North Carolina Department of Insurance Now Performing Surplus Lines Agency Reviews
The North Carolina Department of Insurance (“NCDOI”), Agent Services Division, has notified the North Carolina Surplus Lines Association (“NCSLA”) that it has begun performing agency reviews of both resident and non-resident North Carolina Surplus lines licensees’ files. These agency reviews are being performed to determine whether these licensees are in compliance with the North Carolina Surplus Lines Act.
One of the main focuses of these agency reviews is to ensure the proper licensing of all individuals who are involved in the “procurement” of a non-admitted policy on a North Carolina risk.
There has been a misconception that if either one individual in an office has a surplus lines license or the office has a Business Entity Surplus Lines License, all individuals in that office may “procure” surplus lines insurance on a North Carolina risk.
Surplus lines tax filings may be filed under one licensee’s license number or under the Business Entity license, but that does not allow unlicensed individuals to procure non-admitted policies on North Carolina risks.
The following is a summary of a meeting the Executive Board of the NCSLA and the NCDOI had in 2010.
In this meeting the NCSLA asked the NCDOI to provide its interpretation of N.C.G.S. § 58-21-65(a), Licensing of Surplus Lines Licensees, so that the NCSLA could publish and distribute to all North Carolina surplus lines licensees who were transacting surplus lines business or filing surplus lines business for nonresident agents, a statement clarifying who is required to have a surplus lines license. This led to a discussion of “directly procure any contract of surplus lines insurance with any non-admitted insurer”.
The NCDOI has interpreted “directly procure” to mean obtaining a quote, binder, or the binding of coverage with a non-admitted insurer on a risk in North Carolina. Any employee who performs any of these tasks must have a resident or non-resident North Carolina surplus lines license. Any employee who presents a quote or binds a policy directly to the retail agent or an insured from the non-admitted insurer, must be licensed. For clarification, the last scenario applies primarily to wholesalers and retail agents who deal directly with the non-admitted insurers. It does not apply to retail agents who obtain non-admitted insurance quotes or policies from surplus lines licensees.