Code Section

Insurance Code - INS


  ( Division 1 enacted by Stats. 1935, Ch. 145. )


  ( Part 2 enacted by Stats. 1935, Ch. 145. )

CHAPTER 6. Surplus Line Brokers [1760 - 1780]
  ( Chapter 6 enacted by Stats. 1935, Ch. 145. )


(a) Except as provided in Sections 1760 and 1760.5, and paragraphs (1) and (2) of subdivision (b), a person within this state shall not transact any insurance for a home state insured with nonadmitted insurers, except by and through a surplus line broker licensed under this chapter and upon the terms and conditions prescribed in this chapter.

(b) (1) An insurer domiciled in California may have common directors with an affiliated nonadmitted insurer provided these common directors do not constitute the majority of the voting authority of the nonadmitted insurer and do not perform any management functions for the nonadmitted insurer in California.

(2) An insurer domiciled in California may perform the following administrative services on behalf of an affiliated nonadmitted insurer that has qualified as an eligible surplus line insurer pursuant to Section 1765.1:

(A) Computer operations that are unrelated to the underwriting process, which may include such activities as development and maintenance of application software, databases, and servers, procurement of information technology and services, network operations, and Internet Web site development and support.

(B) Clerical and administrative staffing support, provided that this staff shall not have any contact or interaction with policyholders of the nonadmitted insurer.

(C) Human resources, provided that any decisions relating to the hiring, firing, disciplinary actions, or compensation of any employee, officer, or both, of the nonadmitted insurer shall be made directly by the nonadmitted insurer.

(D) Claims adjusting, as described in Section 14021, except that all claims notices, claims-related decisions, including those relating to setting reserves and claims acceptance, claim payments, and settlements shall be made directly by the affiliated nonadmitted insurer.

(E) Managing investments such as buying, maintaining, and selling financial investment instruments, except that decisions relating to investment goals, risk assumptions such as capital preservation and protection of investment principal, determining liquidity needs, and diversification ratios shall be made by the affiliated nonadmitted insurer.

(3) Nothing in this section permits the nonadmitted insurer to conduct any activity through its affiliate that constitutes the transaction of insurance or a violation of Section 700 or 703.

(Amended by Stats. 2011, Ch. 83, Sec. 13. (AB 315) Effective July 15, 2011. Operative July 21, 2011, by Sec. 34 of Stats. 2011, Ch. 83.)