H.F. _____ DIVISION I 1 SURPLUS LINES INSURANCE 2 Section 1. NEW SECTION . 515I.1 Purpose. 3 1. The purposes of this chapter are to do all of the 4 following: 5 a. Establish a system of regulation which will permit 6 orderly access to surplus lines insurance in this state. 7 b. Encourage admitted insurers to make new and innovative 8 types of insurance available to consumers in this state. 9 c. Protect persons seeking insurance in this state. 10 d. Permit surplus lines insurance to be placed with 11 reputable and financially sound nonadmitted insurers. 12 e. Provide a system through which persons may independently 13 procure surplus lines insurance. 14 f. Protect revenues of this state. 15 g. Foster a national system of regulation of surplus 16 lines insurance by collaborating with other state insurance 17 commissioners. 18 h. Provide a system which subjects surplus lines insurance 19 activities in this state to the jurisdiction of the insurance 20 commissioner and state and federal courts in suits by or on 21 behalf of the state. 22 2. This division shall be liberally construed to promote 23 these purposes. 24 Sec. 2. NEW SECTION . 515I.2 Definitions. 25 As used in this chapter, unless the context otherwise 26 requires: 27 1. “Admitted insurer” means an insurer licensed to do 28 insurance business in this state. 29 2. “Affiliate” means, with respect to an insurer, any entity 30 that controls, is controlled by, or is under common control 31 with the insurer. 32 3. “Affiliated group” means any group of entities that are 33 affiliates. 34 4. “Commercial insurance” means insurance for businesses or 35 -1- LSB 5622HC (3) 84 av/nh 1/ 18

H.F. _____ professionals. 1 5. “Commissioner” means the commissioner of insurance, or 2 the commissioner’s designees. 3 6. “Control” means either of the following: 4 a. That an entity directly or indirectly, or acting through 5 one or more other persons, owns, controls, or has the power 6 to vote twenty-five percent or more of any class of voting 7 securities of another entity. 8 b. That an entity controls in any manner the election of a 9 majority of the directors or trustees of another entity. 10 7. “Eligible surplus lines insurer” means a nonadmitted 11 insurer that has filed an application with the commissioner 12 and been approved for placement of surplus lines insurance and 13 appears on the Iowa listing of nonadmitted companies. 14 8. “Exempt commercial purchaser” means any person purchasing 15 commercial insurance that, at the time of placement, meets all 16 of the following requirements: 17 a. The person employs or retains a qualified risk manager to 18 negotiate insurance coverage. 19 b. The person has paid aggregate nationwide commercial 20 property and casualty insurance premiums in excess of one 21 hundred thousand dollars in the immediately preceding twelve 22 months. 23 c. The person meets at least one of the following criteria: 24 (1) The person possesses a net worth in excess of twenty 25 million dollars except that beginning on January 1, 2015, and 26 on January 1 every five years thereafter, this amount shall be 27 adjusted to reflect the percentage change in the consumer price 28 index for all urban consumers for the most recent available 29 five-year period published by the United States department of 30 labor, bureau of labor statistics. 31 (2) The person generates annual revenues in excess of fifty 32 million dollars except that beginning on January 1, 2015, and 33 on January 1 every five years thereafter, this amount shall be 34 adjusted to reflect the percentage change in the consumer price 35 -2- LSB 5622HC (3) 84 av/nh 2/ 18

