2.2 Unlisted Insurers, Deposits & Withdrawal of Eligibility

Sometimes part of a risk that is eligible for export cannot be placed with eligible insurers. Section 626.918 provides a narrow route for placing that part with named unauthorized insurers that are not on the eligible list. Sections 626.9181 and 626.919 then deal with the deposits that route requires and with removing insurers from the list.

The Unlisted-Insurer Procedure: s. 626.918(5)

Every element of this procedure is testable.

1. Trigger. The risk is eligible for export, but coverage in whole or in part is not procurable from eligible surplus lines insurers after a search of eligible surplus lines insurers.
2. Supplemental statement. The surplus lines agent may file with the office a supplemental signed statement setting out those facts and stating that the unprocurable part is being placed with named unauthorized insurers in the stated amounts and percentages.
3. Deposit. Before accepting any Florida risk, each named unauthorized insurer must deposit with the department cash or securities acceptable to the office and department with a market value of $50,000 for each individual risk, contract, or certificate. The deposit is held for the benefit of Florida policyholders only.
4. Financial statement. The surplus lines agent must obtain from the insurer, and file with the office, a certified copy of its statement of condition as of the close of the last calendar year. If that statement shows net assets, including capital and surplus, at least equal to the amount required for licensure of a domestic insurer, the agent may complete the placement.
5. Signed notation. The policy, binder, or cover note must contain a statement signed by both the insured and the agent saying, in substance, that the insured is aware:
   • certain participating insurers are neither approved to transact business in Florida nor declared eligible as surplus lines insurers by OIR;
   • placement by a licensed Florida surplus lines agent is not approval of the insurer by OIR;
   • the insured has severely limited the assistance available under Florida insurance law; and
   • the insured may be charged a reasonable per-policy fee under s. 626.916(2) for each policy certified for export.
6. Everything else still applies. All other provisions of the Insurance Code apply as if the risk had been placed with an eligible insurer, including stamping, filing, and tax.

The 12.5% relief valve: s. 626.918(6)

When a risk subject to subsection (5) is eligible for placement with an unauthorized insurer and not more than 12.5% of the risk is being placed that way, the office may, in its discretion, permit the agent to proceed by obtaining the insured's signed statement described in subsection (5). All other Code provisions still apply.

Deposits Are Protected: s. 626.9181

No judgment creditor or other claimant of a surplus lines insurer may levy upon assets or securities held in Florida as a deposit under s. 626.918. The deposit exists for Florida policyholders and cannot be seized by the insurer's other creditors.

Withdrawal of Eligibility: s. 626.919

The office must promptly mail notice of every withdrawal to each surplus lines agent at the address of record with the department. Separately, s. 626.9361 allows fines of up to $500 per day against an eligible insurer that fails to file a required report, and says the failure may also result in withdrawal of eligibility.

What the agent should do after a withdrawal

Withdrawal ends the insurer's eligibility to insure Florida surplus lines risks, so the agent may not place new business with it. Section 626.922(3) requires the agent to issue a substitute certificate or endorsement promptly whenever the identity of the insurers on a placement changes. A change of insurer may not produce a contract that would have violated the Surplus Lines Law if originally issued that way.

Worked Example

A $20 million property program is eligible for export. Eligible insurers take $18 million after a search. The agent places the remaining $2 million, which is 10% of the risk, with a named unlisted syndicate.

• Because only 10% of the risk is involved, which is under the 12.5% threshold, OIR may allow the agent to proceed on the insured's signed statement alone.
• If OIR does not grant that relief, the syndicate must post a $50,000 deposit for the risk before accepting it, and the agent must file the insurer's certified year-end statement of condition.
• Either way, the policy carries the notation signed by both the insured and the agent, and the placement is filed and taxed like any other surplus lines placement.