COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.: 1948-01
Bill No.: SB 619
Subject: Insurance - General; Insurance Dept.; Bonds - Surety
Type: Original
Date: March 17, 2003
FISCAL SUMMARY
| FUND AFFECTED | FY 2004 | FY 2005 | FY 2006 |
| General Revenue Fund* | (Unknown less than $100,000) | (Unknown less than $100,000) | (Unknown less than $100,000) |
| Total Estimated
Net Effect on General Revenue Fund * |
(Unknown less than $100,000) | (Unknown less than $100,000) | (Unknown less than $100,000) |
| FUND AFFECTED | FY 2004 | FY 2005 | FY 2006 |
| County Foreign Insurance Fund* | (Unknown less than $100,000) | (Unknown less than $100,000) | (Unknown less than $100,000) |
| Total Estimated
Net Effect on Other State Funds * |
(Unknown less than $100,000) | (Unknown less than $100,000) | (Unknown less than $100,000) |
*The fiscal impact would be divided between the General Revenue Fund and the County Foreign Insurance Fund (which ultimately goes to local school districts ) if some of the taxes were not paid because of defaults by the surplus lines insurers.
Numbers within parentheses: ( ) indicate costs or losses.
This fiscal note contains 4 pages.
| FUND AFFECTED | FY 2004 | FY 2005 | FY 2006 |
| Total Estimated
Net Effect on All Federal Funds |
$0 | $0 | $0 |
| FUND AFFECTED | FY 2004 | FY 2005 | FY 2006 |
| Local Government * | $0 | $0 | $0 |
*The fiscal impact would be divided between the General Revenue Fund and the County Foreign Insurance Fund (which ultimately goes to local school districts ) if some of the taxes were not paid because of defaults by the surplus lines insurers.
ASSUMPTION
Officials from the Department of Economic Development state the proposal would have no fiscal impact on their organization.
Officials from the Department of Insurance (INS) state removing the bond requirement may potentially decrease surplus lines tax collected by the state. Currently the state can collect payment against the bond when a licensee defaults. This has happened twice in the last four years for a total of $10,600 in taxes. Without the bond, this potentially could increase as the state would have little recourse for collection. The INS estimates an unknown loss of revenue to the General Revenue and County Foreign Insurance Fund.
Based on information provided to Oversight, the INS currently collects between $8 and $10 million annually in taxes from surplus lines insurers. There are currently 257 surplus lines insurers in the state. Therefore, the average surplus lines insurer pays between $31,000 and $38,000 annually in taxes. Oversight assumes, based on this information that four (4) surplus lines insurers would have to default annually for the fiscal impact to exceed $100,000. For fiscal note purposes only, Oversight assumes the fiscal impact to be unknown less than $100,000 annually.
This proposal could result in a loss in Total State Revenue.
| FISCAL IMPACT - State Government | FY 2004
(10 Mo.) |
FY 2005 | FY 2006 |
| GENERAL REVENUE FUND | |||
| Loss - Department of Insurance | |||
| Decrease in surplus lines tax collected* | (Unknown less than $100,000) | (Unknown less than $100,000) | (Unknown less than $100,000) |
| ESTIMATED NET EFFECT ON GENERAL REVENUE FUND* |
(Unknown less than $100,000) |
(Unknown less than $100,000) |
(Unknown less than $100,000) |
| COUNTY FOREIGN INSURANCE FUND | |||
| Loss - Department of Insurance | |||
| Decrease in surplus lines tax collected* | (Unknown less than $100,000) | (Unknown less than $100,000) | (Unknown less than $100,000) |
| ESTIMATED NET EFFECT ON COUNTY FOREIGN INSURANCE FUND* |
(Unknown less than $100,000) |
(Unknown less than $100,000) |
(Unknown less than $100,000) |
| FISCAL IMPACT - Local Government | FY 2004
(10 Mo.) |
FY 2005 | FY 2006 |
| $0* | $0* | $0* |
*The fiscal impact would be divided between the General Revenue Fund and the County Foreign Insurance Fund (which ultimately goes to local school districts ) if some of the taxes were not paid because of defaults by the surplus lines insurers.
FISCAL IMPACT - Small Business
This proposal may impact small business insurance companies as it would eliminate the bonding requirements.
DESCRIPTION
This proposal repeals the requirement that applicants for a surplus lines insurance license file a bond with the Director of the Department of Insurance.
This legislation is not federally mandated, would not duplicate any other program and would not require additional capital improvements or rental space.
SOURCES OF INFORMATION
Department of Economic Development
Department of Insurance
Mickey Wilson, CPA
Director
March 17, 2003