Among his last acts as insurance commissioner, Kent Sullivan issued an order adopting a decrease in the stamping fee collected by the Surplus Lines Stamping Office of Texas. The decrease is from 0.15 percent to 0.075 percent of gross written premium. The order, signed on Sept. 30, Sullivan’s last day on the job, becomes effective on surplus lines insurance contracts beginning Jan. 1, 2021.
The order was recommended by Jamie Walker, deputy commissioner of TDI’s financial regulatory division, and reviewed by Moya McKenna, general counsel division, office of financial counsel, and consistent with the recommendation of the stamping office staff and board of directors.
According to the commissioner’s order, the amount of the reduction puts the stamping office in compliance with state law as well as the agency’s plan of operation. The order indicates that the decrease falls under the statutory maximum of 0.75 percent of gross premium and “lowers.the stamping office’s projected reserves . to a level not to exceed two times the average audited operating expenses for the five-year period immediately preceding the subject budget year,” as required by the SLTX Plan of Operation.
The order does not anticipate a future date when the stamping office is expected to become fully compliant with this provision of its Plan of Operation. As of August 31, SLTX’s reserve funds totaled $25.06 million, or $17.80 million more than the maximum fund balance of $7.26 million.
TDI reviewed four comments that were submitted during the comment period that ran from July 24 to Aug. 27. One comment arrived on the last day of the comment period expressing support for the amount of the reduction. Several weeks earlier in the comment period, the others recommended that the fee reduction become effective on Jan. 1, 2021.
Submitting the comments were Mike Whipps, senior vice president of Marsh and McLennan Agency, Dallas; Billie Ashley Gorrell, president of Ashley General Agency; Kimberly Berry, COO of Specialty Insurance Managers, and Kathryn McVaney, senior vice president, regulatory compliance, AmWINS Group.
The fee reduction aligns with the recommendation submitted to the commissioner by the stamping office board of directors on June 25. Because the order was issued 92 days before the end of the year, SLTX announced that it will accept filings up to its standard lead time of 90 days prior to policy effective date.
A few days earlier, SLTX had announced a temporary 45-day lead time when it appeared a decision on the reduced fee might not materialize. Subsequent to the commissioner’s order on Sept. 30, SLTX withdrew its 45-lead-day limitation.
SLTX provided guidance on how and when the new stamping fee applies: “The new stamping fee rate will apply to each new or renewal surplus lines policy with an effective date on or after January 1, 2021. The new rate will also apply to policy date extensions if effective on or after this date. Policies effective on or before December 31, 2020, will run to expiration, cancellation, or next annual anniversary date (for multi-year policies) at the old rate of .15 percent. This includes any subsequent endorsements, audits, cancellations, reinstatements, installments, and monthly or quarterly reports.”
This guidance is consistent with the rules for calculating taxes, said SLTX Executive Director Greg Brandon. While the stamping fee changes have been infrequent, said Brandon, this is how it was handled since the late 1990s.
On Sept. 30, a TDI spokesperson said that delegation orders are in place that allow the department to continue business until an interim or replacement is named for Commissioner Sullivan.