SURPLUS LINES FAQ - Delaware Insurance Commissioner

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If you do not have a policy number when you submit the SL-1905 – and you used a binder number – you will need to submit a SL-1908 Binder Number Replacement Form when you get the policy number. It must be printed and mailed to the Department. 39. Does Delaware have a “White List”? The Department maintains the Eligible Surplus Lines Insurers listing – also referred to as the Bulletin # 5 listing – on its website. Each SL broker must restrict surplus lines business placed by him or her to the insurers on the listing. The status of eligibility, if granted by the Commissioner, only indicates that the insurer appears to be sound financially and to have satisfactory claims practices, and that the Commissioner has no credible evidence to the contrary. Placing a company on the list of eligible SL insurers does not require the Commissioner to determine the actual financial condition or claims practices of the unauthorized insurer. 40. I am looking at the Delaware listing of Eligible Surplus Lines Insurers, but the company I’m looking for is not on the list. What are my options? Your only option is to place the risk with another carrier. Delaware law, §1907 (a), specifically states, “A broker shall not knowingly place surplus line insurance with an insurer that is unsound financially or that is ineligible under this section” [emphasis added]. The Department publishes a list of insurers deemed eligible to place surplus lines coverage, and all SL brokers are permitted to place business with listed eligible insurers only. 41. I need to submit a filing on a policy that was placed with a carrier that is not on Delaware's Eligible Surplus Line Insurers List – it is actually on the list of “Ineligible” Insurers. How should I handle this? The companies on the “Ineligible” Insurers list are Delaware domestic companies, meaning that they are incorporated in the state of Delaware. When a company is domiciled in DE, it is admitted in DE. Delaware domestic SL insurers cannot write business covering Delaware risks on a surplus lines basis. Surplus Lines Brokers should not be placing business with insurers that are not on the listing of Eligible Insurers that is published by the Department, but if it happens there are a couple of ways of handling the situation. If it is a multi-state surplus lines policy, the DE portion of the coverage must be placed with a different surplus lines company. If the entire risk is DE business, there are two possibilities and options: 1. It may actually be admitted business – subject to rate & form filing requirements, etc. just like any other standard coverage 2. If it is definitely surplus lines, it must be written with another surplus lines company.
Check with the underwriter. If it is admitted business, then you don't need to report it or collect and pay taxes on it -- the company is responsible for that. If it is surplus lines, see if the Delaware risk can be written on another carrier's paper -- usually an affiliate. That's what is most often done. Once you get a determination, make the appropriate filing. NOTE: The SL broker may be subject to penalties for failure to comply with Delaware Surplus Lines Law, which states that surplus lines coverage can only be placed with approved eligible SL insurers. 42. Does Delaware allow “Courtesy Filings”? No. The Department defines a courtesy filing as the submission of forms or taxes from a Delaware licensed surplus lines broker as a “courtesy” to an agent/producer/broker who has placed insurance with an unauthorized, eligible surplus lines insurer, but is not licensed as a surplus lines broker in this State. Because Delaware licenses both resident and non-resident surplus lines brokers, courtesy filings are not allowed. If a non-resident surplus lines broker intends to place business on Delaware risks he or she should obtain a Delaware surplus lines license before doing so. 43. Is direct procurement by an insured permissible in Delaware? Delaware law is silent regarding self- or independent- procurement of insurance covering risks located or to be performed in the state of Delaware from unauthorized insurance companies. However, it is the Delaware Insurance Department’s policy to treat self-procured insurance in the same manner as surplus lines insurance as set forth in Title 18 Chapter 19. There is a premium tax of 2% imposed on the “proportion of the premium which is properly allocable to the risks or exposures located in this State.” (§ 1917) 44. Is direct procurement allowed when a Surplus Lines Wholesaler or Retailer are involved in placement of the policy but not licensed in your State? No. First, let’s clarify the definition of direct procurement. In Delaware, if a consumer contacts a surplus lines insurer directly to procure coverage on their own behalf, without any involvement from an insurance licensee, then it is considered direct procurement (also called self- or independent- procurement). If there is a surplus lines broker involved in any capacity, the placement is not considered direct procurement. In that case, the surplus lines broker -- even if it is a wholesaler -- must be licensed for SL with the Department. 45. Does a wholesale broker need to be licensed for surplus lines in Delaware and make State filings? If the wholesale broker is contacted by a retail producer or broker (not licensed for SL), and the wholesale broker procures the coverage directly, then the wholesale broker must be licensed in Delaware and make all filings to the State.
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SURPLUS LINES FAQ - Delaware Insurance Commissioner

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