H.F. _____ index for all urban consumers for the most recent available 1 five-year period published by the United States department of 2 labor, bureau of labor statistics. 3 (3) The person employs more than five hundred full-time or 4 full-time equivalent employees per individual insured or is a 5 member of an affiliated group employing more than one thousand 6 employees in the aggregate. 7 (4) The person is a nonprofit organization or public entity 8 generating annual budgeted expenditures of at least thirty 9 million dollars except that beginning on January 1, 2015, and 10 on January 1 every five years thereafter, this amount shall be 11 adjusted to reflect the percentage change in the consumer price 12 index for all urban consumers for the most recent available 13 five-year period published by the United States department of 14 labor, bureau of labor statistics. 15 (5) The person is a municipality with a population in excess 16 of fifty thousand persons. 17 9. “Home state” means: 18 a. Except as provided in paragraph “b” , with respect to an 19 insured either of the following: 20 (1) The state in which an insured maintains its principal 21 place of business or, in the case of an individual, the 22 individual’s principal residence. 23 (2) If one hundred percent of the insured risk is located 24 out of the state described in subparagraph (1), the state to 25 which the greatest percentage of the insured’s taxable premium 26 for that insurance policy or contract is allocated. 27 b. If more than one insured from an affiliated group is a 28 named insured on a single surplus lines insurance policy or 29 contract, the home state, as determined pursuant to paragraph 30 “a” , subparagraph (1), of the member of the affiliated group 31 that has the largest percentage of premium attributed to it 32 under such insurance policy or contract. 33 10. “Independently procured insurance” means insurance 34 obtained by a person directly from a nonadmitted insurer. 35 -3- LSB 5622HC (3) 84 av/nh 3/ 18

H.F. _____ 11. “Insurer” means the same as defined in section 507.1, 1 subsection 2. 2 12. “Nonadmitted insurer” means an insurer not licensed to 3 do insurance business in this state. “Nonadmitted insurer” does 4 not include a risk retention group as defined in chapter 515E. 5 13. “Person” means the same as defined in section 507.1, 6 subsection 2. 7 14. “Placement” or “placed” means that an eligible surplus 8 lines insurer has accepted a premium and issued an insurance 9 policy or contract for a particular risk. 10 15. “Premium tax” means the tax imposed by the state on 11 a contract of insurance equal to the applicable percent, as 12 provided in section 432.1. 13 16. “Qualified risk manager” means a person who meets all 14 of the following requirements: 15 a. The person is an employee of, or third party consultant 16 retained by a commercial insurance policyholder. 17 b. The person provides skilled services in loss prevention, 18 loss reduction, or risk and insurance coverage analysis, and 19 purchase of insurance. 20 c. The person meets one of the following requirements: 21 (1) The person has a bachelor’s degree from an accredited 22 college or university in risk management, business 23 administration, finance, economics, or any other field 24 determined by the commissioner to demonstrate minimum 25 competence in risk management; and meets both of the following 26 requirements: 27 (a) Has three years of experience in risk financing, claims 28 administration, loss prevention, risk and insurance coverage 29 analysis, or purchasing commercial lines of insurance. 30 (b) Has one of the following designations: 31 (i) Chartered property and casualty underwriter. 32 (ii) Associate in risk management. 33 (iii) Certified risk manager. 34 (iv) Risk and insurance management society fellow. 35 -4- LSB 5622HC (3) 84 av/nh 4/ 18

H.F. _____ (v) Any other designation, certification, or license 1 determined by the commissioner to demonstrate minimum 2 competency in risk management. 3 (2) The person has at least seven years of experience in 4 risk financing, claims administration, loss prevention, risk 5 and insurance coverage analysis, or purchasing commercial lines 6 of insurance; and has any one of the designations specified in 7 subparagraph (1), subparagraph division (b). 8 (3) The person has at least ten years of experience in risk 9 financing, claims administration, loss prevention, risk and 10 insurance coverage analysis, or purchasing commercial lines of 11 insurance. 12 (4) The person has a graduate degree from an accredited 13 college or university in risk management, business 14 administration, finance, economics, or any other field 15 determined by the commissioner to demonstrate minimum 16 competence in risk management. 17 17. “Surplus lines insurance” means any property and 18 casualty insurance in this state on properties, risks, or 19 exposures, located or to be performed in this state, that is 20 placed through a surplus lines insurance producer with an 21 eligible surplus lines insurer. For purposes of this chapter 22 only, “surplus lines insurance” also includes disability 23 insurance that is in excess of policy limits available from an 24 admitted insurer. 25 18. “Surplus lines insurance producer” means a person 26 licensed pursuant to chapter 522B to sell, solicit, or 27 negotiate surplus lines insurance. 28 Sec. 3. NEW SECTION . 515I.3 Placement of surplus lines 29 insurance business with nonadmitted insurers. 30 1. Surplus lines insurance may be placed by a surplus lines 31 insurance producer with a nonadmitted insurer only if all of 32 the following requirements are met: 33 a. The proposed nonadmitted insurer is an eligible surplus 34 lines insurer. 35 -5- LSB 5622HC (3) 84 av/nh 5/ 18

