Eligible surplus lines insurer’s duties.
	21.2(1) Insurer liable. Premium tax payment. Where, pursuant to Iowa Code chapter 515I, coverage is placed with an eligible surplus lines insurer, but the surplus lines insurance producer fails to pay to the state of Iowa division the premium tax required by Iowa Code section 515I.3(2) and rule 191—21.3(515) 191—21.3(515I), the eligible surplus lines insurer shall be liable for must pay the premium tax required by Iowa Code chapter 515I and this chapter.
	21.2(2) How premium tax quoted. An eligible surplus lines insurer or a broker surplus lines producer for an eligible surplus lines insurer is authorized to quote a premium which includes tax as is required by Iowa Code chapter 515I, and thereafter no additional tax amount may be charged or collected. Premium tax may be stated in the contract of insurance as a separate component of the total premium only when the premium is not based upon rates or premiums which included a premium tax component when promulgated. Any fees collected from residents of this state are considered part of the premium and thus are subject to taxation.
191—21.3(515I) Surplus lines insurance producer’s duties.
	21.3(1) Surplus lines insurance producer’s collection of tax. A surplus lines insurance producer who places insurance with an eligible surplus lines insurer shall must collect premium tax from the eligible surplus lines insurer by withholding 1 percent of the premiums for such tax.
	21.3(2) Electronic reporting of premium tax. A surplus lines insurance producer who places insurance with an eligible surplus lines insurer shall must file electronically the premium tax information with the division, as instructed on the division’s website, on or before March 1 for policies issued during the preceding calendar year.
	21.3(3) Annual report. On or before March 1 of each year, every surplus lines insurance producer who has placed insurance with an eligible surplus lines insurer when the policies have been issued during the preceding calendar year shall must file electronically with the division , or as otherwise directed by the division , a sworn report and supporting documentation, as instructed on the division’s website, which may include evidence of a diligent search required pursuant to Iowa Code section 515I.3, of all such business written during the preceding calendar year and shall must submit the amount to cover the taxes due on all such business. The manner of filing electronically and the content of the report and required supporting documentation are listed on the division’s website. If no business was written issued during the preceding calendar year, no report is required. Failure to file an annual report or pay the taxes imposed by Iowa Code chapter 515I will be deemed grounds for the revocation of a surplus lines insurance producer’s license by the division, and failure to file an annual report or pay taxes within the time requirements of this rule will subject the surplus lines insurance producer to the penalties of Iowa Code section 515I.12.
191—21.4(515I) Surplus lines insurance producer’s duty to insured. A surplus lines insurance producer who places coverage with an eligible surplus lines insurer as defined in Iowa Code section 515I.2 shall must deliver to the insured, within 30 days of the date the policy is issued, a notice that states the following: “This policy is issued, pursuant to Iowa Code chapter 515I, by a nonadmitted company an eligible surplus lines insurer in Iowa and as such is not covered by the Iowa Insurance Guaranty Association.” A surplus lines insurance producer may comply with this rule by verifying disclosure of this language in a clear and conspicuous position on the policy or by electronic delivery authorized by Iowa Code chapter 505B, if the method of delivery of the notice allows the division, the surplus lines insurance producer and the intended recipient to verify receipt of the specific notice.
191—21.5(515I) Procedures for qualification and renewal of a nonadmitted insurer as an eligible surplus lines insurer.
	21.5(1) Application and procedures for initial qualification of a nonadmitted insurer as an eligible surplus lines insurer.
	a. 	Any nonadmitted insurer or domestic surplus lines insurer who wishes to qualify under Iowa Code chapter 515I as an eligible surplus lines insurer shall must make an application with the division in a format prescribed by the division, as instructed on the division’s website.
	b. 	The nonadmitted insurer’s application shall contain the following information, which also is listed on the division’s Web site must include:
	(1)	A completed National Association of Insurance Commissioners Uniform Certificate of Authority Application (NAIC UCAA) Expansion Application, available through the division’s Web site or through the NAIC Web site, www.naic.org/industry.
	(2) (1)	The name of an Iowa-licensed Iowa resident surplus lines insurance producer qualified in Iowa to write surplus lines insurance, whom the nonadmitted insurer is designating as the person to accept inquiries and notices on behalf of the nonadmitted insurer.
