CHAPTER 95 HOUSE Substitute for SENATE BILL No. 60 An Act relating to the insurance department; concerning municipal funded pools; con-
cerning title insurance and escrow accounts; concerning the insurance department serv-
ice regulation fund; amending K.S.A. 12-2620, 12-2622 and 44-586 and K.S.A. 1998
Supp. 12-2621, 40-112, 44-584 and 44-585 and repealing the existing sections; also re-
pealing K.S.A. 1998 Supp. 40-112a.
Be it enacted by the Legislature of the State of Kansas:

      Section  1. K.S.A. 1998 Supp. 40-112 is hereby amended to read as
follows: 40-112. (a) For the purpose of maintaining the insurance de-
partment and the payment of expenses incident thereto, there is hereby
established the insurance department service regulation fund in the state
treasury which shall be administered by the commissioner of insurance.
All expenditures from the insurance department service regulation fund
shall be made in accordance with appropriation acts upon warrants of the
director of accounts and reports issued pursuant to vouchers approved
by the commissioner of insurance or by a person or persons designated
by the commissioner.

      (b) On and after the effective date of this act, all fees received by the
commissioner of insurance pursuant to any statute and 1% of taxes re-
ceived pursuant to K.S.A. 40-252 and amendments thereto shall be re-
mitted to the state treasurer for deposit in the state treasury and credited
to the insurance department service regulation fund.

      (c) Except as otherwise provided by this section, the commissioner
of insurance shall make an annual assessment on each group of affiliated
insurers whose certificates of authority to do business in this state are in
good standing at the time of the assessment. The total amount of all such
assessments for a fiscal year shall be equal to the amount sufficient which,
when combined with the total amount to be credited to the insurance
department service regulation fund pursuant to subsection (b) is equal to
the amount approved by the legislature to fund the insurance company
regulation program. With respect to each group of affiliated insurers, such
assessment shall be in proportion to the amount of total assets of the
group of affiliated insurers as reported to the commissioner of insurance
pursuant to K.S.A. 40-225 and amendments thereto for the immediately
preceding calendar year, shall not be less than $500 and shall not be more
than the amount equal to .0000015 of the amount of total assets of the
group of affiliated insurers or $25,000, whichever is less. The total as-
sessment for any fiscal year shall not increase by any amount greater than
15% of the total budget approved by the legislature to fund the insurance
company regulation program for the fiscal year immediately preceding
the fiscal year for which the assessment is made. In the event the total
amount of the assessment would be less than the aggregate amount re-
sulting by assessing the $500 minimum on each insurer, the commissioner
may establish a lower minimum to be assessed equally on each insurer.

      (d) If, by the laws of any state other than Kansas or by the retaliatory
laws of any state other than Kansas, any insurer domiciled in Kansas shall
be required to pay any fee or tax in such other state of licensure, and the
fee or tax is due and payable either because the insurance department
service regulation fee imposed by this section on insurers licensed in Kan-
sas and organized or domiciled in such other state is greater than the
comparable fee or tax assessed in such other state, or such other state has
no comparable fee or tax but requires payment on a retaliatory basis, then
to the extent such fee or tax amounts are legally due and are paid in such
other state, any insurer domiciled in Kansas may claim a dollar-for-dollar
credit for such fees paid against insurer's annual premium taxes due the
state of Kansas under K.S.A. 40-252 and amendments thereto or privilege
fee due the state of Kansas under K.S.A. 40-3213 and amendments thereto,
but such credit shall only be calculated on the amount which would not
have been required to be paid in such other state of licensure in the ab-
sence of the existence of the insurance department service regulation fee
imposed by this section, and in no event shall the credit permitted by this
section exceed 90% of the insurer's annual premium tax or privilege fee
due the state of Kansas. The insurance commissioner shall prescribe the
forms for reporting such credits.

      (d) (e) Assessments payable under this section shall be past due if not
paid to the insurance department within 45 days of the billing date of
such assessment. A penalty equal to 10% of the amount assessed shall be
imposed upon any past due payment and the total amount of the assess-
ment and penalty shall bear interest at the rate of 1.5% per month or any
portion thereof.

