Laws Restricting Surplus Lines

Due to the expanding number of states that offer non-resident surplus lines licenses (currently 45 and growing), requirements that impinge on surplus lines writers and producers take greater significance.  

In order to assist our membership, in late 2003 NAPSLO surveyed state surplus lines associations to determine what, if any, laws or regulations or other requirements exist that would impact or circumscribe the ability of surplus lines policy to be issued free of any rate or form control or regulation.

The following is a summary of the results received.

COLORADO
Colorado requires that all insurers issuing Automobile Financial Responsibility policies comply with 10-4-701,10-4-725and the reporting requirements contained in 10-4-615 (see Regulation 2-4-1 6D). In addition there are a couple of situations Medical Malpractice for example where Surplus Lines Insurers have not been exempted from Non Renewal,Cancellation and Policy Change provisions. It is unclear whether this was an oversight but in other situations they are specifically exempted. 

GEORGIA
There is a provision in the Georgia law, adopted several years ago, that does specifically prohibit the Office of the Insurance Commissioner from regulating or requiring the filing of rates and forms for Surplus Lines carriers. 

OREGON
Effective January 1,2004 under Oregon law the Insurance Division director now has the discretion to allow non-resident surplus lines applications from states that are non-reciprocal with Oregon (e.g. require bonds, exams, etc. of Oregon applicants).  

PENNSYLVANIA
Only unique forms require Insurance Department approval for personal lines placements. See www.pasla.org; Surplus Lines Law; Section 1604; (3). Unique form wordings needed Insurance Department approval until September 7, 2002 but at that time, the law underwent major amendments.

TEXAS
Under Article 13 of SB14 passed by the Texas legislature in 2003, "Rate Standards" specifically includes a surplus lines insurer, stating "rates used under this code must be just, fair, reasonable, adequate, not confiscatory and not excessive for the risks to which they apply, and not unfairly discriminatory.  An insurer may not use rates that violate this article."