1.1.................... moves to amend H.F. No. 1394, the delete everything amendment
1.2(H1394DE1), as follows:
1.3Page 3, after line 9, insert:

1.4    "Sec. 9. Minnesota Statutes 2010, section 60A.19, subdivision 8, is amended to read:
1.5    Subd. 8. Insurance from unlicensed foreign companies. Any person, firm, or
1.6corporation desiring to obtain insurance upon any property, interests, or risks of any nature
1.7other than life insurance in this state in companies not authorized to do business in the
1.8state whose home state is Minnesota, that procures insurance on any property, interests,
1.9or risks of any nature other than life insurance directly from a nonadmitted insurer, must
1.10agree to file with the commissioner of revenue all returns required under chapter 297I and
1.11pay to the commissioner of revenue any amounts required to be paid under chapter 297I.
1.12Upon that agreement, the commissioner of commerce shall issue a license, good for one
1.13year. Insurance procured under the license is valid and the provisions of the policies are
1.14considered to be in accordance, and construed as if identical in effect, with the standard
1.15policy prescribed by the laws of this state. The insurers may enter the state to perform
1.16any act necessary or proper in the conduct of the business.
1.17EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
1.18that go into effect after July 20, 2011.

1.19    Sec. 10. Minnesota Statutes 2010, section 60A.196, is amended to read:
1.2060A.196 DEFINITIONS.
1.21    Unless the context otherwise requires, the following terms have the meanings given
1.22them for the purposes of sections 60A.195 to 60A.209:
1.23    (a) "Surplus lines insurance" means insurance placed with an insurer permitted
1.24to transact the business of insurance in this state only pursuant to sections 60A.195 to
1.2560A.209.
2.1    (b) "Eligible surplus lines insurer" means an insurer recognized as eligible to write
2.2insurance business under sections 60A.195 to 60A.209 but not licensed by any other
2.3Minnesota law to transact the business of insurance.
2.4    (c) "Ineligible surplus lines insurer" means an insurer not recognized as an eligible
2.5surplus lines insurer pursuant to sections 60A.195 to 60A.209 and not licensed by any
2.6other Minnesota law to transact the business of insurance. "Ineligible surplus lines
2.7insurer" includes a risk retention group as defined under the Liability Risk Retention
2.8Act, Public Law 99-563.
2.9    (d) "Surplus lines licensee" or "licensee" means a person licensed under sections
2.1060A.195 to 60A.209 to place insurance with an eligible or ineligible surplus lines insurer.
2.11    (e) "Association" means an association registered under section 60A.208.
2.12    (f) "Alien insurer" means any insurer which is incorporated or otherwise organized
2.13outside of the United States.
2.14    (g) "Insurance laws" means chapters 60 to 79 inclusive.
2.15    (h) "Stamping" means electronically assigning a unique identifying number that is
2.16specific to a submitted policy, contract, or insurance document.
2.17(a) "Affiliated group" means a group which includes the insured and any entity, or
2.18group of entities, that controls, is controlled by, or is under common control with the
2.19insured. An entity has control over another entity when: (1) the entity directly, indirectly,
2.20or acting through one or more persons owns, controls, or has the power to vote 25 percent
2.21or more of any class of voting securities of the other entity; or (2) the entity controls in any
2.22manner the election of a majority of the directors or trustees of the other entity.
2.23    (b) "Alien insurer" means any insurer which is incorporated or otherwise organized
2.24outside of the United States.
2.25    (c) "Association" means an association registered under section 60A.208.
2.26    (d) "Eligible surplus lines insurer" means a nonadmitted insurer recognized as
2.27eligible to write insurance business under sections 60A.195 to 60A.209.
2.28(e) "Exempt commercial purchaser" means any person purchasing commercial
2.29insurance that, at the time of placement, meets the following requirements:
2.30(1) the person employs or retains a qualified risk manager to negotiate insurance
2.31coverage;
2.32(2) the person has paid aggregate nationwide commercial property and casualty
2.33insurance premiums in excess of $100,000 in the immediately preceding 12 months;
2.34(3) the person meets at least one of the following criteria:
2.35(i) the person possesses a net worth in excess of $20,000,000, as such amount is
2.36adjusted pursuant to clause (4);
3.1(ii) the person generates annual revenues in excess of $50,000,000, as such amount
3.2is adjusted pursuant to clause (4);
3.3(iii) the person employs more than 500 full-time or full-time equivalent employees
3.4per individual insured or is a member of an affiliated group employing more than 1,000
3.5employees in the aggregate;