H.F. _____ b. The proposed nonadmitted insurer is authorized to write 1 the type of insurance sought in this state in its domiciliary 2 jurisdiction. 3 c. Unless otherwise exempt from this requirement, after a 4 diligent search the full amount or type of insurance cannot be 5 obtained from an admitted insurer. 6 d. All other requirements of this chapter are met. 7 2. a. In addition to the full amount of gross premiums 8 charged by the nonadmitted insurer for the insurance on which 9 a premium tax is imposed, a surplus lines insurance producer 10 shall collect and pay to the state of Iowa the appropriate 11 amount of premium tax as provided in section 432.1 for surplus 12 lines insurance. The commissioner shall adopt rules to specify 13 the use of credits or deductions that may be applied to the 14 premium tax. 15 b. The tax on any portion of the premium unearned at the 16 termination of the surplus lines insurance that has been 17 credited by the state shall be returned to the policyholder 18 directly by the surplus lines insurance producer. The surplus 19 lines insurance producer is prohibited from rebating, for any 20 reason, any part of the tax. 21 3. This section shall not apply to a person properly 22 licensed as an insurance producer, who, for a fee and pursuant 23 to a written agreement, is engaged solely to offer advice, 24 counsel, opinion, or service to an insured with respect to 25 the benefits, advantages, or disadvantages promised under 26 any proposed or in-force policy of insurance if the person 27 does not, directly or indirectly, participate in the sale, 28 solicitation, or negotiation of insurance on behalf of the 29 insured. 30 4. Insurance placed under this section shall be valid and 31 enforceable as to all parties. 32 Sec. 4. NEW SECTION . 515I.4 Requirements for eligible 33 surplus lines insurers. 34 1. When this state is the home state of the insured, a 35 -6- LSB 5622HC (3) 84 av/nh 6/ 18

H.F. _____ nonadmitted insurer shall not place any surplus lines insurance 1 business in this state unless the insurer has been approved 2 for such activity by the commissioner. A nonadmitted insurer 3 seeking to qualify as an eligible surplus lines insurer shall 4 submit a request to so qualify in a form and format as directed 5 by the commissioner which demonstrates all of the following: 6 a. Capital and surplus or its equivalent under the laws of 7 the insurer’s domiciliary jurisdiction which equals the greater 8 of either of the following: 9 (1) The minimum capital and surplus requirements under the 10 laws of this state. 11 (2) Fifteen million dollars. 12 b. If the nonadmitted insurer is not domiciled in a state or 13 territory of the United States, verification of the insurer’s 14 listing on the national association of insurance commissioners 15 quarterly listing of alien insurers as maintained by the 16 national association of insurance commissioners international 17 insurers department. 18 c. Evidence that the nonadmitted insurer is in good standing 19 with its domiciliary regulator. 20 2. The commissioner may waive the requirements of this 21 section or set specific requirements on a case-by-case 22 basis upon an affirmative finding of acceptability by 23 the commissioner that the placement of insurance with the 24 nonadmitted insurer is necessary and will not be detrimental 25 to the public and to policyholders. In determining whether 26 business may be placed with a nonadmitted insurer, the 27 commissioner shall consider all of the following: 28 a. The interests of the public and policyholders. 29 b. The length of time the insurer has been licensed to 30 do insurance business in its domiciliary jurisdiction and 31 elsewhere. 32 c. The unavailability of particular coverages from other 33 admitted insurers or eligible surplus lines insurers in this 34 state. 35 -7- LSB 5622HC (3) 84 av/nh 7/ 18