      (e) (f)  When there exists in the insurance department service regu-
lation fund a deficiency which would render such fund temporarily in-
sufficient during any fiscal year to meet the insurance department's fund-
ing requirements, the commissioner of insurance shall certify the amount
of the insufficiency. Upon receipt of any such certification, the director
of accounts and reports shall transfer an amount of moneys equal to the
amount so certified from the state general fund to the insurance depart-
ment service regulation fund. On June 30 of any fiscal year during which
an amount or amounts are certified and transferred under this subsection,
the director of accounts and reports shall provide for the repayment of
the amounts so transferred and shall transfer the amount equal to the
total of all such amounts transferred during the fiscal year from the in-
surance department service regulation fund to the state general fund.

      (f) (g) Any unexpended balance in the insurance department service
regulation fund at the close of a fiscal year shall remain credited to the
insurance department service regulation fund for use in the succeeding
fiscal year and shall be used to reduce future assessments or to accom-
modate cash flow demands on the fund.

      (g) (h) The commissioner of insurance shall exempt the assessment
of any insurer which, as of December 31 of the calendar year preceding
the assessment, has a surplus of less than two times the minimum amount
of surplus required for a certificate of authority on and after May 1, 1994,
and which is subject to the premium tax or privilege fee liability imposed
on insurers organized under the laws of this state. The commissioner of
insurance may also exempt or defer, in whole or in part, the assessment
of any other insurer if, in the opinion of the commissioner of insurance,
immediate payment of the total assessment would be detrimental to the
solvency of the insurer.

      (h) (i) As used in this section:

      (1) ``Affiliates'' or ``affiliated'' has the meaning ascribed by K.S.A. 40-
3302 and amendments thereto;

      (2) ``group'' or ``group of affiliated insurers'' means the affiliated in-
surers of a group and also includes an individual, unaffiliated insurer; and

      (3) ``insurer'' means any insurance company, as defined by K.S.A. 40-
201 and amendments thereto, any fraternal benefit society, as defined by
K.S.A. 40-738 and amendments thereto, any reciprocal or interinsurance
exchange under K.S.A. 40-1601 through 40-1614 and amendments
thereto, any mutual insurance company organized to provide health care
provider liability insurance under K.S.A. 40-12a01 through 40-12a09 and
amendments thereto, any nonprofit dental service corporation under
K.S.A. 40-19a01 through 40-19a14 and amendments thereto, any non-
profit medical and hospital service corporation under K.S.A. 40-19c01
through 40-19c11 and amendments thereto, any health maintenance or-
ganization, as defined by K.S.A. 40-3202 and amendments thereto, or any
captive insurance company, as defined by K.S.A. 40-4301 and amend-
ments thereto, which is authorized to do business in Kansas.

      Sec.  2. K.S.A. 12-2620 is hereby amended to read as follows: 12-
2620. (a) All certificates granted hereunder shall be perpetual unless
sooner suspended or revoked by the commissioner or the attorney gen-
eral.

