Disputes over surplus lines insurance in Texas are about to get a lot more local.
Under Senate Bill 455, recently passed unanimously by both chambers of the Texas Legislature, any surplus lines insurance contract covering a risk located entirely within the state must include an arbitration agreement that stipulates proceedings be conducted in Texas and governed by Texas law.
The new rules apply to contracts delivered, issued for delivery, or renewed on or after January 1, 2026. Contracts executed before that date remain subject to the laws in place at the time.
There is a notable caveat: insurers and policyholders may agree to a different arbitration venue and legal framework only if the insurer first provides written notice of the change and offers a premium credit to offset the policyholder’s resulting costs.
For contracts insuring more than $2 million in value, the law allows parties to agree—by mutual consent and in a defined format—to arbitration outside Texas and under another state’s laws.
The legislation, which becomes effective September 1, 2025, aims to anchor dispute resolution in familiar legal territory for Texas-based insureds, while allowing flexibility for larger, more complex risks. It reflects a clear intent to ensure that the interpretation and resolution of surplus lines insurance contracts for in-state risks are handled under Texas jurisdiction, unless both sides decide otherwise.