H.F. _____ d. The size of the nonadmitted insurer as measured by 1 the insurer’s assets, capital and surplus, reserves, premium 2 writings, insurance in force, or other appropriate criteria. 3 e. The kinds of business the nonadmitted insurer writes, the 4 insurer’s net exposure, and the extent to which the insurer’s 5 business is diversified among several lines of insurance and 6 geographic locations. 7 f. The past and projected trend in the size of the 8 nonadmitted insurer’s capital and surplus considering such 9 factors as premium growth, operating history, loss and expense 10 ratios, or other appropriate criteria. 11 3. Eligible surplus lines insurers shall not be required to 12 file or seek approval of their forms and rates. 13 Sec. 5. NEW SECTION . 515I.5 Duties of surplus lines 14 insurance producers. 15 1. A surplus lines insurance producer shall not issue 16 or deliver any evidence of insurance or purport to insure 17 or represent that insurance will be or has been written by 18 an eligible surplus lines insurer, unless the producer has 19 authority from the insurer to bind the risk to be insured, or 20 has received information from the insurer in the regular course 21 of business that the coverage has been granted. 22 2. Upon placement of surplus lines insurance, the surplus 23 lines insurance producer shall promptly deliver to the insured 24 the policy or contract, or if the policy or contract is not 25 then available, a certificate cover note, binder, or other 26 evidence of insurance. The certificate cover note, binder, 27 or other evidence of insurance shall contain information as 28 specified by the commissioner by rule. 29 3. As soon as is reasonably possible after the placement 30 of the insurance, the surplus lines insurance producer shall 31 deliver a copy of the policy or contract or, if not available, 32 a certificate of insurance to the insured to replace any 33 evidence of insurance previously issued. Each policy or 34 contract or certificate of insurance shall contain or have 35 -8- LSB 5622HC (3) 84 av/nh 8/ 18

H.F. _____ attached a complete record of all policy or contract insuring 1 agreements, conditions, exclusions, clauses, endorsements, or 2 any other material facts that would regularly be included in 3 the policy or contract. 4 4. If, after delivery of any evidence of insurance, there 5 is any change in the identity of the eligible surplus lines 6 insurer, or the proportion of the risk assumed by such insurer, 7 or any other material change in coverage as stated in the 8 original evidence of insurance, or in any other material change 9 as to the insurance coverage so evidenced, the surplus lines 10 insurance producer shall promptly issue and deliver to the 11 insured an appropriate substitute for, or endorsement of the 12 original document, accurately showing the current status of 13 the coverage and the surplus lines insurer responsible for the 14 coverage. 15 5. Each surplus lines insurance producer shall keep a 16 full and true record of each surplus lines insurance policy 17 or contract placed by an eligible surplus lines insurer and 18 issued or delivered by that person which covers risks wholly 19 or partly located or to be performed in this state. These 20 records and any other records deemed reasonably necessary by 21 the commissioner shall be made available to the commissioner 22 for examination upon request. Records shall be maintained for 23 a period of not less than five years following termination of 24 the surplus lines insurance policy or contract. 25 6. A surplus lines insurance producer shall file a report 26 and remit all premium taxes due to this state for all surplus 27 lines insurance placed by an eligible surplus lines insurer and 28 issued or delivered by that person during the reporting period 29 established by the commissioner. The specific requirements 30 for the timing of and content of the report and the manner of 31 filing shall be specified by the commissioner by rule. 32 Sec. 6. NEW SECTION . 515I.6 Actions against eligible 33 surplus lines insurers. 34 An eligible surplus lines insurer may be sued upon a cause of 35 -9- LSB 5622HC (3) 84 av/nh 9/ 18