3.6(iv) the person is a not-for-profit organization or public entity generating annual
3.7budgeted expenditures of at least $30,000,000, as such amount is adjusted pursuant to
3.8clause (4); or
3.9(v) the person is a municipality with a population in excess of 50,000 persons.
3.10(4) Effective January 1, 2015, and every five years thereafter, the amounts in clause
3.11(3), items (i), (ii), and (iv), shall be adjusted to reflect the percentage change for the
3.12five-year period in the Consumer Price Index for All Urban Consumers published by the
3.13Bureau of Labor Statistics of the Department of Labor.
3.14(f) "Home state" means the state in which an insured maintains its principal place of
3.15business, or in the case of an individual, the individual's principal residence. If 100 percent
3.16of the insured risk is located out of the state, the term means the state to which the greatest
3.17percentage of the insured's taxable premium for that insurance contract is allocated. If
3.18more than one insured from an affiliated group are named insureds on a single nonadmitted
3.19insurance contract, the term means the home state of the member of the affiliated group
3.20that has the largest percentage of premium attributed to it under that insurance contract.
3.21    (g) "Ineligible surplus lines insurer" means a nonadmitted insurer not recognized as
3.22an eligible surplus lines insurer under sections 60A.195 to 60A.209.
3.23    (h) "Insurance laws" means chapters 60 to 79 inclusive.
3.24    (i) "Nonadmitted insurance" means any property and casualty insurance permitted to
3.25be placed directly or through a surplus lines broker with a nonadmitted insurer in this state
3.26only under sections 60A.195 to 60A.209.
3.27(j) "Nonadmitted insurer" means an insurer not licensed to engage in the business
3.28of insurance in Minnesota, but does not include a risk retention group, as the term is
3.29defined in section 2(a)(4) of the Liability Risk Retention Act of 1986, United States Code,
3.30title 15, section 3901(a)(4).
3.31(k) "Qualified risk manager" means, with respect to a policyholder of commercial
3.32insurance, a person who meets all of the following requirements:
3.33(1) the person is an employee of, or third-party consultant retained by, the
3.34commercial policyholder;
3.35(2) the person provides skilled services in loss prevention, loss reduction, or risk and
3.36insurance coverage analysis, and purchase of insurance;
4.1(3) the person (i) has a bachelor's degree or higher from an accredited college or
4.2university in risk management, business administration, finance, economics, or any other
4.3field determined by a state insurance commissioner or other state regulatory official or
4.4entity to demonstrate minimum competence in risk management and has three years of
4.5experience in risk financing, claims administration, loss prevention, risk and insurance
4.6analysis, or purchasing commercial lines of insurance; or
4.7(ii) has a designation as a Chartered Property and Casualty Underwriter (CPCU)
4.8issued by the American Institute for CPCU/Insurance Institute of America, an Associate
4.9in Risk Management (ARM) issued by the American Institute for CPCU/Insurance
4.10Institute of America, a Certified Risk Manager (CRM) issued by the National Alliance
4.11for Insurance Education & Research, a RIMS Fellow (RF) issued by the Global Risk
4.12Management Institute, or any other designation, certification, or license determined by
4.13a state insurance commissioner or other state insurance regulatory official or entity to
4.14demonstrate minimum competency in risk management.
4.15(iii) has at least seven years of experience in risk financing, claims administration,
4.16loss prevention, risk and insurance coverage analysis, or purchasing commercials lines of
4.17insurance and one of the designations specified in clause (ii);
4.18(iv) has at least ten years of experience in risk financing, claims administration,
4.19loss prevention, risk and insurance coverage analysis, or purchasing commercial lines of
4.20insurance; or
4.21(v) has a graduate degree from an accredited college or university in risk
4.22management, business administration, finance, economics, or any other field determined
4.23by a state insurance commissioner or other state regulatory official or entity to demonstrate
4.24minimum competence in risk management.
4.25    (l) "Stamping" means electronically assigning a unique identifying number that is
4.26specific to a submitted policy, contract, or insurance document.
4.27    (m) "Surplus lines broker" or "broker" means an individual, firm, or corporation
4.28which is licensed in this state to sell, solicit, or negotiate insurance on properties, risks, or
4.29exposures located or to be performed in this state with nonadmitted insurers only under
4.30sections 60A.195 to 60A.209.
4.31EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
4.32that go into effect after July 20, 2011.

