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What is Surplus Lines
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Here is a
letter from the Montana Department of Insurance in regards to the confusion
caused by the “10% AND $1500 exception” MCA 33-2-302 (2) that was established in
the 2005 legislative session. Please
read this as it is very important.
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June 12, 2006
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To All Surplus Lines
Producers:
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Under Montana Law, a producer can place a
risk in the surplus lines market only when certain statutory criteria
requirements are met. They must be able to demonstrate that they have
tried to place it first in the admitted market by showing that the risk had
been declined by at least three companies in that market. In the past,
there was no exception to this. If a risk could be placed in the
admitted market, but the insured could actually get a better premium or
better terms of the contract in the non-admitted market, the risk had to be
placed in the admitted market. Since the last legislative session
there has been a change in this.
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Now, a producer can place a risk in the
surplus lines market (even if it is available in the admitted market)
for the benefit of obtaining a lower premium only when there is
difference in premium of at least 10% AND $1,500 less than the premium rate
quoted by any and all admitted carrier(s). In order for an agent to
do this however, the company must have a financial rating of "A" or better as well as
a disclosure form required and provided on the MSLAA website. In
looking at the actual code, it could appear that the rating is
"A-" or better. This is because there is a hyphen in the
specific code. The purpose of this memo is to clarify (for producers)
that the financial rating must be at least an "A". The "A-" rating would not
be acceptable to the Department of Insurance under MCA 33-2-302
(2) if it were brought to our attention. It is understandable
that by looking in that section of code "A-" appears acceptable,
but this memo is to clarify our position on this issue.
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If you have any questions, feel free to contact me at
800-332-6148.
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Kim
Benjamin
(406)
444-3897
kbenjamin@mt.gov
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Compliance
Specialist
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Montana Department of Insurance
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