Exam 1 Pard D Flashcards
Surplus Lines
”- Statutory provision in state insurance codes
- Allows insurance buyers access to nonaddmitted/unauthorized insurance companies
- Access via specially licensed brokers when the state’s licensed insurers are unable to fulfill the buyer’s insurance needs”
Surplus Lines: Why requirements?
”- Tax
- Providesa an orderly , regulated, legitimate and taxable method of accessing a supplemental outlet
- "”safety valve”” market
- consisting of non admitted/unauthorized carriers”
Underwriting Cycles
”- Soft Market
- Hard Market”
Soft Market
”- Write many classes - (standard market)
- Flexible with loss history
- Competitive premiums
- Optional coverage available
- Goal is to increase market share”
Hard Market
”- Write less classes
- Not flexible w/loss history
- Increased premiums
- Less optional coverages available
- Goal to reduce writings to optimal level”
Surplus Lines Broker
”- Specialty broker licensed by the state
- Place or procure insurance from eligible surplus lines insurers”
Types of Surplus Lines Brokers
”- Wholesale Insurance Broker
- Retail Broker”
Wholesale Insurance Broker
Broker/Producer providing insurance products (usally specialized insurance products) to retail producers
Retail Broker
A broker or producer who deals with the public to provide them with insurance products and solve their insurance problems
E&S Business Flow
“1) Insured - Retail Agent
2) Retail Agent - Standard Contractor Carrior
3) Standard Contract Carrior declines
4) Retail agent - Wholesale Agent
5) Wholesale Agent - Surplus Carrier”
Freedom of Rate & Form
”- Foundation of surplus lines is based on freedom of rate and form from regulation
- Varying risks and limited data = need for freed”
Varying Risks for E&S
”- New
- Unique
- Distressed
- High capacity requirements
- Less seasoned”
E&S Examples
”- Products liabilityy
- Unbrella/Excess Liability
- Professional Liability
- Environmental
- Catastrophic Property
- Special Events
- Energy and Marine coverages”
E&S Risks
”- Cycle Risks
- Catastrophic Exposure”
E&S Cycle Risks
Risks that move in and out of the admitted market as the underwriting cycles change
E&S Catastrophic Exposure
Varies depending on recent loss exposure/experience, location and type of risk
Legal Requirements of a Surplus Lines Placement
“1) Risk must be placed by a specially licensed broker
2) Risk must be placed with eligible companies
3) Risk must first be rejected by licensed market
4) Affidavit must be executed and filed with department
5) Taxes must be admitted to authorities”
Legal Requirements of a Surplus Lines Placement
“1) Risk must be placed by a specially licensed broker
2) Risk must be placed with eligible companies
3) Risk must first be rejected by licensed market
4) Affidavit must be executed and filed with department
5) Taxes must be admitted to authorities”