4.33    Sec. 11. Minnesota Statutes 2010, section 60A.198, is amended to read:
5.160A.198 TRANSACTION OF SURPLUS LINES NONADMITTED
5.2INSURANCE.
5.3    Subdivision 1. License required. A person, as defined in section 60A.02,
5.4subdivision 7 , shall not act in any other manner as an agent or broker in the transaction of
5.5surplus lines nonadmitted insurance unless licensed under sections 60A.195 to 60A.209.
5.6A surplus lines license is not required for a licensed agent who assists in the placement
5.7of surplus lines nonadmitted insurance with a surplus lines licensee broker pursuant to
5.8sections 60A.195 to 60A.209. This subdivision does not apply to nonadmitted insurance
5.9procured by a surplus lines broker when an insured's home state is a state other than
5.10Minnesota.
5.11    Subd. 2. Compliance with statutory provisions. A person shall not offer, solicit,
5.12make a quotation on, sell, or issue a policy of insurance, binder, or any other evidence
5.13of insurance with an eligible or ineligible surplus lines a nonadmitted insurer, except in
5.14compliance with sections 60A.195 to 60A.209. This subdivision does not apply when an
5.15insured's home state is a state other than Minnesota.
5.16    Subd. 3. Procedure for obtaining license. A person licensed as an agent in this
5.17state pursuant to other law may obtain a surplus lines license by doing the following:
5.18(a) filing an application in the form and with the information the commissioner
5.19may reasonably require to determine the ability of the applicant to act in accordance
5.20with sections 60A.195 to 60A.209;
5.21(b) maintaining an agent's license in this state;
5.22(c) registering with the association created pursuant to section 60A.2085;
5.23(d) agreeing to file with the commissioner of revenue all returns required by chapter
5.24297I and paying to the commissioner of revenue all amounts required under chapter 297I;
5.25(e) agreeing to file all documents required pursuant to section 60A.2086 and to pay
5.26the stamping fee assessed pursuant to section 60A.2085, subdivision 7; and
5.27(f) paying a fee as prescribed by section 60K.55.
5.28    Subd. 4. Licensee's Broker's powers. A surplus lines licensee broker may do
5.29any or all of the following:
5.30(a) place insurance on risks in this state with eligible surplus lines insurers;
5.31(b) place insurance on risks in this state with ineligible surplus lines insurers in strict
5.32compliance with section 60A.209. If the insurance is provided through the participation of
5.33several surplus lines nonadmitted insurers and the licensee broker has reason to believe
5.34that a substantial portion of the insurance would be assumed by eligible surplus lines
5.35insurers, then with respect to the ineligible surplus lines insurers, the insured or the
6.1insured's representative shall be informed as provided in section 60A.209, subdivision 1,
6.2clause (a); or
6.3(c) engage in any other acts expressly or implicitly authorized by sections 60A.195
6.4to 60A.209 and the other insurance laws.
6.5    Subd. 5. Disclosures. Before placement of insurance with an eligible surplus
6.6lines insurer, a surplus lines licensee broker shall inform an insured or the insured's
6.7representative that coverage may be placed in conformance with sections 60A.195
6.8to 60A.209 with an insurer not licensed in this state and that payment of loss is not
6.9guaranteed in the event of insolvency of the eligible surplus lines insurer.
6.10    Subd. 7. Participation in national producer database for surplus lines brokers.
6.11For the purposes of carrying out the provisions of the Nonadmitted and Reinsurance
6.12Reform Act of 2010, the commissioner is authorized to utilize the national insurance
6.13producer database of the National Association of Insurance Commissioners, or any other
6.14equivalent uniform national database, for the licensure of surplus lines brokers and for
6.15renewal of the licenses.
6.16EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
6.17that go into effect after July 20, 2011.

6.18    Sec. 12. Minnesota Statutes 2010, section 60A.199, subdivision 1, is amended to read:
6.19    Subdivision 1. Examination of books and records. If the commissioner considers
6.20it necessary, the commissioner may examine the books and records of a surplus lines
6.21licensee broker to determine whether the licensee broker is conducting business
6.22in accordance with sections 60A.195 to 60A.209. For the purposes of facilitating
6.23examinations, the licensee broker shall allow the commissioner free access at reasonable
6.24times to all of the licensee's broker's books and records relating to the transactions to
6.25which sections 60A.195 to 60A.209 apply. If an examination is conducted, the cost of the
6.26examination shall be paid by the surplus line agent or agency.
6.27EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
6.28that go into effect after July 20, 2011.

