Deposits, Fees and Guaranty Association Assessments

Karen Weldin Stewart, CIR-ML Commissioner Delaware Department of Insurance # SURPLUS LINES BULLETIN NO. 16 TO: ALL DELAWARE DOMESTIC SURPLUS LINES INSURERS AND FOREIGN NONADMITTED (SURPLUS LINES) COMPANIES REDOMESTICATING TO DELAWARE RE: DEPOSITS, FEES AND GUARANTY ASSOCIATION ASSESSMENTS DATED: September 23, 2014 ## PURPOSE The purpose of this bulletin is to set forth the position of the Delaware Department of Insurance regarding deposits, fees and guaranty fund assessments applicable to foreign surplus lines insurance companies that redomesticate to Delaware and become a Delaware Domestic Surplus Lines Insurer (DSLI). ## BACKGROUND The Delaware Nonadmitted Insurance Act, 18 Del. C. Ch. 19, enacted in 2011, created a new category of insurance company referred to as a “Delaware Domestic Surplus Lines Insurer” (“DSLI”). A DSLI differs from other Delaware Domestic Insurance Companies in that it allows the DSLI to write surplus lines insurance in this state. A DSLI will be domiciled and admitted company in Delaware but will not be permitted to write insurance coverage that surplus lines companies are prohibited from writing or insurance coverages that state law mandates may not be written by surplus lines insurers. In the past, if a surplus lines insurer was an admitted domestic company in Delaware, the company was not permitted to write coverage on the Delaware portion of a multi-state surplus lines policy, making it necessary to obtain that portion of the coverage from another insurer through a separate policy. Under the new law, a DSLI will be a Delaware domiciled admitted insurer that only writes surplus lines insurance business. Delaware is one of a handful of states in which a domestic insurer may offer surplus lines coverage in all 50 states including its state of domicile. A surplus lines insurer that redomesticates to Delaware from another state to be licensed as a DSLI would become an admitted Delaware domiciled company that would be able to write 841 Silver Lake Blvd., Dover, DE 19904-2465 • www.delawareinsurance.gov (302) 674-7300 Dover • (302) 739-5280 fax • (302) 577-5280 Wilmington 1 surplus lines business in all jurisdictions including the State of Delaware. Although the company is an admitted company, a DSLI can only write surplus lines business. A DSLI may only insure a Delaware risk when such coverage is procured according to the rules and procedures in 18 Del. C. Ch. 19 governing surplus lines insurance. In addition, premium charged by the DSLI shall be subject to a surplus lines premium tax pursuant to 18 Del. C. §1925. A DSLI must agree to abide by all the requirements of 18 Del. C. Ch. 19, and with all other requirements of the Delaware Code applicable to Delaware domestic insurers, unless otherwise exempted. The provisions of 18 Del. C. Ch. 42 and Ch. 44 regarding the Delaware Insurance Guaranty Associations will not apply to a DSLI. Pursuant to 18 Del. C. §1932(c), a DSLI may not issue a policy of insurance designed to satisfy: i) The motor vehicle financial responsibility requirements of this state; ii) The Workers' Compensation Act, 19 Del. C. §2372(a); or iii) Any other law of this state mandating insurance coverage by a licensed insurance company. ## PAYMENT OF FEES OR ASSESSMENTS A DSLI is not required to post any deposits or pay any fees required of a Delaware Domestic Insurance Company to write specific lines of coverage if the DSLI is prohibited by statute from writing that coverage. A DSLI may retain the authority in its license to write the prohibited line of business even though it is not permitted to write the coverage in the State of Delaware. Further, since a DSLI is exempted from participation in the Delaware Insurance Guaranty Associations, a DSLI shall not be required to pay any deposit or assessment for the Delaware Insurance Guaranty Associations. If any company has been licensed as a DSLI and, prior to becoming a DSLI, paid any deposit to the Department described in this Bulletin, such deposit shall be repaid to the DSLI upon written request and after any notification period required by law. In addition, if after becoming a DSLI such DSLI paid any assessment for the Delaware Insurance Guaranty Associations, such portion of the assessment related to the period of time following the conversion to a DSLI shall be repaid to the DSLI upon written request; provided, however, that such written request is received no later than 12 months following the payment of such deposit or assessment. This bulletin shall be effective immediately and shall remain in effect unless withdrawn or superseded by subsequent law, regulation or bulletin. Karen Weldin Stewart, CIR-ML Insurance Commissioner 2