      (b) Whenever the commissioner shall deem it necessary the com-
missioner may make, or direct to be made, an examination of the affairs
and the financial condition of any pool, except that once every five years
the commissioner shall conduct an examination of the affairs and the
financial condition of each pool. Each pool shall submit a certified inde-
pendent audited financial statement no later than 90 days after the end
of the fiscal year. The financial statement shall include outstanding re-
serves for claims and for claims incurred but not reported. Each pool
shall file reports as to income, expenses and loss data at such times and
in such manner as the commissioner shall require. Any pool which does
not use rates developed by an approved rating organization shall file with
the commissioner an actuarial certification that such rates are actuarially
sound. Whenever it appears to the commissioner from such examination
or other satisfactory evidence that the ability to pay current and future
claims of any such pool is impaired, or that it is doing business in violation
of any of the laws of this state, or that its affairs are in an unsound con-
dition so as to endanger its ability to pay or cause to be paid claims in the
amount, manner and time due, the commissioner shall, before filing such
report or making the same public, grant such pool upon reasonable notice
a hearing, and, if on such hearing the report be confirmed, the commis-
sioner shall may require any of the actions allowed under K.S.A. 40-222b
and amendments thereto or suspend the certificate of authority for such
pool until its ability to pay current and future claims shall have been fully
restored and the laws of the state fully complied with. The commissioner
may, if there is an unreasonable delay in restoring the ability to pay claims
of such pool and in complying with the law or if rehabilitation or correc-
tive action taken under K.S.A. 40-222b and amendments thereto is un-
successful, revoke the certificate of authority of such pool to do business
in this state. Upon revoking any such certificate the commissioner shall
communicate the fact to the attorney general, whose duty it shall be to
commence and prosecute an action in the proper court to dissolve such
pool or to enjoin the same from doing or transacting business in this state.
The commissioner of insurance may call a hearing under K.S.A. 40-222b,
and amendments thereto, and the provisions thereof shall apply to group-
funded pools.

      (c) On an annual basis, or within 30 days of any change thereto, each
pool shall supply to the commissioner the name and qualifications of the
designated administrator of the pools and the terms of the specific and
aggregate excess insurance contracts of the pool.

      Sec.  3. K.S.A. 1998 Supp. 12-2621 is hereby amended to read as
follows: 12-2621. (a) With respect to the categories of coverage described
in subparagraphs (d)(1) through (4) of K.S.A. 12-2618, and amendments
thereto, premium contributions to the pool shall be based upon appro-
priate manual classification and rates, plus or minus applicable experience
credits or debits, and minus any advance discount approved by the trus-
tees, not to exceed 25% of manual premium. The pool shall use rules,
classifications and rates as promulgated by an approved rating organiza-
tion for workers compensation if the pool has been in operation for less
than five years. Such rates shall either be the rates effective June 1, 1994,
or the prospective loss costs, as defined in K.S.A. 40-1113c, and amend-
ments thereto, plus expenses necessary to administer the pool. For pur-
poses of subsection (b), the prospective loss costs shall be presumed to
be the 70% required to be deposited in the claims fund. If the pool has
been in operation for more than five years, the board of trustees may
determine such rates and discounts as approved by the commissioner.
Premium contributions to the pool for all other lines of insurance shall
be based on rates filed by a licensed rating organization or on rates of
certain companies filing rates with the commissioner and approved by
the commissioner for the pool. In lieu of the foregoing, the board of
trustees may determine such classification, rates and discounts as ap-
proved by the commissioner.

      Premium contributions to any pool providing life insurance or any pool
providing group sickness and accident insurance as described in K.S.A.
12-2617, and amendments thereto, shall be based on sound actuarial prin-
ciples.

      (b) An amount equal to at least 70% of the annual premium shall be
maintained in a designated depository for the purpose of paying claims
in a claims fund account. If the pool has been in operation for more than
five years the commissioner may authorize allocation of a different
amount to the claims fund account, if solvency of the pool would not be
endangered. The remaining annual premium shall be placed into a des-
ignated depository for the payment of taxes, fees and administrative and
other operational costs in an administrative fund account.

      (c) Any moneys for a fund year in excess of the amount necessary to
fulfill all obligations of the pool for that fund year, including any obligation
to retain adequate surplus funds, as defined by subsection (h) of K.S.A.
12-2618, and amendments thereto, in lieu of specific and aggregate excess
insurance, may be declared to be refundable by the trustees not less than
12 months after the end of the fund year. Any such refund shall be paid
only to those members who remained participants in the pool for an entire
year. Payment of previously earned refunds shall not be contingent on
continued membership in the pool.