H.F. _____ action arising in this state under a surplus lines insurance 1 policy or contract placed by the insurer or upon evidence of 2 insurance placed by the insurer and issued or delivered in 3 this state by a surplus lines insurance producer. A policy 4 or contract issued by an eligible surplus lines insurer shall 5 contain a provision stating the substance of this section and 6 designating the person upon whom service of process can be made 7 on behalf of the insurer. 8 Sec. 7. NEW SECTION . 515I.7 Effect of payment to surplus 9 lines insurance producer. 10 A payment of premium to a surplus lines insurance producer 11 acting for a person other than the producer in procuring, 12 continuing, or renewing any policy or contract of surplus lines 13 insurance procured under this chapter shall be deemed to be 14 payment to the eligible surplus lines insurer, notwithstanding 15 any other conditions or stipulations that are inserted in the 16 policy or contract of insurance. 17 Sec. 8. NEW SECTION . 515I.8 Referrals to surplus lines 18 insurance producers. 19 A surplus lines insurance producer may accept referrals 20 to place surplus lines insurance from any other licensed 21 insurance producer and the surplus lines insurance producer may 22 compensate the referring insurance producer for the referral. 23 Sec. 9. NEW SECTION . 515I.9 Exempt commercial purchasers. 24 A surplus lines insurance producer seeking to procure or 25 place surplus lines insurance in this state for an exempt 26 commercial purchaser is not required to make a diligent search 27 to determine whether the full amount or type of insurance 28 sought by such exempt commercial purchaser can be obtained from 29 an admitted insurer if both of the following requirements are 30 met: 31 1. The surplus lines insurance producer has disclosed 32 to the exempt commercial purchaser that such insurance may 33 be available from an admitted insurer that may provide the 34 purchaser with greater protection and with more regulatory 35 -10- LSB 5622HC (3) 84 av/nh 10/ 18

H.F. _____ oversight. 1 2. The exempt commercial purchaser has subsequently 2 requested in writing that the surplus lines insurance producer 3 place such insurance with an eligible surplus lines insurer. 4 Sec. 10. NEW SECTION . 515I.10 Independently procured 5 surplus lines insurance —— premium tax —— penalty. 6 1. When this state is the home state of the insured, a 7 person who directly procures, continues, or renews a surplus 8 lines insurance policy or contract independently and without 9 using a surplus lines insurance producer on properties, 10 risks, or exposures located or to be performed in whole or in 11 part in this state shall file a written report regarding the 12 transaction with the commissioner, in a manner and method as 13 directed by the commissioner by rule. 14 2. When this state is the home state of the insured, 15 each person who has independently procured a surplus lines 16 insurance policy or contract shall pay a premium tax at a 17 rate appropriate to the amount of premium tax equal to the 18 applicable percent, as provided in section 432.1. The tax 19 shall be remitted via a method and schedule and in a manner as 20 directed by the commissioner by rule. 21 3. The commissioner may assess a penalty of one percent of 22 the delinquent amount of taxes owed per month as specified in 23 section 507A.9. 24 Sec. 11. NEW SECTION . 515I.11 Violations and penalties. 25 1. The commissioner may declare a surplus lines insurer 26 ineligible to place surplus lines insurance in the state if at 27 any time the commissioner has reason to believe that a surplus 28 lines insurer meets any of the following conditions: 29 a. Is in unsound financial condition or has acted in an 30 untrustworthy manner. 31 b. No longer meets the standards set forth in this chapter. 32 c. Has willfully violated the laws of this state. 33 d. Does not conduct its claims settlement practices in a 34 fair and reasonable manner. 35 -11- LSB 5622HC (3) 84 av/nh 11/ 18

