SURPLUS LINES FAQ - Delaware Insurance Commissioner

58. Do you require us to provide an original stamped copy of policies to the insured?
59. Is the stamp a rubber stamp or a paper insert? If rubber, do you provide this to us or do we need to
order one ourselves? If paper, can we print the stamp?
60. Are there any font size or color requirements?
61. Does the binder/dec page require a signature? If so, whose signature is required?
1. What is Surplus Lines?
Surplus Lines is defined as specialized property or liability coverage provided by a nonadmitted
insurer in cases where the coverage is not available in the regular market through an admitted
insurer. This insurance is only written through specially trained and licensed surplus lines
brokers.
2. What is the difference between admitted companies and nonadmitted companies?
Admitted or authorized companies hold a Certificate of Authority issued by the Commissioner
showing that they are duly authorized to transact insurance business in this state. By becoming
authorized in Delaware, these companies place themselves under the jurisdiction of the Delaware
Insurance Commissioner, and are regulated by the Delaware Insurance Department. Most
insurance coverage is placed through admitted insurers.
Nonadmitted or unauthorized companies do not have a certificate of authority, but are deemed
eligible to provide certain types of coverage if approved by the Department. Surplus Lines
companies are not under the jurisdiction of the Delaware Insurance Commissioner, and though
the Department monitors these companies, it is to a much lesser extent than the regulation of
admitted companies. The regulation of surplus lines is largely accomplished by placing a
number of requirements on the surplus lines brokers rather than the companies.
3. What special requirements are placed on surplus lines brokers?
� Licensing: The Department requires that both individuals and business entities (agencies,
brokerages, firms, etc.) be specially licensed for surplus lines. A SL broker must be an insurance
producer, licensed for general lines of authority, who also obtains a SL license that allows him or
her to sell, solicit or negotiate contracts of insurance with eligible nonadmitted surplus lines
insurers.
� Diligent Effort: Before placing any coverage with a nonadmitted insurer, the individual that
represents the insured – usually the Producer but can be the SLB – must first seek the desired
coverage from among admitted insurers who are writing comparable coverage in Delaware.
� Inquiry into Financial condition of Insurer: Although the SLB is required to place business only
with insurers on the Eligible SL Insurers list, the Commissioner is not required to determine the
actual financial condition or claims practices of any unauthorized insurer on the list. Every SLB
should make a thorough inquiry into the financial condition and operating history of the SL
insurer before placing business with the company.