Arizona Gov. Doug Ducey has signed legislation allowing surplus lines insurers based in his state to sell surplus lines insurance there.Ducey's signing of House Bill 2149 means Arizona becomes the 10th jurisdiction to allow domestic insurers to sell surplus lines insurance in their state of domicile, said Keri Kish, director of government relations at the National Association of Professional Surplus Lines Offices.
Domestic surplus lines insurers can sell non-admitted surplus lines insurance in 49 states and the District of Columbia. However, until laws such as the one in Arizona had passed, those companies had been unable to sell surplus lines in their state of domicile, said David Kodama, assistant vice president and research and policy analysis at the Property Casualty Insurers Association of America.
To do so, they have had to first capitalize a second company in another state that could sell surplus lines in the original company's state of domicile. The Arizona law sets requirements for companies to qualify as domestic surplus lines insurers in the state of domicile, including one requiring $15 million in minimum capital and surplus in hand. "It's a much more efficient use of capital," he said.
Kish said in an email the Arizona law is projected to take effect on Aug. 26, 2016. "The benefit is that a surplus lines insurer does not have to set up a second office in another state, with a second company that also has to establish the minimum capital and surplus, employees, and all the other requirements of establishing a company," she said.
Surplus Line Association of Arizona Executive Director Scott Wede said he was unsure what impact the new law would have on the state, but suspected certain insurance companies could attract new insureds. "Perhaps it's a trend that's coming," he said.
PCI is among those pushing state lawmakers to pass similar laws and Kodama said he is getting lawmakers to agree with him on the need once the situation is explained. Kodama said the effort is in part designed for states such as Arizona to attract new companies from states that do not have a domestic surplus line insurer law. "I expect other states to consider it in the coming years," he said.
Kodama said there is a need for such laws in order to address new and unique nonstandard risks such as cybersecurity and ridesharing, areas where there is an appetite to write policies.