      Sec.  4. K.S.A. 12-2622 is hereby amended to read as follows: 12-
2622. The trustees shall not utilize any of the contributions collected as
premiums for any purpose unrelated to the pool. Moneys not needed for
current obligations may be invested by the trustees. Such investments
shall be limited to bonds or other evidences of indebtedness issued, as-
sumed or guaranteed by the United States of America, or by any agency
or instrumentality thereof; in certificates of deposit in a federally insured
bank located in Kansas; or in shares or savings deposits in a federally
insured savings and loan association located in Kansas Such investments
shall be limited to investments permitted by K.S.A. 12-1677b and 75-4209
and amendments thereto, except that a pool which has been in existence
for at least five years shall be permitted to invest in any of the securities
or other investments permitted by article 2a of chapter 40 of the Kansas
Statutes Annotated.

      Sec.  5. K.S.A. 1998 Supp. 44-584 is hereby amended to read as fol-
lows: 44-584. (a) The application for a new certificate shall be signed by
the trustees of the trust fund created by the pool. Any application for a
renewal of an existing certificate shall meet at least the standards estab-
lished in subsections (f), (g), (h), (i), (j), (k), (l), (m) and (n) of K.S.A. 44-
582 and amendments thereto. After evaluating the application the com-
missioner shall notify the applicant that the plan submitted is approved
or conversely, if the plan submitted is inadequate, the commissioner shall
then fully explain to the applicant what additional requirements must be
met. If the application is denied, the applicant shall have 15 days to make
an application for hearing by the commissioner after service of the denial
notice. The hearing shall be conducted in accordance with the provisions
of the Kansas administrative procedure act.

      (b) An approved certificate of authority shall remain in full force and
effect until such certificate is suspended or revoked by the commissioner.
An existing pool operating under an approved certificate of authority must
file with the commissioner, within 120 days following the close of the
pool's fiscal year, a current financial statement on a form approved by the
commissioner showing the financial ability of the pool to meet its obli-
gations under the worker compensation act and confirmation of specific
and aggregate excess insurance as required by law for the pool. If an
existing pool's certificate of authority is suspended or revoked, such pool
shall have the same rights to a hearing by the commissioner as for appli-
cants for new certificates of authority as set forth in subsection (a) above.

      (c) Whenever the commissioner shall deem it necessary the commis-
sioner may make, or direct to be made, an examination of the affairs and
financial condition of any pool in accordance with K.S.A. 40-222 and
K.S.A. 40-223 and amendments thereto, except that once every five years
the commissioner shall conduct an examination of the affairs and financial
condition of each pool. Each pool shall submit a certified independent
audited financial statement no later than 90 days after the end of the
pool's fiscal year. The financial statement shall include outstanding re-
serves for claims and for claims incurred but not reported. Each pool
shall file payroll records, accident experience and compensation reports
and such other reports and statements at such times and in such manner
as the commissioner shall require. Whenever it appears to the commis-
sioner from such examination or other satisfactory evidence that the sol-
vency of any such pool is impaired, or that it is doing business in violation
of any of the laws of this state, or that its affairs are in an unsound con-
dition so as to endanger its ability to pay or cause to be paid the com-
pensation in the amount, manner and time due as provided for in the
Kansas workers compensation act, the commissioner shall, before filing
such report or making the same public, grant such pool upon reasonable
notice a hearing in accordance with the provisions of the Kansas admin-
istrative procedure act, and, if on such hearing the report be confirmed,
the commissioner shall suspend the certificate of authority for such pool
until its solvency shall have been fully restored and the laws of the state
fully complied with. The commissioner may, if there is an unreasonable
delay in restoring the solvency of such pool and in complying with the
law, revoke the certificate of authority of such pool to do business in this
state. Upon revoking any such certificate the commissioner shall com-
municate the fact to the attorney general, whose duty it shall be to com-
mence and prosecute an action in the proper court to dissolve such pool
or to enjoin the same from doing or transacting business in this state. The
commissioner of insurance may call a hearing under K.S.A. 40-222b, and
amendments thereto, and the provisions shall apply to group workers
compensation pools.

