SECTION 1. Section 27-3-38 of the General Laws in Chapter 27-3 entitled "Agents, Brokers, and Solicitors" is hereby amended to read as follows:

27-3-38. Surplus line brokers -- License -- Affidavit of inability to obtain insurance -- Records -- Premium tax -- Notice to purchasers. -- (a) The insurance commissioner may issue a surplus line broker's license to any person, firm, or corporation who or which is licensed as an insurance agent in this state, authorizing the licensee to procure, subject to the restrictions provided in this section, policies of insurance, except life and health and accident, from insurers which are on the commissioner's list of approved surplus insurers in this state. This license may be suspended or revoked by the insurance commissioner whenever, in the commissioner's judgment, a suspension or revocation will best promote the interest of the people of this state. Before any license is issued by the insurance commissioner and before each renewal of a license, there shall be filed in his or her office a written application by the person, firm, or corporation desiring the license in the form or forms and supplements to the form, and containing any information, that the insurance commissioner may prescribe.

(b) When any policy of insurance is procured under the authority of that license, there shall be executed, both by the licensee and by the insured, affidavits setting forth facts showing that the insured and the licensee or a licensed Rhode Island producer were unable, after diligent effort, to procure from any no less than three (3) authorized insurer or insurers the full amount of insurance required to protect the property owned or controlled by the insured or the risks insured,. and further showing that the amount of insurance procured from an approved surplus lines insurer or insurers is only the excess over the amount, if any, so procurable from authorized insurers and that the purpose of obtaining that insurance from approved surplus lines insurers is not to procure insurance on forms different from those which would be used by authorized insurers writing insurance against the same risks or hazards. For purposes of this section, residual market mechanisms shall not be considered authorized insurers. These affidavits shall be filed by the licensee with the insurance commissioner within thirty (30) sixty (60) days after the policies have been procured and the insurance commissioner, if not satisfied with the affidavits, may order the licensee to take any further action to obtain the insurance from authorized insurers that he or she may deem necessary. Notwithstanding the provisions of this subsection, for any policy renewed, continued, or extended by the same insurer, no affidavit shall be required to be filed by a licensee with the commissioner, for any policy of insurance or coverage under a policy procured by the licensee, for which the licensee has previously filed an affidavit. Prior to renewing, continuing, or extending any policy, the licensee surplus line broker must confirm that the insurer is on the insurance commissioner's list of approval surplus line insurers in this state.

(c) The licensee shall keep a complete and separate record of all policies procured from approved surplus lines insurers under the license and these records shall be open to the examination of both the insurance commissioner and tax administrator at all reasonable times, and shall show the exact amount of each kind of insurance permitted under this section which has been procured for each insured, the gross premiums charged by the insurers for each kind of insurance permitted under this section which were returned to each insured, the name of the insurer or insurers which issued each of these policies, the effective dates of these policies, and the terms for which these policies were issued.

(d) Every person, firm, or corporation licensed pursuant to the provisions of this section shall file with the insurance commissioner, not later than April 1 of each year, a certificate of the tax administrator, on a blank furnished by the insurance commissioner, certifying that the licensee has paid to the tax administrator, for all policies procured by the licensee pursuant to the license during the next preceding calendar year, a tax, computed at the rate of three percent (3%) on the gross premiums charged the insured by the insurers, less the amount of premiums returned to the insureds.

(e) Every application form for insurance from a surplus lines insurer, every affidavit form executed by the insured, and every policy (on its front and declaration pages) issued by the surplus lines insurer, shall contain in ten (10) point type the following notice:

NOTICE

THIS INSURANCE CONTRACT HAS BEEN PLACED WITH AN INSURER NOT LICENSED TO DO BUSINESS IN THE STATE OF RHODE ISLAND BUT APPROVED AS A SURPLUS LINES INSURER. THE INSURER IS NOT A MEMBER OF THE RHODE ISLAND INSURERS INSOLVENCY FUND. SHOULD THE INSURER BECOME INSOLVENT, THE PROTECTION AND BENEFITS OF THE RHODE ISLAND INSURERS INSOLVENCY FUND ARE NOT AVAILABLE.

SECTION 2. This act shall take effect upon passage.