Bulletin #16: Illinois Domestic Surplus Line Insurers
General Bulletin #16
ILLINOIS DOMESTIC SURPLUS LINE INSURERS
This is to advise you of some recent
changes to the Illinois Insurance Code that could affect
you. These changes were effective August 14, 1998.
Section 445a has been added to the
Illinois Insurance Code creating a new category of Insurer
called an Illinois Domestic Surplus Line Insurer. Until
now, in Illinois and all other states, a surplus line
insurer was always an admitted insurer in its own state of
domicile. This provision, the first such provision in the
50 states, provides for an Illinois-domiciled insurer to be
treated as non-admitted in Illinois for certain purposes.
Here are some questions you might have:
Will such insurers still be subject to
the $15,000,000 capital and surplus standard applicable to
non-Illinois domiciled surplus line insurers?
Yes. They must still meet this
standard.
Must policies placed with a Domestic
Surplus Line Insurer be presented to the Surplus Line
Association for stamping?
Yes, and the stamping fee still
applies.
What tax implications will there be for
placements we make with such insurers?
a. It is the position of the
Illinois Department of Insurance that the 3.5% Surplus Line
tax will apply.
b. It is the position of the
Illinois Department of Insurance that the Fire Marshal tax
will apply.
Do we still need to obtain declinations
from admitted insurers?
Yes, but note that the declinations
cannot be from a Domestic Surplus Line Insurer.
Will these insurers be free from rate
and form filings, like any other surplus line insurer?
Yes.
Will the policies issued by these
insurers be covered by the state guaranty fund?
No. For policies issued by these
insurers, the
Department of Insurance has indicated that
rule
2701.120 will be amended to require the following legend:
NOTICE TO POLICYHOLDER: This
contract is issued by a domestic surplus line insurer, as defined in Section 445a,
pursuant to Section 445 and as such is not covered by the Illinois Insurance Guaranty Fund.
Will the Service of Suit requirements
of Section 445 apply to these insurers?
The
Illinois Department of Insurance
has indicated that the
Service of Suit required by Section
445 will not apply to placements with Illinois Domestic
Surplus Line Insurers.
How can we find out which insurers are
Illinois Domestic Surplus Line Insurers?
The insurer should be able to tell
you if they fall into this category. For an up-to-date list
of Domestic Surplus Line Insurers registered with the
Illinois Department of Insurance, click here. Additionally,
you may contact the Surplus Line Association to inquire
about the status of specific insurers.
The Domestic Surplus Line Insurer
provision is part of Senate Bill 1728 which made several
changes to the Insurance Code including such subjects as
Risk Based Capital, Industrial Insureds and Lloyd's. For a
full copy you can contact Senate Enrolling at (217)
782-6970. They charge 10 cents per page plus a handling fee.
Issued 10/1/98.
Revised 7/1/03, 7/1/06
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