Texas House Insurance Committee Discusses Surplus Lines Bills

In the current legislative session, there are four pending bills that affect the excess and surplus lines industry. The bills revolve around hail storm litigation, an exemption for industrial insureds, domestic surplus lines insurers, and collateral for reinsurance. Each bill has been filed both in the Texas Senate and in the House of Representatives.

The House Insurance Committee held a public hearing on Tuesday, April 4, at the state capitol to discuss 24 different insurance-related bills. Three of the four surplus lines bills were discussed, with two left pending and one sent to the full House.

House Bill 2491 would create an option for Texas-based companies to receive credit for reinsurance purchased. Currently, state law requires that reinsurers domiciled outside of the United States post 100 percent collateral when doing business with Texas-based companies. Companies inside the country do not have to post 100 percent collateral. This collateral represents trapped capital, which may limit a reinsurer’s ability to do business.

If the bill is passed, qualified reinsurers would be allowed to post less than 100 percent collateral. However, insurers could still require up to 100 percent if they so choose, as the certified reinsurer designation would not be mandatory.

This law represents a standard put forth by the National Association of Insurance Commissioners (NAIC), which must be adopted by January 2019 to retain NAIC accreditation.

House Bill 2492 would allow insurers domiciled in Texas to write surplus lines coverage in the state of Texas. At the present time, a surplus lines insurer must be domiciled outside the state to conduct business in Texas.

If passed, Texas will become the 11th state to allow domestic surplus lines insurers. The bill could lower regulatory costs for insurers, allow for more state regulation, increase jobs for Texans, and raise local and state revenue.

Both House Bill 2491 and House Bill 2492 were left pending.

The Insurance Committee presented a substitution for House Bill 1774, which was introduced after it was observed that the number of lawsuits against insurers after weather-related events was rising dramatically.

The substitutions include clarifying the text of the bill for understanding and adding that prejudgment interest is available to the claimant. The bill also provides more information on the litigation process.

After a vote, the bill was substituted and is to be reported to the full House. Representatives Muñoz, Turner, and Vo voted against the motion.