Surplus Lines Flashcards
Describe a surplus lines transaction
Insureds cannot get coverage in admitted market and are denied through “diligent search” due to high limits, difficult underwriting and highly individualized risks. Then agents with special license place the policy with non-admitted market surplus line insurer.
Insurance regulations from which surplus lines insurers are exempt
-Do not have to file rates / not subject to rate regulation
-Do not have to file coverage forms
-Do not have a guaranty fund
-Does not have an involuntary market / assigned risk plans
-Does not need to be licensed in the state
Ways in which surplus lines market is regulated
-Producers are specially licensed to sell surplus lines insurance
-Insurers must meet the minimum capital requirements to be able to sell surplus lines
-Still has to adhere to solvency requirements
-Still required to file financial statements, which regulators can review
-Surplus insurers must file annual statements
-Subject to RBC regulatory levels
- Still need to meet high financial rating in order to sell surplus lines
-Surplus lines carriers are still subject to the Sherman Act when it comes to boycott, coercion and intimidation (these acts are illegal)