H.F. _____ e. Has committed an unfair or deceptive insurance trade 1 practice under chapter 507B. 2 2. The commissioner may suspend, revoke, or refuse to renew 3 the license of a surplus lines insurance producer or impose any 4 sanction or penalty allowed under chapter 507B after notice and 5 hearing for one or more of the following grounds: 6 a. Removal of the resident surplus lines insurance 7 producer’s principal place of business from this state without 8 notice to the commissioner. 9 b. Removal of the resident surplus lines insurance 10 producer’s office accounts and records from this state during 11 the period for which the accounts and records are required to 12 be maintained. 13 c. Closure of the surplus lines insurance producer’s 14 office for a period of more than thirty business days, unless 15 permission is granted by the commissioner. 16 d. Failure to file required reports with the commissioner 17 or the commissioner’s designee. 18 e. Failure to remit surplus lines insurance premium taxes to 19 this state as directed by the commissioner. 20 f. Violating any provision of this chapter. 21 g. For any cause for which an insurance producer license 22 could be denied, revoked, or suspended, or renewal refused or a 23 civil penalty imposed under chapter 522B. 24 3. The commissioner may initiate an administrative 25 proceeding against a surplus lines insurance producer for the 26 collection of unpaid premium taxes. The commissioner may 27 assess a penalty of one percent of the delinquent amount of 28 taxes owed per month as specified in section 507A.9 and any 29 other penalties allowed by law. 30 4. A person that represents or aids a nonadmitted insurer 31 in violation of this chapter shall be subject to criminal 32 penalties as set forth in section 507A.10. 33 Sec. 12. NEW SECTION . 515I.12 Cease and desist orders —— 34 civil and criminal penalties. 35 -12- LSB 5622HC (3) 84 av/nh 12/ 18

H.F. _____ 1. Upon a determination by the commissioner, after a 1 hearing conducted pursuant to chapter 17A, that a surplus lines 2 insurance producer, an eligible surplus lines insurer, or a 3 nonadmitted insurer has violated a provision of this chapter, 4 the commissioner shall reduce the findings of the hearing to 5 writing and deliver a copy of the findings to the producer 6 or insurer. The commissioner may issue an order requiring 7 the producer or insurer to cease and desist from engaging in 8 the conduct resulting in the violation and may assess a civil 9 penalty of not more than fifty thousand dollars against the 10 producer or insurer. 11 2. a. Upon a determination by the commissioner that a 12 surplus lines insurance producer, an eligible surplus lines 13 insurer, or a nonadmitted insurer has engaged, is engaging, 14 or is about to engage in any act or practice constituting a 15 violation of this chapter or a rule adopted or order issued 16 under this chapter, the commissioner may issue a summary order, 17 including a brief statement of findings of fact, conclusions 18 of law, and policy reasons for the decision, and directing the 19 producer or insurer to cease and desist from engaging in the 20 act or practice or to take other affirmative action as is in 21 the judgment of the commissioner necessary to comply with the 22 requirements of this chapter. 23 b. A surplus lines insurance producer, an eligible surplus 24 lines insurer, or a nonadmitted insurer to whom a summary order 25 has been issued under this subsection may contest the order by 26 filing a request for a contested case proceeding and hearing as 27 provided in chapter 17A and in accordance with rules adopted by 28 the commissioner. However, the producer or insurer shall have 29 at least thirty days from the date that the order is issued in 30 order to file the request. Section 17A.18A is inapplicable to 31 a summary order issued under this subsection. If a hearing 32 is not timely requested, the summary order becomes final by 33 operation of law. The order shall remain effective from the 34 date of issuance until the date the order becomes final by 35 -13- LSB 5622HC (3) 84 av/nh 13/ 18

H.F. _____ operation of law or is overturned by a presiding officer or 1 court following a request for hearing. 2 c. A surplus lines insurance producer, an eligible surplus 3 lines insurer, or a nonadmitted insurer violating a summary 4 order issued under this subsection shall be deemed in contempt 5 of that order. The commissioner may petition the district 6 court to enforce the order as certified by the commissioner. 7 The district court shall find the producer or insurer in 8 contempt of the order if the court finds after hearing that 9 the producer or insurer is not in compliance with the order. 10 The court may assess a civil penalty against the producer or 11 insurer and may issue further orders as it deems appropriate. 12 3. A person acting as a surplus lines insurance producer, 13 an eligible surplus lines insurer, or nonadmitted insurer who 14 willfully violates any provision of this chapter, or any rule 15 adopted or order issued under this chapter, is guilty of a 16 class “D” felony. 17 4. A person acting as a surplus lines insurance producer, 18 an eligible surplus lines insurer, or nonadmitted insurer who 19 willfully violates any provision of this chapter, or any rule 20 adopted or order issued under this chapter, when such violation 21 results in a loss of more than ten thousand dollars, is guilty 22 of a class “C” felony. 23 5. The commissioner may refer such evidence as is available 24 concerning violations of this chapter or of any rule adopted 25 or order issued under this chapter, or of the failure of a 26 person to comply with the licensing requirements of chapter 27 522B, to the attorney general or the proper county attorney who 28 may, with or without such reference, institute the appropriate 29 criminal proceedings under this chapter. 30 6. This chapter does not limit the power of the state to 31 punish any person for any conduct that constitutes a crime 32 under any other statute. 33 Sec. 13. NEW SECTION . 515I.13 Insurance policy or contract 34 remains valid. 35 -14- LSB 5622HC (3) 84 av/nh 14/ 18

