Texas Adopts Amendments to Surplus Lines Stamping Office Plan of Operation with Enhanced Department of Insurance Oversight

Kent C. Sullivan, Commissioner of the Texas Department of Insurance (TDI) issued Order No. 2020-6384 on July 3, 2020, approving an amended Plan of Operation of the Surplus Lines Stamping Office of Texas (SLSOT).

In May, TDI formally rejected amendments to the Plan of Operation previously proposed by SLSOT on the basis of perceived impediments to the TDI’s oversight of SLSOT operations and SLSOT operational deficiencies. The proposed amended Plan of Operation was the subject of a June public hearing during which comments on the proposed amendments and the SLSOT operations were considered by TDI in the Commissioner’s final July 3 approval of an amended Plan of Operation.

Created by the Texas Legislature in 1987 and governed by Texas Insurance Code Chapter 981, SLSOT operates in Texas as an unincorporated non-profit association under the direction of a nine member Board of Directors, who are appointed by the Commissioner. Through his approval of the Plan of Operations and mandated regular SLSOT interactions with TDI staff, the Commissioner exercises overall supervisory responsibility for SLSOT operations and ensures its functioning within statutorily prescribed boundaries.

The amendments better align the SLSOT Plan of Operation with the Chapter 981 requirements and further facilitate the Commissioner’s supervision of SLSOT operations.

Among other highlights, the Plan of Operation authorizes the Commissioner to appoint replacement SLSOT directors in the event of a Board vacancy; requires the execution of annual conflicts of interest statements by Board members; requires, instead of permits, SLSOT to purchase bonds and insurance covering its operations, officers and directors and imposes procedural requirements on the renewal of those bonds and insurance policies; prohibits SLSOT from lending money; requires formal notice to TDI in advance of any SLSOT regular Board meeting, which are subject to the Texas Open Records Act; outlines surplus lines stamping fee approval requirements, which are premium based; affirms competitive bidding requirements for SLSOT contracts; and outlines SLSOT’s reporting and information sharing requirements with TDI and the Texas Comptroller.

A copy of the Amended Plan of Operation as adopted by Commissioner Sullivan is found here.