      Sec.  6. K.S.A. 1998 Supp. 44-585 is hereby amended to read as fol-
lows: 44-585. (a) Premium contributions to the pool shall be based upon
appropriate manual classification and rates, plus or minus applicable ex-
perience credits or debits, and minus any advance discount approved by
the trustees, not to exceed 15% of manual premium. The pool must use
rules, classifications and rates as promulgated by an approved rating or-
ganization and must report premium and loss data to a rating organization.
Such rates shall either be the rates effective June 1, 1994, or the pro-
spective loss costs, as defined in K.S.A. 40-1113, and amendments
thereto, plus expenses necessary to administer the pool. For purposes of
subsection (b) the prospective loss costs shall be presumed to be the 70%
required to be deposited in the claims fund. If the pool has been in
operation for more than five years, the board of trustees may determine
such rates as approved by the commissioner.

      (b) At least 70% of the annual premium shall be placed into a des-
ignated depository for the sole purpose of paying claims. If so approved
by the commissioner of insurance, the annual premium to be designated
to such depository may be determined to be the net amount of premium
after all or a portion of the specific and aggregate excess insurance pre-
mium costs have been paid. This shall be called the claims fund account.
The remaining annual premium shall be placed into a designated depos-
itory for the payment of taxes, fees and administrative costs. This shall be
called the administrative fund account. If a pool has been in operation for
more than five years, the commissioner may authorize allocation of a
different amount to the claims fund account, if solvency of the pool would
not be endangered.

      (c) Any surplus moneys for a fund year in excess of the amount nec-
essary to fulfill all obligations under the workers compensation act for
that fund year may be declared to be refundable by the trustees not less
than 12 months after the end of the fund year, upon the approval of the
commissioner. Such approval can be obtained only upon satisfactory ev-
idence that sufficient funds remain on deposit for the payment of all
outstanding claims and expenses, including incurred but not reported
claims. Any such refund shall be paid only to those employers who re-
mained participants in the pool for an entire year. Payment of previously
earned refunds shall not be contingent on continued membership in the
pool.

      Sec.  7. K.S.A. 44-586 is hereby amended to read as follows: 44-586.
The trustees shall not utilize any of the moneys collected as premiums
for any purpose unrelated to Kansas workers' compensation. Moneys not
needed for current obligations may be invested by the trustees. Such
investments shall be limited to bonds or other evidences of indebtedness
issued, assumed or guaranteed by the United States of America, or by
any agency or instrumentality thereof; in certificates of deposit in a fed-
erally insured bank; or in shares or savings deposits in a federally insured
savings and loan association Unless authorized elsewhere in this act, all
funds of a pool shall be invested only in securities or other investments
permitted by article 2a of chapter 40 of the Kansas Statutes Annotated,
or such other securities or investments as the commissioner may permit.

      New Sec.  8. The purpose of sections 8 through 14 is to provide the
state of Kansas with a comprehensive body of law for the effective reg-
ulation and supervision of title insurance agencies engaged in settlement
and closing of the sale of an interest in real estate.

      New Sec.  9. As used in this act, unless the context otherwise re-
quires:

      (a) ``Commissioner'' means the commissioner of insurance of the
state of Kansas.

      (b) ``Escrow'' means written instruments, money or other items de-
posited by one party with a depository, escrow agent or escrow for deliv-
ery to another party upon the performance of a specified condition or the
happening of a certain event.

      (c) ``Person'' means a natural person, partnership, association, coop-
erative, corporation, trust or other legal entity.

      (d) ``Qualified financial institution'' means an institution that is:

      (1) Organized or (in the case of a U.S. branch or agency office of a
foreign banking organization) licensed under the laws of the United States
or any state and has been granted authority to operate with fiduciary
powers;

      (2) regulated, supervised and examined by federal or state authorities
having regulatory authority over banks and trust companies;

      (3) insured by the appropriate federal entity; and

      (4) qualified under any additional rules established by the commis-
sioner.