6.29    Sec. 13. Minnesota Statutes 2010, section 60A.201, is amended to read:
6.3060A.201 PLACEMENT OF INSURANCE BY LICENSEE BROKER.
6.31    Subdivision 1. Restrictions. Insurance shall not be placed by the surplus lines
6.32licensee broker with an eligible or ineligible surplus lines a nonadmitted insurer when
6.33coverage is available from a licensed insurer.
7.1    Subd. 2. Availability of other coverage; presumption. There shall be a rebuttable
7.2presumption that the following coverages are available from a licensed insurer:
7.3(a) all mandatory automobile insurance coverages required by chapter 65B;
7.4(b) private passenger automobile physical damage coverage;
7.5(c) homeowners and property insurance on owner-occupied dwellings whose value
7.6is less than $500,000. This figure shall be changed annually by the commissioner by the
7.7same percentage as the Consumer Price Index for the Minneapolis-St. Paul Metropolitan
7.8Area is changed;
7.9(d) any coverage readily available from three or more licensed insurers unless the
7.10licensed insurers quote a premium and terms not competitive with a premium and terms
7.11quoted by an eligible surplus lines insurer; and
7.12(e) workers' compensation insurance, except excess workers' compensation insurance
7.13which is not available from the Workers' Compensation Reinsurance Association.
7.14    Subd. 3. Unavailability of other coverage; presumption. There shall be a
7.15rebuttable presumption that the following coverages are unavailable from a licensed
7.16insurer:
7.17    (a) coverages where one portion of the risk is acceptable to licensed insurers but
7.18another portion of the same risk is not acceptable. The entire coverage may be placed with
7.19eligible surplus lines insurers if it can be shown that the eligible surplus lines insurer will
7.20accept the entire coverage but not the rejected portion alone; and
7.21    (b) any coverage that the licensee broker is unable to procure after diligent search
7.22among licensed insurers.
7.23    Subd. 5. Streamlined application for exempt commercial purchasers. A surplus
7.24lines broker is not required to make a diligent search to determine whether the full amount
7.25or type of insurance can be obtained from licensed insurers when the broker is seeking to
7.26procure or place nonadmitted insurance for an exempt commercial purchaser provided:
7.27(1) the broker procuring or placing the nonadmitted insurance has disclosed to the
7.28exempt commercial purchaser that the insurance may or may not be available from a
7.29licensed insurer that may provide greater protection with more regulatory oversight; and
7.30(2) the exempt commercial purchaser has subsequently requested in writing for the
7.31broker to procure or place the insurance from a nonadmitted insurer.
7.32EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
7.33that go into effect after July 20, 2011.

7.34    Sec. 14. Minnesota Statutes 2010, section 60A.202, is amended to read:
8.160A.202 EVIDENCE OF PLACEMENT OF INSURANCE BY LICENSEE
8.2BROKER.
8.3    Subdivision 1. Restriction. Only a surplus lines licensee broker shall issue evidence
8.4of placement of insurance with an eligible or ineligible surplus lines a nonadmitted insurer.
8.5    Subd. 2. Written communication of coverage to be delivered. A licensee broker
8.6shall, within seven working days after the date on which the risk was bound or the insured
8.7or applicant was advised that coverage has been or will be obtained, deliver to the insured
8.8or the insured's representative a policy, a written binder, a certificate or other written
8.9evidence of insurance placed with an eligible or ineligible surplus lines a nonadmitted
8.10insurer.
8.11    Subd. 3. Contents of written communication. The written communication
8.12showing that insurance has been obtained shall identify all known surplus lines
8.13nonadmitted insurers directly assuming any risk of loss. If there is more than one
8.14surplus lines nonadmitted insurer, any document issued or certified by the licensee broker
8.15pursuant to subdivision 2 shall specify, to the extent known by the licensee broker,
8.16whether the obligation is joint or several, and if the obligation is several, the proportion of
8.17the obligation assumed by each insurer.
8.18EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
8.19that go into effect after July 20, 2011.

8.20    Sec. 15. Minnesota Statutes 2010, section 60A.203, is amended to read:
8.2160A.203 RETENTION OF RECORDS.
8.22Each surplus lines licensee broker shall keep a separate account of each transaction
8.23entered into pursuant to sections 60A.195 to 60A.209. Evidence of these transactions shall
8.24be documented in the form and manner designated by the commissioner and retained by
8.25the licensee broker for a minimum of five years. The forms must be readily available
8.26for review and audit by the commissioner.
8.27EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
8.28that go into effect after July 20, 2011.

8.29    Sec. 16. Minnesota Statutes 2010, section 60A.204, subdivision 2, is amended to read:
8.30    Subd. 2. Regulation of fees and commissions. A surplus lines licensee broker
8.31may charge a fee and commission, in addition to the premium, that is not excessive or
8.32discriminatory. The licensee broker shall maintain complete documentation of all fees
8.33and commissions charged.
9.1EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
9.2that go into effect after July 20, 2011.

9.3    Sec. 17. Minnesota Statutes 2010, section 60A.205, subdivision 1, is amended to read:
9.4    Subdivision 1. Authorization. A surplus lines licensee broker may be compensated
9.5by an eligible surplus lines insurer and the licensee broker may compensate a licensed
9.6agent in this state for obtaining surplus lines nonadmitted insurance business. A licensed
9.7agent authorized by the licensee broker may collect a premium on behalf of the licensee
9.8broker, and as between the insured and the licensee broker, the licensee broker shall be
9.9considered to have received the premium if the premium payment has been made to
9.10the agent.
9.11EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
9.12that go into effect after July 20, 2011.

9.13    Sec. 18. Minnesota Statutes 2010, section 60A.205, subdivision 2, is amended to read:
9.14    Subd. 2. Consequences of receipt. If an eligible surplus lines insurer has assumed a
9.15risk, and if the premium for that risk has been received by the licensee broker who placed
9.16the insurance, then as between the insurer and the insured, the insurer shall be considered
9.17to have received the premium due to it for the coverage and shall be liable to the insured
9.18for any loss covered by the insurance and for the unearned premium upon cancellation of
9.19the insurance, regardless of whether the licensee broker is indebted to the insurer.
9.20EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
9.21that go into effect after July 20, 2011.