	(3) (2)	Remittance of Payment of the greater of a $100 filing fee or a retaliatory fee, and a $500 an examination fee for all new applicants.
	(3)	Demonstrated maintenance of the capital and surplus required pursuant to Iowa Code chapter 515I.
	c. 	In addition to the above requirements, the nonadmitted insurer shall:
	(1)	Maintain the greater of either minimum capital and surplus of $5 million or risk-based capital pursuant to Iowa Code chapter 521E, and
(2) Have must have been actively in operation for at least three years without significant changes in ownership or management during the three-year period.
These financial and This management requirements requirement may be waived by the division upon a finding that the insurer will be offering coverage in a line of insurance for which there is an unavailability of capacity and an extraordinary need for coverage in this state. The division may require other information as deemed necessary pursuant to the division’s waiver process in 191—Chapter 4.
	21.5(2) Procedures for renewal of a nonadmitted an insurer as an eligible surplus lines insurer. A nonadmitted An eligible surplus lines insurer that is not an alien insurer as defined in Iowa Code section 515.70 and that was approved by the division as an eligible surplus lines insurer shall, except for an alien insurer under Iowa Code section 515I.2(7)“b,” must by March 1 of each year following the year of approval:
	a. 	Continue to comply Be in compliance with paragraph 21.5(1)“c” subparagraph 21.5(1)“b”(3);
	b. 	Pay the greater of a $100 renewal fee or a retaliatory fee; and
	c. 	Submit to the division the documents and materials listed on the division’s Web site website.
	21.5(3) Periodic reporting. An eligible surplus lines insurer, except for an alien insurer under Iowa Code section 515I.2(7)“b,” must submit quarterly financial statements to the division as instructed on the division’s website.
	21.5(3) 21.5(4) Failure to comply with renewal procedures. Failure of a nonadmitted an eligible surplus lines insurer to timely submit the renewal materials required in this rule or to otherwise fail to comply with this rule shall by subrule 21.5(2) will result in the automatic termination of the nonadmitted insurer’s status as an eligible surplus lines insurer.
191—21.6(515E) Procedures for qualification as a risk retention group.
	21.6(1) Any insurer who wishes to register under Iowa Code chapter 515E as a risk retention group shall file with the division an application that contains must:
	a. 	The File with the division an application that contains information required by Iowa Code section 515E.4, which also is listed on the division’s Web site website; and
	b. 	Remittance Pay the greater of a $100 filing fee plus any additional or a retaliatory fees fee and, for all new applicants, an examination fee.
	21.6(2) A risk retention group shall must pay a $100 renewal fee by March 1 of each year following the year of registration. The risk retention group shall must annually provide information requested by the division for determination of continued registration.
191—21.7(515E) Risk retention groups. A risk retention group as defined in Iowa Code chapter 515E may utilize its producers to report and pay premium taxes or may pay the taxes directly. If producers are utilized, the producers shall must file the premium tax information electronically with the division through the division’s Web site website on or before March 1 for policies issued during the preceding calendar year.
191—21.8(515E) Procedures for qualification registration as a purchasing group.
	21.8(1) Prior to doing business in this state, a purchasing group shall must furnish to the division notice that shall include includes:
	a. 	The information set forth in Iowa Code section 515E.8, which also is listed on the division’s Web site website; and
	b. 	Designation of the commissioner for service of process, as set forth in Iowa Code section 515E.8(3); and
	b.  c.	Remittance of a $100 filing fee.
	21.8(2) A registered purchasing group shall must pay a $100 renewal fee by March 1 of each year following the year of registration. The purchasing group must provide information requested by the division for determination of continued registration.
191—21.9(515E,515I) Failure to comply; penalties. Failure of a producer, surplus lines insurance producer, insurer, risk retention group or purchasing group to comply with this chapter or with Iowa Code chapters 515E and 515I may subject the producer, surplus lines insurance producer, insurer, risk retention group or purchasing group to penalties set forth in Iowa Code chapter chapters  507B, 515E  or and 515I.
These rules are intended to implement Iowa Code sections 515.120 to 515.122 chapters 515I and 515E.
[Filed 10/30/19, effective 12/25/19]
[Published 11/20/19]
Editor’s Note: For replacement pages for IAC, see IAC Supplement 11/20/19.