      (e) ``Title insurance agent'' or ``agent'' means an authorized person,
other than a bona fide employee of the title insurer who, on behalf of the
title insurer, performs the following acts, in conjunction with the issuance
of a title insurance report or policy:

      (1) Determines insurability and issues title insurance reports or pol-
icies, or both, based upon the performance or review of a search, or an
abstract of title;

      (2) collects or disburses premiums, escrow or security deposits or
other funds;

      (3) handles escrow, settlements or closings;

      (4) solicits or negotiates title insurance business; or

      (5) records closing documents.

      (f) ``Title insurer'' or ``insurer'' means a company organized under
laws of this state for the purpose of transacting the business of title in-
surance and any foreign or non-U.S. title insurer licensed in this state to
transact the business of title insurance.

      (g) ``Title insurance policy'' or ``policy'' means a contract insuring or
indemnifying owners of, or other persons lawfully interested in, real or
personal property or any interest in real property, against loss or damage
arising from any or all of the following conditions existing on or before
the policy date and not excepted or excluded:

      (1) Defects in or liens or encumbrances on the insured title;

      (2) unmarketability of the insured title;

      (3) invalidity, lack of priority, or unenforceability of liens or encum-
brances on the stated property;

      (4) lack of legal right of access to the land; or

      (5) unenforceability of rights in title to the land.

      New Sec.  10. A title insurance agent may operate as an escrow, set-
tlement or closing agent, provided that:

      (a) All funds deposited with the title insurance agent in connection
with an escrow, settlement or closing shall be submitted for collection to,
invested in or deposited in a separate fiduciary trust account or accounts
in a qualified financial institution no later than the close of the next busi-
ness day, in accordance with the following requirements:

      (1) The funds shall be the property of the person or persons entitled
to them under the provisions of the escrow, settlement or closing agree-
ment and shall be segregated for each depository by escrow, settlement
or closing in the records of the title insurance agent in a manner that
permits the funds to be identified on an individual basis;

      (2) the funds shall be applied only in accordance with the terms of
the individual instructions or agreements under which the funds were
accepted; and

      (3) an agent shall not retain any interest on any money held in an
interest-bearing account without the written consent of all parties to the
transaction.

      (b) Funds held in an escrow account shall be disbursed only:

      (1) Pursuant to written authorization of buyer and seller;

      (2) pursuant to a court order; or

      (3) when a transaction is closed according to the agreement of the
parties.

      (c) A title insurance agent shall not commingle the agent's personal
funds or other moneys with escrow funds. In addition, the agent shall not
use escrow funds to pay or to indemnify against the debts of the agent or
of any other party. The escrow funds shall be used only to fulfill the terms
of the individual escrow and none of the funds shall be utilized until the
necessary conditions of the escrow have been met. All funds deposited
for real estate closings, including closings involving refinances of existing
mortgage loans, which exceed $2,500 shall be in one of the following
forms:

      (1) Lawful money of the United States;

      (2) wire transfers such that the funds are unconditionally received by
the title insurance agent or the agent's depository;

      (3) cashier's checks, certified checks or bank money orders issued by
a federally insured financial institution and unconditionally held by the
title insurance agent;

      (4) funds received from governmental entities or drawn on an escrow
account of a real estate broker licensed in the state or drawn on an escrow
account of a title insurer or title insurance agent licensed to do business
in the state; or

      (5) other negotiable instruments which have been on deposit in the
escrow account at least 10 days.

      (d) Each title insurance agent shall have an audit made of its escrow,
settlement and closing deposit accounts, conducted by a certified public
accountant or by a title insurer for which the title insurance agent has a
licensing agreement, according to the following schedule. Audits shall be
considered current if dated within the 12 months prior to submission of
the audit as required herein. The title insurance agent shall provide a
copy of the audit report to the commissioner and to each title insurance
company which it represents within 160 days after the close of the cal-
endar year for which an audit is required. Title insurance agents who are
attorneys and who issue title insurance policies as part of their legal rep-
resentation of clients are exempt from the requirements of this subsec-
tion. However, the title insurer, at its expense, may conduct or cause to
be conducted an annual audit of the escrow, settlement and closing ac-
counts of the attorney. Attorneys who are exclusively in the business of
title insurance are not exempt from the requirements of this subsection.
Audits shall be required as follows:

      (1) Annual audit required in counties having a population of 40,001
and over;

      (2) biennial audit required in counties having a population of 20,001
- 40,000; and

      (3) triennial audit required in counties having a population of 20,000
or under.