H.F. _____ A policy or contract of insurance issued or delivered by an 1 eligible surplus lines insurer or a nonadmitted insurer which 2 is otherwise valid and contains a condition or provision not 3 in compliance with the requirements of this chapter is not 4 thereby rendered invalid but shall be construed and applied in 5 accordance with the conditions and provisions which would have 6 applied had the policy or contract been issued or delivered in 7 full compliance with this chapter. 8 Sec. 14. NEW SECTION . 515I.14 Severability. 9 If any provision of this chapter, or the application of the 10 provision of this chapter to any person or circumstance, is 11 held invalid, the remainder of the chapter and the application 12 of the provision to persons or circumstances other than those 13 as to which it is held invalid, shall not be affected by that 14 holding. 15 Sec. 15. NEW SECTION . 515I.15 Rulemaking authority. 16 The commissioner shall adopt rules pursuant to chapter 17A 17 to implement the purposes of this chapter. 18 DIVISION II 19 COORDINATING PROVISIONS 20 Sec. 16. Section 507A.4, subsection 1, Code Supplement 21 2011, is amended to read as follows: 22 1. The lawful transaction of surplus lines insurance as 23 permitted by sections 515.120 through 515.122 chapter 515I . 24 Sec. 17. Section 515E.9, Code Supplement 2011, is amended 25 to read as follows: 26 515E.9 Purchasing group restrictions. 27 A purchasing group shall not purchase insurance from an 28 insurer not admitted in this state unless the purchase is 29 effected through a duly licensed agent or broker insurance 30 producer acting pursuant to sections 515.120 through 31 515.122 chapter 515I . 32 Sec. 18. Section 522B.6, subsection 2, paragraph g, Code 33 2011, is amended to read as follows: 34 g. Excess and surplus lines insurance provided by certain 35 -15- LSB 5622HC (3) 84 av/nh 15/ 18

H.F. _____ nonadmitted insurers pursuant to section 515.120 chapter 515I . 1 Sec. 19. REPEAL. Sections 515.120 through 515.122, Code and 2 Code Supplement 2011, are repealed. 3 Sec. 20. EFFECTIVE UPON ENACTMENT. This Act, being deemed 4 of immediate importance, takes effect upon enactment. 5 EXPLANATION 6 This bill establishes new regulations to permit increased 7 access to surplus lines insurance in the state, and contains 8 penalties, coordinating provisions, repeals, and effective date 9 provisions. 10 The bill creates new Code chapter 515I which contains 11 regulations that permit the sale of surplus lines insurance 12 in the state by insurers who are not licensed to do insurance 13 business in the state. Such insurers shall be listed as 14 eligible surplus lines insurers if they meet the requirements 15 of the Code chapter and are approved to sell such insurance by 16 the commissioner of insurance. 17 Surplus lines insurance producers that are licensed pursuant 18 to Code chapter 522B to sell, solicit, or negotiate surplus 19 lines insurance are also subject to new regulations and must 20 file reports and remit premium taxes to the state for all 21 surplus lines insurance sold or delivered by the producer, as 22 required by the commissioner by rule. A payment of premium to 23 a producer is deemed to be payment to the insurer. 24 Surplus lines insurance producers may sell insurance issued 25 by an insurer that is not admitted to do business in this 26 state if the insurer is an eligible surplus lines insurer, the 27 insurer is authorized to write the type of insurance being sold 28 in its domiciliary jurisdiction, and a diligent search by the 29 producer indicates that the type of insurance being sold cannot 30 be obtained from an insurer admitted to do insurance business 31 in this state. Surplus lines insurance producers may sell 32 commercial surplus lines insurance, without determining whether 33 the coverage is available from an insurer admitted to do 34 business in the state, to certain exempt commercial purchasers 35 -16- LSB 5622HC (3) 84 av/nh 16/ 18