9.22    Sec. 19. Minnesota Statutes 2010, section 60A.206, subdivision 1, is amended to read:
9.23    Subdivision 1. Insurers to be recognized by commissioner. A surplus lines
9.24licensee broker shall place surplus lines nonadmitted insurance only with insurers
9.25which are in a stable and unimpaired financial condition. An insurer recognized by the
9.26commissioner as an eligible surplus lines insurer pursuant to subdivision 2 shall be
9.27considered to meet the requirements of this subdivision. Recognition as an eligible surplus
9.28lines insurer shall be conditioned upon the insurers continued compliance with sections
9.2960A.195 to 60A.209.
9.30EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
9.31that go into effect after July 20, 2011.

10.1    Sec. 20. Minnesota Statutes 2010, section 60A.206, subdivision 3, is amended to read:
10.2    Subd. 3. Standards to be met by insurers. (a) The commissioner shall recognize
10.3the insurer as an eligible surplus lines insurer when satisfied that the insurer is in a stable,
10.4unimpaired financial condition and that the insurer is qualified to provide coverage in
10.5compliance with sections 60A.195 to 60A.209. If filed with full supporting documentation
10.6before July 1 of any year, applications submitted under subdivision 2 shall be acted upon
10.7by the commissioner before December 31 of the year of submission.
10.8(b) The commissioner shall not authorize an a foreign insurer as an eligible surplus
10.9lines insurer unless the insurer continuously maintains capital and surplus of at least
10.10$3,000,000 and transaction of business by the insurer is not hazardous, financially or
10.11otherwise, to its policyholders, its creditors, or the public. Each alien surplus lines
10.12insurer shall have current financial data filed with the National Association of Insurance
10.13Commissioners Nonadmitted Insurers Information Office.:
10.14(1) is domiciled within a United States jurisdiction and authorized to write the type
10.15of insurance in its domiciliary jurisdiction; and
10.16(2) qualifies under one of the following items:
10.17(i) has capital and surplus or its equivalent under the laws of its domiciliary
10.18jurisdiction which equals the greater of:
10.19(A) the minimum capital and surplus requirements under the laws of Minnesota; or
10.20(B) $15,000,000; or
10.21(ii) the requirements of item (i)(A) may be satisfied by an insurer's possessing less
10.22than the minimum capital and surplus upon an affirmative finding of acceptability by the
10.23commissioner. The finding shall be based upon factors as quality of management, capital
10.24and surplus of any parent company, company underwriting profit and investment income
10.25trends, market availability, and company record and reputation within the industry. In
10.26no event shall the commissioner make an affirmative finding of acceptability when the
10.27surplus lines insurer's capital and surplus is less than $4,500,000.
10.28(c) Eligible surplus lines insurers domiciled within the United States shall file an
10.29annual statement and an annual financial audit, under the terms and conditions of section
10.3060A.13, subdivisions 1, 3a, and 6 , and are subject to the penalties of section 72A.061,
10.31and are subject to section 60A.03, subdivision 5, in regard to those requirements. The
10.32commissioner also has the powers provided in section 60A.13, subdivision 2, in regard
10.33to eligible surplus lines insurers.
10.34(d) Eligible surplus lines insurers domiciled outside the United States shall file
10.35an annual statement on the standard nonadmitted insurers information office financial
10.36reporting format as prescribed by the National Association of Insurance Commissioners
11.1and an annual financial audit performed by an independent accounting firm. The
11.2commissioner shall not prohibit a surplus lines broker from placing nonadmitted insurance
11.3with, or procuring nonadmitted insurance from, an alien insurer that is included on the
11.4Quarterly Listing of Alien Insurers maintained by the National Association of Insurance
11.5Commissioners International Insurers Department.
11.6EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
11.7that go into effect after July 20, 2011.

11.8    Sec. 21. Minnesota Statutes 2010, section 60A.207, is amended to read:
11.960A.207 POLICIES TO INCLUDE NOTICE.
11.10Each policy, cover note, or instrument evidencing surplus lines nonadmitted
11.11insurance from an eligible surplus lines insurer which is delivered to an insured or a
11.12representative of an insured shall have printed, typed, or stamped upon its face in not less
11.13than 10 point type, the following notice: "THIS INSURANCE IS ISSUED PURSUANT
11.14TO THE MINNESOTA SURPLUS LINES INSURANCE ACT. THE INSURER IS AN
11.15ELIGIBLE SURPLUS LINES INSURER BUT IS NOT OTHERWISE LICENSED BY
11.16THE STATE OF MINNESOTA. IN CASE OF INSOLVENCY, PAYMENT OF CLAIMS
11.17IS NOT GUARANTEED." This notice shall not be covered or concealed in any manner.
11.18EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
11.19that go into effect after July 20, 2011.

