At the December National Association of Insurance Commissioners (NAIC) Fall National Meeting, the Surplus Lines Working Group adopted changes to the IID Plan of Operation. The updated Plan of Operation incorporates, among others, the changes noted in our October posting below. The 2023 Plan of Operation is now available at the “Documents” tab of the Surplus Lines Working Group home page.”
On October 19, 2022, the National Association of Insurance Commissioners (NAIC) Surplus Lines Working Group exposed proposed changes to the International Insurers Department (IID) Plan of Operation applicable to insurers domiciled outside the U.S. (alien) participating in the U.S. insurance market.
Highlights of the proposed changes include the following:
- An increase the required minimum shareholders’ equity amount from $45 million to $50 million required to apply and stay on the Quarterly Listing.
The proposed increase would apply for new entrants immediately upon adoption of the updated Plan of Operation and June 30, 2023 for insurers currently on the Quarterly Listing.
- Increases the minimum U.S. Trust Fund balance to $6.5 million (from $5.4 million) and increases the maximum Trust Fund balance required to $300 million (from $250 million).
The proposed increase would be effective immediately for new applications and effective June 30, 2023 for current Quarterly Listing insurers. The Working Group stressed that the last increase in the Trust Fund minimum was in December 1996.
- Clarifies that the required Trust Fund may consist of cash, securities, or an acceptable evergreen letter of credit, or combination, at an appropriate level, deposited with a trustee for the benefit of U.S. policyholders.
- Clarifies that the Trust Fund minimum amount is based on the U.S. gross surplus lines liabilities (i.e., gross reserve for unpaid losses for case and IBNR + gross reserve for unpaid loss adjustment expenses) excluding liabilities arising from aviation, ocean marine, and transportation insurance, and direct procurement. [emphasis added]
- Clarifies how the Trust Fund balance is to be computed. The calculation of the required Trust Fund minimum balance will be listed as follows:
- 30% of U.S. gross liabilities amount up to $200 million, plus
- 25% of U.S. gross liabilities greater than $200 million and up to $500 million, plus
- 20% of U.S. gross liabilities greater than $500 million and up to $1 billion, plus
- 15% of U.S. gross liabilities in excess of $1.0 billion.
- Provides a new section regarding voluntary termination from the Quarterly Listing and provides that an insurer that wishes to voluntarily terminate may do so by sending a letter to the IID and that, following termination, the insurer must continue to comply with the requirements of the Trust Agreement for Alien Excess or Surplus Lines Insurers.
Interested parties have until November 21 to comment on the proposed changes.
Locke Lord will continue to monitor for any developments.
The post Update: LL Surplus Lines Series (Entry 35): Surplus Lines Working Group Exposes Changes to IID Plan of Operation for Alien Insurers appeared first on Insurance & Reinsurance.