      (e) The commissioner may promulgate rules and regulations setting
forth the standards of the audit and the form of audit report required.

      (f) If the title insurance agent is appointed by two or more title in-
surers and maintains fiduciary trust accounts in connection with providing
escrow and closing settlement services, the title insurance agent shall
allow each title insurer reasonable access to the accounts and any or all
of the supporting account information in order to ascertain the safety and
security of the funds held by the title insurance agent.

      (g) Nothing in this section is intended to amend, alter or supersede
other laws of this state or the United States, regarding an escrow holder's
duties and obligations.

      New Sec.  11. (a) The title insurance agent shall maintain sufficient
records of its escrow operations and escrow trust accounts so that the
commissioner may adequately ensure that the title insurance agent is in
compliance with all provisions of sections 8 through 14 and amendments
thereto. The commissioner may prescribe the specific record entries and
documents to be kept and the length of time for which the records must
be maintained.

      (b) The title insurance agent shall make available for inspection by
the commissioner, or the commissioner's representatives, all records re-
lating to the title insurance agent's escrow, settlement and closing busi-
ness, and any other fiduciary trust accounts required to be kept by the
title insurance agent. Such availability for inspection shall include any
records to which subsection (f) of section 10 and amendments thereto
applies.

      New Sec.  12. (a) The title insurance agent who handles escrow, set-
tlement or closing accounts shall file with the commissioner a surety bond
or irrevocable letter of credit in a form acceptable to the commissioner,
issued by an insurance company or financial institution authorized to con-
duct business in this state, securing the applicant's or the title insurance
agent's faithful performance of all duties and obligations set out in sec-
tions 8 through 14 and amendments thereto.

      (b) The terms of the bond or irrevocable letter of credit shall be:

      (1) The surety bond shall provide that such bond may not be termi-
nated without 30 days prior written notice to the commissioner.

      (2) An irrevocable letter of credit shall be issued by a bank which is
insured by the federal deposit insurance corporation or its successor if
such letter of credit is initially issued for a term of at least one year and
by its terms is automatically renewed at each expiration date for at least
an additional one-year term unless at least 30 days prior written notice of
intention not to renew is given to the commissioner of insurance.

      (c) The amount of the surety bond or irrevocable letter of credit for
those agents servicing real estate transactions on property located in coun-
ties having a certain population shall be required as follows:

      (1) $100,000 surety bond or irrevocable letter of credit in counties
having a population of 40,001 and over;

      (2) $50,000 surety bond or irrevocable letter of credit in counties
having a population of 20,001 to 40,000; and

      (3) $25,000 surety bond or irrevocable letter of credit in counties
having a population of 20,000 or under.

      (d) The surety bond or irrevocable letter of credit shall be for the
benefit of any person suffering a loss if the title insurance agent converts
or misappropriates money received or held in escrow, deposit or trust
accounts while acting as a title insurance agent providing any escrow or
settlement services.

      New Sec.  13. The commissioner may issue rules, regulations and or-
ders necessary to carry out the provisions of sections 8 through 14 and
amendments thereto.

      New Sec.  14. If the commissioner determines that the title insurance
agent or any other person has violated this act, or any rules and regulation
or order promulgated thereunder, after notice and opportunity to be
heard, the commissioner may order that such person be subject to the
penalties provided in K.S.A. 40-2406 et seq. and amendments thereto.

      Sec.  15. K.S.A. 12-2620, 12-2622 and 44-586 and K.S.A. 1998 Supp.
12-2621, 40-112, 40-112a, 44-584 and 44-585 are hereby repealed.

      Sec.  16. This act shall take effect and be in force from and after its
publication in the statute book.

Approved April 14, 1999.
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