11.20    Sec. 22. Minnesota Statutes 2010, section 60A.208, is amended to read:
11.2160A.208 LICENSEE BROKER ASSOCIATION.
11.22    Subdivision 1. Licensee's Broker's right to associate. Surplus lines licensees
11.23brokers may associate and the commissioner may register the association for one or more
11.24of the following purposes:
11.25(a) advising the commissioner as to the availability of surplus lines nonadmitted
11.26insurance coverage and market practices and standards for surplus lines nonadmitted
11.27insurers and licensees brokers;
11.28(b) collecting and furnishing records and statistics; or
11.29(c) submitting recommendations regarding administration of sections 60A.195 to
11.3060A.209 .
11.31    Subd. 2. Filing requirements. (a) Each association shall file with the commissioner
11.32for approval all of the following:
12.1(1) a copy of the association's constitution and articles of agreement or association,
12.2or the association's certificate of incorporation and bylaws and any rules governing the
12.3association's activities; and
12.4(2) an agreement that, as a condition of continued registration under subdivision 1,
12.5the commissioner may examine the association.
12.6(b) Each association shall file with the commissioner and keep current all of the
12.7following:
12.8(1) a list of members; and
12.9(2) the name and address of a resident of this state upon whom notices or orders of
12.10the commissioner or process issued by the commissioner may be served.
12.11    Subd. 3. Commissioner's powers; suspension of registration. The commissioner
12.12may refuse to register, or may suspend or revoke the registration of an association for any
12.13of the following reasons:
12.14(a) it reasonably appears that the association will not be able to carry out the
12.15purposes of sections 60A.195 to 60A.209;
12.16(b) the association fails to maintain and enforce rules which will assure that
12.17members of the association and persons associated with those members comply with
12.18sections 60A.195 to 60A.209, other applicable chapters of the insurance laws and rules
12.19promulgated under either;
12.20(c) the rules of the association do not assure a fair representation of its members in
12.21the selection of directors and in the administration of its affairs;
12.22(d) the rules of the association do not provide for an equitable allocation of
12.23reasonable dues, fees, and other charges among members;
12.24(e) the rules of the association impose a burden on competition; or
12.25(f) the association fails to meet other applicable requirements prescribed in sections
12.2660A.195 to 60A.209.
12.27    Subd. 4. Membership limited to licensees brokers. An association shall deny
12.28membership to any person who is not a licensee broker.
12.29    Subd. 5. Association is voluntary. No licensee broker may be compelled to join
12.30an association as a condition of receiving a license or continuing to be licensed under
12.31sections 60A.195 to 60A.209.
12.32    Subd. 6. Financial statement to be filed. Each association shall annually file a
12.33certified audited financial statement.
12.34    Subd. 7. Reports and recommendations by the association. An association may
12.35submit reports and make recommendations to the commissioner regarding the financial
12.36condition of any eligible surplus lines insurer. These reports and recommendations shall
13.1not be considered to be public information. There shall not be liability on the part of, or a
13.2cause of action of any nature shall not arise against, eligible surplus lines insurers, the
13.3association or its agents or employees, the directors, or the commissioner or authorized
13.4representatives of the commissioner, for statements made by them in any reports or
13.5recommendations made under this subdivision.
13.6    Subd. 8. Operating assessment. (a) Upon request from the association, the
13.7commissioner may approve the levy of an assessment of not more than one-half of one
13.8percent of premiums charged pursuant to sections 60A.195 to 60A.209 for operation
13.9of the association to the extent that the operation relieves the commissioner of duties
13.10otherwise required of the commissioner pursuant to sections 60A.195 to 60A.209. Any
13.11assessment so approved may be subtracted from the premium tax owed by the licensee
13.12broker under chapter 297I.
13.13(b) The association may revoke the membership and the commissioner may revoke
13.14the license in this state, of any licensee broker who fails to pay an assessment when due, if
13.15the assessment has been approved by the commissioner.
13.16EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
13.17that go into effect after July 20, 2011.

