Under section 1604(2)(i) of the act (40 P. S. §
991.1604(2)(i)), surplus
lines insurance may be procured through a surplus lines licensee from
nonadmitted insurers if a diligent search is made among the admitted insurers
who are writing, in this Commonwealth, coverage comparable to the coverage
being sought. The following minimum requirements and conditions apply to the
conduct of a diligent search among admitted insurers under section 1604(2)(i)
of the act.
(1) Under section
1609(a)(1)(i) of the act (
40 P. S. §
991.1609(a)(1)(i)), the
writing producer shall execute and forward to the surplus lines licensee a
written statement, in a form prescribed by the Department, declaring that a
diligent effort to procure the desired coverage from admitted insurers was
made. A diligent effort will be deemed to have been made if the writing
producer has documented a declination of coverage from at least three admitted
insurers which are writing, in this Commonwealth, coverage comparable to the
coverage being sought. A declination may be documented by any of the following:
(i) A written declination from the admitted
insurer.
(ii) A written record of
an oral declination made by the person who initially received the declination
or by another person working for the business from information transmitted by
the person who received the declination. The written record must include:
(A) The name, office location and phone
number of the admitted insurer or firm acting in the capacity of underwriting
manager for the admitted insurer.
(B) The name and position of the person
contacted.
(C) The date of
contact.
(D) An explanation of the
declination.
(iii) A
written record that the writing producer contacted an admitted insurer who
failed to respond within 5 business days, which includes the manner in which
the contact was made and the information required under subparagraph
(ii)(A)-(C).
(iv) A written record
that the risk does not meet the underwriting guidelines of the admitted
insurer. The written record must include:
(A)
The name of the admitted insurer.
(B) Reference to the underwriting guidelines
upon which the declination is based.
(2) A declination shall be obtained from the
admitted insurer or recorded by the writing producer at or near the time of
receipt of the declination and maintained for at least 5 years following
termination of the contract.
(3) A
declination of coverage by an admitted insurer shall be made by a person who is
a full-time employee of the admitted insurer and who has underwriting
responsibility for that admitted insurer or by a full-time employee of a firm
acting in the capacity of underwriting manager for the admitted
insurer.
(4) For purposes of this
paragraph, the term "affiliate" is used as defined in section 1401 of The
Insurance Company Law of 1921 (
40 P. S. §
991.1401).
(i) A declination may not be obtained from an
admitted insurer which is an affiliate of an admitted insurer from which a
declination has already been obtained.
(ii) Surplus lines insurance may not be
placed with a nonadmitted insurer that is an affiliate of an admitted insurer
from which a declination has been obtained.
(iii) The restrictions in subparagraphs (i)
and (ii) do not apply if the affiliated insurers write independently of each
other using separate and independently developed underwriting criteria and
marketing plans, and for underwriting purposes, compete with each other for the
same type of coverage or class of insurance.
(5) Under section 1609(a)(2) of the act, the
surplus lines licensee shall file with the Department a written declaration of
the licensee's lack of knowledge of how the coverage could have been procured
from admitted insurers and shall simultaneously file the written declaration of
the writing producer required under section 1609(a)(1) of the act. Under
section 1609(a)(3) of the act, if the surplus lines licensee acts as both the
writing producer and surplus lines licensee in a particular transaction, the
surplus lines licensee is required to execute the declarations required under
section 1609(a)(1) and (2) of the act.
