West Virginia FAIR Plan and the Voluntary Market

[LOGO] STATE OF WEST VIRGINIA Offices of the Insurance Commissioner EARL RAY TOMBLIN Governor JANE L. CLINE Insurance Commissioner # JUNE 2011 # WEST VIRGINIA INFORMATIONAL LETTER NO. 180 TO: All Insurance Companies, Insurance Agencies, Individual Insurance Producers and all Persons engaged in the business of insurance in the State of West Virginia. RE: West Virginia FAIR Plan and the Voluntary Market Questions have arisen as to whether a producer can place homeowners coverage in the surplus lines market before attempting to place the coverage with the West Virginia FAIR Plan. The purpose of this Informational Letter is to share the Insurance Commissioner's interpretation of the coverage placement requirements regarding surplus lines insurance and the FAIR Plan, and to provide guidance to interested parties on this topic. The West Virginia FAIR Plan does not compete with the voluntary insurance market. The West Virginia FAIR Plan is an insurance association that provides coverage on insurable property for owners who have been unable to obtain coverage elsewhere. An individual producer, after having performed a diligent search for coverage among licensed carriers as required by W.Va. CSR § 114-20-4, may place the coverage through a surplus lines licensee, without having first attempted to place the coverage with the West Virginia FAIR Plan. # ADVICE TO CONSUMERS REGARDING SURPLUS LINES COVERAGE Surplus lines carriers are out-of-state companies not licensed in West Virginia, but legally eligible to sell insurance on risks that licensed companies won't cover. Surplus lines carriers generally charge more than licensed companies and offer less coverage. The Insurance Commissioner does not approve the rates or forms of surplus lines carriers. Surplus lines carriers are not members of a guaranty association. This means that a claim under a policy might go unpaid if the surplus lines carrier becomes unable to pay its claims. Producers must make a "diligent effort" to find coverage with a licensed company before offering consumers a surplus lines policy. Before a consumer buys coverage from a surplus lines carrier, he or she should make sure there are no other options, and ask for the identity of the licensed companies that declined to write the coverage, and the reasons for the declinations. If you have a question concerning this Informational Letter, please e-mail your question to Informational.Letters@wvinsurance.gov or call (304) 558-0401. Jane L. Cline Insurance Commissioner Executive Office Post Office Box 50540 Charleston, West Virginia 25305-0540 "We are an Equal Opportunity Employer" [LOGO] Telephone (304).558.3354 Facsimile (304).558.0412 www.wvinsurance.gov