13.18    Sec. 23. Minnesota Statutes 2010, section 60A.2085, subdivision 1, is amended to read:
13.19    Subdivision 1. Association created; duties. There is hereby created a nonprofit
13.20association to be known as the Surplus Lines Association of Minnesota. The association
13.21is not a state agency for purposes of chapter 16A, 16B, 16C, or 43A. All surplus lines
13.22licensees brokers are members of this association. Section 60A.208 does not apply to
13.23the association created pursuant to the provisions of this section. The association shall
13.24perform its functions under the plan of operation established under subdivision 3 and must
13.25exercise its powers through a board of directors established under subdivision 2 as set
13.26forth in the plan of operation. The association shall be authorized and have the duty to:
13.27    (1) receive, record, and stamp all surplus lines nonadmitted insurance documents
13.28that surplus lines licensees brokers are required to file with the association;
13.29    (2) prepare and deliver monthly to the commissioners of revenue and commerce a
13.30report regarding surplus lines business. The report must include a list of all the business
13.31procured during the preceding month, in the form the commissioners prescribe;
13.32    (3) educate its members regarding the surplus lines law of this state including
13.33insurance tax responsibilities and the rules and regulations of the commissioners of
13.34revenue and commerce relative to surplus lines nonadmitted insurance;
14.1    (4) communicate with organizations of agents, brokers, and admitted insurers with
14.2respect to the proper use of the surplus lines market;
14.3    (5) employ and retain persons necessary to carry out the duties of the association;
14.4    (6) borrow money necessary to effect the purposes of the association and grant a
14.5security interest or mortgage in its assets, including the stamping fees charged pursuant to
14.6subdivision 7 in order to secure the repayment of any such borrowed money;
14.7    (7) enter contracts necessary to effect the purposes of the association;
14.8    (8) provide other services to its members that are incidental or related to the
14.9purposes of the association;
14.10(9) form and organize itself as a nonprofit corporation under chapter 317A, with the
14.11powers set forth in section 317A.161 that are not otherwise limited by this section or in
14.12its articles, bylaws, or plan of operation;
14.13(10) file such applications and take such other action as necessary to establish and
14.14maintain the association as tax exempt pursuant to the federal income tax code;
14.15(11) recommend to the commissioner of commerce revisions to Minnesota law
14.16relating to the regulation of surplus lines nonadmitted insurance in order to improve the
14.17efficiency and effectiveness of that regulation; and
14.18    (12) take other actions reasonably required to implement the provisions of this
14.19section.
14.20EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
14.21that go into effect after July 20, 2011.

14.22    Sec. 24. Minnesota Statutes 2010, section 60A.2085, subdivision 3, is amended to read:
14.23    Subd. 3. Plan of operation. (a) The plan of operation shall provide for the
14.24formation, operation, and governance of the association as a nonprofit corporation under
14.25chapter 317A. The plan of operation must provide for the election of a board of directors
14.26by the members of the association. The board of directors shall elect officers as provided
14.27for in the plan of operation. The plan of operation shall establish the manner of voting and
14.28may weigh each member's vote to reflect the annual surplus lines nonadmitted insurance
14.29premium written by the member. Members employed by the same or affiliated employers
14.30may consolidate their premiums written and delegate an individual officer or partner
14.31to represent the member in the exercise of association affairs, including service on the
14.32board of directors.
14.33    (b) The plan of operation shall provide for an independent audit once each year of all
14.34the books and records of the association and a report of such independent audit shall be
15.1made to the board of directors, the commissioner of revenue, and the commissioner of
15.2commerce, with a copy made available to each member to review at the association office.
15.3    (c) The plan of operation and any amendments to the plan of operation shall be
15.4submitted to the commissioner and shall be effective upon approval in writing by the
15.5commissioner. The association and all members shall comply with the plan of operation or
15.6any amendments to it. Failure to comply with the plan of operation or any amendments
15.7shall constitute a violation for which the commissioner may issue an order requiring
15.8discontinuance of the violation.
15.9    (d) If the interim board of directors fails to submit a suitable plan of operation
15.10within 60 days following the creation of the interim board, or if at any time thereafter the
15.11association fails to submit required amendments to the plan, the commissioner may submit
15.12to the association a plan of operation or amendments to the plan, which the association
15.13must follow. The plan of operation or amendments submitted by the commissioner shall
15.14continue in force until amended by the commissioner or superseded by a plan of operation
15.15or amendment submitted by the association and approved by the commissioner. A plan
15.16of operation or an amendment submitted by the commissioner constitutes an order of
15.17the commissioner.
15.18EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
15.19that go into effect after July 20, 2011.

15.20    Sec. 25. Minnesota Statutes 2010, section 60A.2085, subdivision 7, is amended to read:
15.21    Subd. 7. Stamping fee. The services performed by the association shall be
15.22funded by a stamping fee assessed for each premium-bearing document submitted to
15.23the association. The stamping fee shall be established by the board of directors of the
15.24association from time to time. The stamping fee shall be paid by the insured to the surplus
15.25lines licensee broker and remitted to the association by the surplus lines licensee broker in
15.26the manner established by the association.
15.27EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
15.28that go into effect after July 20, 2011.

15.29    Sec. 26. Minnesota Statutes 2010, section 60A.2085, subdivision 8, is amended to read:
15.30    Subd. 8. Data classification. Unless otherwise classified by statute, a temporary
15.31classification under section 13.06, or federal law, information obtained by the
15.32commissioner from the association is public, except that any data identifying insureds or
15.33the Social Security number of a licensee broker or any information derived therefrom is
16.1private data on individuals or nonpublic data as defined in section 13.02, subdivisions
16.29 and 12.
16.3EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
16.4that go into effect after July 20, 2011.