H.F. _____ that employ qualified risk managers to negotiate the coverage 1 and meet certain financial and size parameters. 2 When this state is the home state of the insured, a person 3 who procures surplus lines insurance independently without 4 using the services of a surplus lines insurance producer is 5 required to file a written report about the transaction and 6 pay the appropriate premium taxes that are due in the manner 7 that is required by the commissioner by rule. Delinquent taxes 8 shall be increased by a penalty of 1 percent per month of the 9 delinquent amount. 10 The commissioner may declare a nonadmitted insurer 11 ineligible to place surplus lines insurance in the state if 12 the commissioner believes that the insurer is in an unsound 13 financial condition or has acted in an untrustworthy manner; 14 no longer meets the requirements of Code chapter 515I; has 15 willfully violated Iowa law; does not conduct its claims 16 settlement practices in a fair and reasonable manner; or has 17 committed an unfair or deceptive trade practice under Code 18 chapter 507B. 19 The commissioner may also suspend, revoke, or refuse to 20 renew the license of a surplus lines insurance producer or 21 impose any penalty under Code chapter 507B for specified 22 reasons. The commissioner may initiate an administrative 23 proceeding against a surplus lines insurance producer for 24 the collection of unpaid premium taxes and assess a penalty 25 of 1 percent per month of the delinquent amount. A person 26 who represents or aids a nonadmitted insurer in violation of 27 the new Code chapter is subject to criminal penalties. Upon 28 a determination by the commissioner that a surplus lines 29 producer, an eligible surplus lines insurance insurer, or 30 a nonadmitted insurer is violating or about to violate the 31 provisions of Code chapter 515I, the commissioner may issue a 32 summary order directing the producer or insurer to cease and 33 desist, and may impose civil penalties. 34 Willful violation of the provisions of the Code chapter by 35 -17- LSB 5622HC (3) 84 av/nh 17/ 18

H.F. _____ a surplus lines insurance producer, an eligible surplus lines 1 insurer, or a nonadmitted insurer is punishable as a class “D” 2 felony. A class “D” felony is punishable by confinement for 3 no more than five years and a fine of at least $750 but not 4 more than $7,500. Such a willful violation that results in a 5 loss of more than $10,000 is punishable as a class “C” felony. 6 A class “C” felony is punishable by confinement for no more 7 than 10 years and a fine of at least $1,000 but not more than 8 $10,000. 9 A policy or contract issued by an eligible surplus lines 10 insurer or a nonadmitted insurer which is otherwise valid 11 and contains a condition or provision not in compliance with 12 the requirements of Code chapter 515I shall be construed in 13 accordance with the conditions and provisions which would have 14 applied if the policy or contract had been issued or delivered 15 in compliance with the Code chapter. Also, if a provision of 16 the chapter is held invalid as to a person or circumstance, the 17 rest of the Code chapter shall be valid as to other persons or 18 circumstances. 19 The commissioner shall adopt rules pursuant to Code chapter 20 17A to implement the purposes of the new Code chapter. 21 The bill repeals several provisions currently contained in 22 Code chapter 515 which relate to the sale of surplus lines 23 insurance in the state. Code sections 507A.4(1) and 515E.9 are 24 amended to reflect this repeal and the enactment of new Code 25 chapter 515I. 26 The bill is effective upon enactment. 27 -18- LSB 5622HC (3) 84 av/nh 18/ 18