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    Texas Legislature Passes Domestic Surplus Lines Insurance Company Legislation

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    The Texas Legislature has passed legislation authorizing domestic surplus lines insurance companies in Texas, which may lead to an influx of new insurance company applications for licensure and redomestication to Texas applications as insurer groups seek to take advantage of the increasingly liberalized Texas rules governing its surplus lines market. An option for domestic surplus lines authorization in Texas eliminates the need to utilize out-of-state insurers as designated surplus lines writers for Texas-based risks and permits those risks to be underwritten by Texas domestics on a surplus lines basis.

    Texas also recently enacted legislation relaxing surplus lines procurement conditions for so-called “industrial insureds.” Those highly favorable for business rules become effective September 1, 2017.

    To qualify for the newly authorized statutory category of Domestic Surplus Lines Insurer designation, insurance companies must meet certain eligibility requirements and may not concurrently write admitted risks in Texas. Surplus lines procurement requirements and disclosures will still apply to domestically placed risks.

    The legislation expressly authorizes eligible out of state insurers to re-domesticate to Texas as a Domestic Surplus Lines Insurer.

    The domestic surplus lines legislation was broadly supported by the Texas Department of Insurance and if signed by Governor Greg Abbott in the coming days, should become effective January 1, 2018.

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