One of the hallmarks of surplus lines regulation throughout the United States is the “diligent search” requirement whereby the surplus lines broker (or retail producer) must attempt to place insurance coverage in the admitted market before exporting such coverage to an eligible, unauthorized surplus lines insurer. While a small minority of states have done away with this requirement, it would likely take a state like New York to begin the process of relaxing the standard on a truly national scale. And it looks like New York may be doing just that.
At the request of the Excess Lines Association of New York, New York State Senate Insurance Committee Chair Neil Breslin introduced Senate Bill 769 on January 9, 2019 amending N.Y. Ins. Law § 2118 to allow for wholesale excess (surplus) lines brokers to bypass to the diligent search requirement with respect to commercial lines policies. The exemption would only apply when an unaffiliated retail broker is involved in the transaction in order to avoid circumstances where retail brokers may establish affiliated surplus lines licensed producer entities to bypass the admitted market. Moreover, there are currently no plans to enact an exemption from the diligent search requirement for personal lines policies in part because the insurance industry has typically put a priority on protecting the rights of personal lines consumers who are less likely to have employed risk managers or other experienced insurance professionals.
While it remains to be seen if Senate Bill 769 will ultimately be signed into law, its potential impact on the efficiency and ease of surplus lines product placement in New York and potentially nationally should not be understated. The bill would also remove certain requirements with respect to required affidavit filings as well. A full copy of the bill can be found here.
*Locke Lord is proud to publish the Locke Lord Excess and Surplus Lines Manual on an annual basis, located here.
The post LL Surplus Lines Series (Entry 2): New York to Consider Elimination of Diligent Search Requirement for Certain Commercial Policies appeared first on Insurance & Reinsurance.