Advanced Insurance Terms

Correct

The answer is B: Industrial insured exemption

Under Insurance Code §981.0033, an industrial insured is a commercial buyer that employs or retains a qualified risk manager and either paid more than $25,000 in nationwide commercial property and casualty premiums in the preceding 12 months or employs at least 25 full-time employees. The diligent effort requirement does not apply if the agent discloses that comparable admitted coverage may be available with more regulatory oversight, the surplus lines insurer is rated A- or better by A.M. Best, and the insured then asks in writing for the surplus lines placement (§981.004(d)). The placement still goes through a surplus lines agent.

Source: Insurance Code §981.0033 · Insurance Code §981.004(d)

Correct

The answer is A: Make a diligent effort in the admitted market first

Before placing coverage with a surplus lines (nonadmitted) insurer, a Texas surplus lines agent must generally make a diligent effort to obtain the full amount of coverage from admitted insurers (Insurance Code §981.004). This keeps the surplus lines market for coverage the admitted market cannot provide. Exceptions include exempt commercial purchasers and certain commercial lines, such as pollution, cyber and liquor liability. The process is regulated by the Texas Department of Insurance, not by courts or federal agencies.

Source: Insurance Code §981.004

Correct

The answer is D: Fraternal benefit society

A fraternal benefit society is a nonprofit organization that provides insurance benefits (primarily life insurance and annuities) to members who share a common bond, such as religious, ethnic, social, or occupational ties. Under Texas Insurance Code §885.051, it has a lodge system and a representative form of government, operates solely for the benefit of its members and their beneficiaries and not for profit, and has no capital stock. Fraternal benefit societies enjoy certain regulatory and tax exemptions not available to commercial insurers.

Source: Insurance Code §885.051

Correct

The answer is D: Texas Windstorm Insurance Association (TWIA)

The Texas Windstorm Insurance Association (TWIA) provides windstorm and hail coverage to property owners in designated catastrophe areas along the Texas coast. TWIA serves as the insurer of last resort when private market coverage is unavailable. It covers properties in first-tier coastal counties including Galveston. TWIA does not cover flood (that is NFIP) or other property perils. The FAIR Plan, which writes residential property insurance, may not provide windstorm and hail coverage for a risk TWIA can insure (Insurance Code §2211.156).

Source: Insurance Code §2211.156

Correct

The answer is B: Texas FAIR Plan Association

The Texas FAIR Plan Association (Fair Access to Insurance Requirements) provides residential property insurance, such as homeowners and dwelling fire coverage, to Texans in underserved areas who cannot get coverage in the voluntary market (Insurance Code ch. 2211). Apart from property owners' association coverage that the commissioner may add (§2211.051(b)), it does not write commercial property. TWIA covers only windstorm and hail in designated coastal areas, NFIP covers only flood damage, and the Texas Automobile Insurance Plan Association places high-risk auto insurance.

Source: Insurance Code §2211.051(b)