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Committee approves bill clarifying surplus-lines coverage can meet Arkansas auto financial-responsibility rules
Summary
Senators passed a bill clarifying that surplus-lines insurance may satisfy Arkansas motor-vehicle financial-responsibility requirements in certain circumstances. The measure drew technical questions from committee members and testimony from the insurance commissioner and industry advisers.
The Senate Insurance & Commerce Committee voted to pass Senate Bill 276, which clarifies how surplus-lines insurers may be treated under state law for automobile coverage purposes.
Sen. Blake Johnson, who presented the bill, said the measure does not change current marketplace practice but adds "verbiage that clarifies that surplus lines meets the financial responsibility for auto insurance as needed." Alan Kerr, a former state insurance commissioner and president of Alan Kerr Advisors, described the change as a codification and clarification rather than a regulatory shift.
Committee members asked detailed questions about how surplus lines differ from "authorized" or admitted insurers. Jimmy Harris, deputy insurance commissioner, and Allen McClain, the insurance commissioner, explained that surplus-lines carriers operate under different licensing and capital rules and are not part of the state property and casualty guaranty fund. "The main consumer protection that does not exist in surplus lines is they're not part of the property and casualty guarantee fund," Harris told the committee.
Committee senators pressed on practical safeguards for consumers and how the bill interacts with the assigned-risk/assigned-risk plan for auto coverage. Commissioner McClain said Arkansas' assigned-risk plan has very low enrollment in recent years and that allowing a surplus-lines option before assigning a risk may provide another path for certain commercial or unique personal risks without growing the assigned-risk pool unnecessarily.
Senators also asked whether insurers must show a policyholder had been rejected by multiple admitted carriers before using surplus lines. Kerr and the commissioner’s office explained that separate statutory or regulatory requirements outside this bill (such as showing rejection by multiple authorized carriers) continue to apply.
After the discussion, Sen. Johnson moved passage; Sen. McKee seconded. The committee chair called the ayes and the bill passed on a voice vote.
