The Delaware Insurance Department recently issued a bulletin reviewing the background for a new category of insurance company, "Domestic Surplus Lines Insurer (DSLI), which was created as part of new legislation this year.
The Nonadmitted Insurance Act [SB 109], enacted this year, creates the DSLI and it allows a Delaware-domiciled insurer to be treated as nonadmitted in Delaware for particular business purposes. A Delaware domestic surplus lines insurer will be domiciled and admitted in Delaware but, unlike all other Delaware-domiciled insurers, can write surplus lines policies in Delaware.
In the past, if a surplus lines insurer was admitted 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, this new type of insurer must fulfill all the requirements of an admitted domestic company, but will be considered nonadmitted for the writing of surplus lines business. This new law makes Delaware one of a handful of states in which a domestic insurer may offer surplus lines coverage in all 50 states including Delaware, its state of domicile.
A company that is licensed as a Delaware domestic surplus lines insurer may write surplus lines insurance business in any jurisdiction, including this state. Although the company is an admitted company, a domestic surplus lines insurer is limited to the writing of surplus lines business only.
The provisions of Chapters 42 and 44 of Title 18 regarding the Delaware Insurance Guaranty Funds will not apply to a domestic surplus lines insurer.
Companies applying to become Delaware domestic surplus lines insurers will have to prove adequate financial solvency, meet certain regulatory criteria, and specifically be approved by the Insurance Commissioner. The bulletin addresses the procedures that must be followed by companies wishing to become a Domestic Surplus Lines Insurer in Delaware.