More About UsSurplus Lines Insurance - What is it?
Most insurance in Idaho is written by insurance companies licensed by the Idaho Department of Insurance and protected by the Idaho Guaranty Fund. These companies are regulated by the State in a variety of ways, including restrictions on the amount of premium charged and policy forms used. However, licensed companies will not provide all the insurance coverage needed by Idaho citizens. With the exception of "Eligible Lines for Export", a needed coverage must first be rejected by licensed companies before it can be written in the surplus lines market, and then only by eligible companies on the Idaho "White List" or the NAIC Quarterly Listing of Alien Insurers. Surplus Line policies must be placed through licensed resident or non-resident Surplus Line Brokers.
The Idaho Department of Insurance does not directly regulate the rates and policy forms used by Surplus Line insurers. This provides the flexibility needed to write the hard-to-place risks found in the Surplus Lines market. The typical types of risks written in Surplus Lines include those that:
- Are high risk (explosive manufacturing)
- Do not fit standard market underwriting
- Require higher limits than offered by standard markets
- Have excessive loss history
- Specialty coverage (one day events and unique situations)
The Surplus Line Association of Idaho was organized in 1958 and incorporated in 1972 as an Idaho 501(c)(6) non-profit trade association. The association exists under Insurance regulation and is independently governed by a board of directors elected by SLA Idaho membership. The SLA assists the insurance director in regulating Surplus Lines insurance and encourages its members to comply with all provisions of Title 41, Chapter 12 and additional rules and regulations with respect to the placement of Surplus Lines.
SLA Idaho is not funded from the general revenues of the State of Idaho. We are funded by a processing fee, called a "stamping fee", earned for review of Surplus Line coverages. Hence the term, STAMPING OFFICE.
The concept of stamping offices originated in California in 1939. Currently, 15 stamping/service offices exist across the US, which collectively account for over 60% of all Surplus Lines insurance written nationally.
A.M. Best concluded in a 1996 study of Surplus Lines insurer solvency, that stamping/service offices have proven effective in promoting "a strong working relationship between the Surplus Lines market and state regulators." That statement is as true today as in 1996. In addition to Best, the WSIA (Wholesale & Specialty Insurance Association) and other E&S industry groups support the operation of stamping offices as beneficial to industry, regulators, and insureds.
Each licensed Idaho Surplus Lines broker must electronically provide to our office an affidavit for each Surplus Lines insurance policy written. We review these documents for adherence to Idaho code and rules, and report transactions, premium tax and data to the Idaho Director of Insurance. The Stamping Office compiles statistical information on the Idaho Surplus Line market (such as types of coverage and volume of premium written), and provides copies of broker records, as requested, to the Department of Insurance. SLA staff offers technical assistance and education to licensees and the public regarding Surplus Lines insurance.
No action or inaction of this association shall relieve any member and/or broker of responsibility to comply with the law. Each member shall hold harmless the association, its board of directors, manager and employees from any liability that may arise by reason of any member’s failure to comply with any law.
Antitrust statement... The Surplus Line Association of Idaho intends to comply fully with all laws and regulations applicable to its operations. The antitrust laws aim to protect the public from agreements between competitors that affect the price or distribution of products, while promoting fair and vigorous competition in the marketplace. Each Idaho member is solely responsible for their own compliance with these guidelines and with federal and state antitrust laws.