Bulletin #25: Residual Markets and Surplus Line
General Bulletin #25
RESIDUAL MARKETS AND SURPLUS LINE
On August 6, 2004, the governor signed Senate Bill 2560 into
law (Public
Act 93-0876). This bill makes some important changes to the surplus line
law. As of August 6, 2004, the following provisions will apply:
- In general, when making a diligent effort to first obtain coverage from authorized companies, a surplus
line producer is not required to submit a risk to any residual market
mechanism (like the Auto Plan,
FAIR Plan, etc.). An
important exception to this is described in 2c.
- Producers cannot obtain coverage from a surplus line insurer that is:
a. designed to satisfy any primary insurance requirement in the law, when that
law says the insurance must be from an
"authorized" insurer (one example would
be the primary auto liability coverage required in the Illinois Vehicle Code); or
b. primary Workers' Compensation coverage; or
c. a primary personal lines risk, when there is residual market coverage
available for that risk at the limits requested by the insured.
- If the primary insurance described in 2a, 2b or 2c above is properly placed
with an authorized insurer or residual market, surplus line producers
can obtain
coverage on an excess or umbrella basis from a surplus line insurer, provided
producer has gotten the proper declinations from authorized insurers.
- A producer can no longer be required to submit a risk to a residual market
for a declination when the residual market does not offer the desired coverage
or the requested limits.
- The separate "Notice to Policyholder" requirement for domestic surplus line
insurers which until now was a Department of Insurance directive, is now codified
in the law. See your procedures manual for more information.
Contact the Association if you have any
questions. You are encouraged to
view the
bill in its entirety on the Illinois Legislature website.
06-Aug-2004
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