Surplus Lines Premiums on the Rise in Texas

By Stephanie K. Jones | December 3, 2012

The amount of surplus lines insurance premium written in Texas rose by 25 percent as of the end of October compared with the same period the year before, signaling a boost to companies operating in this sector. Texas also stands to benefit as the taxes collected on surplus lines policies goes directly into the state’s general fund.

“Texas consistently ranks as the 2nd or 3rd largest surplus lines market in the U.S.,” Texas Insurance Commissioner Eleanor Kitzman told attendees at the recent annual meeting of the Texas Surplus Lines Association (TSLA). “In 2011 you had $2.25 billion in premium that was reported. … And $160 million in tax revenue was generated. … We appreciate that very much.”

Premium reported to the Surplus Lines Stamping Office of Texas (SLSOT) through October was $3.335 billion. Of that, $252 million was non-Texas premium on multi-state policies, which is now taxed as Texas premium in a post-Nonadmitted and Reinsurance Reform Act (NRRA) world.

Kitzman said that of the total number of policies reported to SLSOT through the end of October, 2,100, or 0.5 percent of the total, were multi-state policies. But, she noted, the premiums from those multi-state policies “can be sizeable. The projected $15 million increase in tax revenue is kind of surprising because a lot of people assumed that the impact [of the NRRA] on Texas based on the home state rule would be greater. … There was a perception that if there were a sharing of this premium that Texas would be a loser, we would be a donor state. The preliminary numbers indicate that that is just not as significant as some people thought that it would be.”

There was a perception that if there were a sharing of this premium that Texas would be a loser.

Also in a post-NRRA environment, agents may procure surplus lines policies for some exempt commercial insurance purchasers without having to go through a due diligence effort to find coverage in the admitted insurance market. However, the Texas Department of Insurance requires those purchases to be identified and reported to the stamping office.

Beginning Jan. 1, SLSOT will begin tracking information related to exempt commercial purchasers. TDI will use that information, Kitzman said, to evaluate the effect of new rule.

“There’s a concern that business that doesn’t comply with the terms of that exemption is actually undermining the rest of the market,” Kitzman said.

From This Issue

Insurance Journal West December 3, 2012
December 3, 2012
Insurance Journal West Magazine

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