§ 124.5. Diligent search of admitted insurers.
Under section 1604(2)(i) of the act (40 P. S. § 991.1604(2)(i)), surplus lines insurance may be procured through a surplus lines licensee from nonadmitted insurers if a diligent search is made among the admitted insurers who are writing, in this Commonwealth, coverage comparable to the coverage being sought. The following minimum requirements and conditions apply to the conduct of a diligent search among admitted insurers under section 1604(2)(i) of the act.
(1) Under section 1609(a)(1)(i) of the act (40 P. S. § 991.1609(a)(1)(i)), the writing producer shall execute and forward to the surplus lines licensee a written statement, in a form prescribed by the Department, declaring that a diligent effort to procure the desired coverage from admitted insurers was made. A diligent effort will be deemed to have been made if the writing producer has documented a declination of coverage from at least three admitted insurers which are writing, in this Commonwealth, coverage comparable to the coverage being sought. A declination may be documented by any of the following:
(i) A written declination from the admitted insurer.
(ii) A written record of an oral declination made by the person who initially received the declination or by another person working for the business from information transmitted by the person who received the declination. The written record must include:
(A) The name, office location and phone number of the admitted insurer or firm acting in the capacity of underwriting manager for the admitted insurer.
(B) The name and position of the person contacted.
(C) The date of contact.
(D) An explanation of the declination.
(iii) A written record that the writing producer contacted an admitted insurer who failed to respond within 5 business days, which includes the manner in which the contact was made and the information required under subparagraph (ii)(A)—(C).
(iv) A written record that the risk does not meet the underwriting guidelines of the admitted insurer. The written record must include:
(A) The name of the admitted insurer.
(B) Reference to the underwriting guidelines upon which the declination is based.
(2) A declination shall be obtained from the admitted insurer or recorded by the writing producer at or near the time of receipt of the declination and maintained for at least 5 years following termination of the contract.
(3) A declination of coverage by an admitted insurer shall be made by a person who is a full-time employee of the admitted insurer and who has underwriting responsibility for that admitted insurer or by a full-time employee of a firm acting in the capacity of underwriting manager for the admitted insurer.
(4) For purposes of this paragraph, the term ‘‘affiliate’’ is used as defined in section 1401 of The Insurance Company Law of 1921 (40 P. S. § 991.1401).
(i) A declination may not be obtained from an admitted insurer which is an affiliate of an admitted insurer from which a declination has already been obtained.
(ii) Surplus lines insurance may not be placed with a nonadmitted insurer that is an affiliate of an admitted insurer from which a declination has been obtained.
(iii) The restrictions in subparagraphs (i) and (ii) do not apply if the affiliated insurers write independently of each other using separate and independently developed underwriting criteria and marketing plans, and for underwriting purposes, compete with each other for the same type of coverage or class of insurance.
(5) Under section 1609(a)(2) of the act, the surplus lines licensee shall file with the Department a written declaration of the licensee’s lack of knowledge of how the coverage could have been procured from admitted insurers and shall simultaneously file the written declaration of the writing producer required under section 1609(a)(1) of the act. Under section 1609(a)(3) of the act, if the surplus lines licensee acts as both the writing producer and surplus lines licensee in a particular transaction, the surplus lines licensee is required to execute the declarations required under section 1609(a)(1) and (2) of the act.
Authority The provisions of this § 124.5 amended under sections 206, 506, 1501 and 1502 of The Administrative Code of 1929 (71 P. S. § § 66, 186, 411 and 412); and Article XVI of The Insurance Company Law of 1921 (40 P. S. § § 991.1601—991.1626).
Source The provisions of this § 124.5 amended October 25, 2013, effective November 25, 2013, 43 Pa.B. 6345. Immediately preceding text appears at serial pages (263782) to (263783).
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