16.5    Sec. 27. Minnesota Statutes 2010, section 60A.2086, subdivision 1, is amended to read:
16.6    Subdivision 1. Submission of documents to Surplus Lines Association of
16.7Minnesota; certification. (a) A surplus lines licensee broker shall submit every insurance
16.8policy or contract issued under the licensee's broker's license to the Surplus Lines
16.9Association of Minnesota for recording and stamping. The submission and stamping must
16.10be effected through electronic means. The submission must include:
16.11    (1) the name of the insured;
16.12    (2) a description and location of the insured property or risk;
16.13    (3) the amount insured;
16.14    (4) the gross premiums charged or returned;
16.15    (5) the name of the surplus lines nonadmitted insurer from whom coverage has
16.16been procured;
16.17    (6) the kind or kinds of insurance procured; and
16.18    (7) the amount of premium subject to tax.
16.19    (b) The submission of insurance policies or contracts to the Surplus Lines
16.20Association of Minnesota constitutes a certification by the surplus lines licensee broker, or
16.21by the insurance producer who presented the risk to the surplus lines licensee broker for
16.22placement as a surplus lines risk, that the insurance policies or contracts were procured in
16.23accordance with sections 60A.195 to 60A.209.
16.24EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
16.25that go into effect after July 20, 2011.

16.26    Sec. 28. Minnesota Statutes 2010, section 60A.2086, subdivision 2, is amended to read:
16.27    Subd. 2. Stamping requirement; penalty. (a) It shall be unlawful for an insurance
16.28agent, broker, or surplus lines licensee broker to deliver in this state any surplus lines
16.29nonadmitted insurance policy or contract unless the insurance document is stamped by the
16.30association. A licensee's surplus lines broker's failure to comply with the requirements of
16.31this subdivision shall not affect the validity of the coverage.
17.1    (b) Any insurance agent, broker, or surplus lines licensee broker who delivers in this
17.2state any insurance policy or contract that has not been stamped by the association shall be
17.3subject to a penalty payable to the commissioner as follows:
17.4    (1) $50 for delivery of the first unstamped policy;
17.5    (2) $250 for delivery of a second unstamped policy; and
17.6    (3) $1,000 per policy for delivery of any additional unstamped policies.
17.7EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
17.8that go into effect after July 20, 2011.

17.9    Sec. 29. Minnesota Statutes 2010, section 60A.209, subdivision 1, is amended to read:
17.10    Subdivision 1. Authorization; regulation. A resident of this state may obtain
17.11insurance from an ineligible surplus lines insurer in this state through a surplus lines
17.12licensee broker. The licensee broker shall first attempt to place the insurance with a
17.13licensed insurer, or if that is not possible, with an eligible surplus lines insurer. If coverage
17.14is not obtainable from a licensed insurer or an eligible surplus lines insurer, the licensee
17.15broker shall certify to the commissioner, on a form prescribed by the commissioner, that
17.16these attempts were made. Upon obtaining coverage from an ineligible surplus lines
17.17insurer, the licensee broker shall:
17.18(a) Have printed, typed, or stamped in red ink upon the face of the policy in
17.19not less than 10-point type the following notice: "THIS INSURANCE IS ISSUED
17.20PURSUANT TO THE MINNESOTA SURPLUS LINES INSURANCE ACT. THIS
17.21INSURANCE IS PLACED WITH AN INSURER THAT IS NOT LICENSED BY THE
17.22STATE NOR RECOGNIZED BY THE COMMISSIONER OF COMMERCE AS AN
17.23ELIGIBLE SURPLUS LINES INSURER. IN CASE OF ANY DISPUTE RELATIVE
17.24TO THE TERMS OR CONDITIONS OF THE POLICY OR THE PRACTICES OF
17.25THE INSURER, THE COMMISSIONER OF COMMERCE WILL NOT BE ABLE TO
17.26ASSIST IN THE DISPUTE. IN CASE OF INSOLVENCY, PAYMENT OF CLAIMS IS
17.27NOT GUARANTEED." The notice may not be covered or concealed in any manner; and
17.28(b) Collect from the insured appropriate premium taxes, as provided under chapter
17.29297I, and report the transaction to the commissioner of revenue on a form prescribed by
17.30the commissioner. If the insured fails to pay the taxes when due, the insured shall be
17.31subject to a civil fine of not more than $3,000, plus accrued interest from the inception of
17.32the insurance.
17.33EFFECTIVE DATE.This section is effective for nonadmitted insurance policies
17.34that go into effect after July 20, 2011.

18.1    Sec. 30. REVISOR'S INSTRUCTION.
18.2The revisor of statutes shall recode Minnesota Statutes, section 60A.19, subdivision
18.38, as section 60A.198, subdivision 7."
18.4Renumber the sections in sequence and correct the internal references
18.5Amend the title accordingly