Compliance

I, the North Carolina surplus lines licensee, have verified that after a diligent search the producing agent has been unable to obtain the full amount or kind of insurance necessary to protect the risks of this insured from any insurance company licensed to do business in North Carolina; therefore, application is made under article §58- 21-15 of the General Statutes of North Carolina to procure insurance through an insurance company that is not licensed in North Carolina.

I have complied with N.C. Gen. Stat. §58-21-50 and the insured has been notified in writing that:

1. For surplus lines insurers that are not a nonadmitted domestic surplus lines insurer, the insurer with which the coverage has been placed is not licensed by this State and is not subject to its supervision and in the event the insurer who issued this policy becomes insolvent, losses will not be paid by any State guaranty or solvency fund.
2. For nonadmitted domestic surplus lines insurers, in the event of the insolvency of the surplus lines insurer with which the coverage has been placed, losses will not be paid by any State insurance guaranty or solvency fund.

In addition, I verify that every evidence of insurance negotiated, placed or procured under the provisions of N.C. Gen. Stat. §58-21 issued by this North Carolina surplus lines licensee shall bear the name of the licensee and the following legend in 12 point type and in contrasting color, or in 12 point type and underlined and in bold print:

1. For nonadmitted insurers: “The insurer with which this coverage has been placed is not licensed by the State of North Carolina and is not subject to its supervision. In the event of the insolvency of the insurance company, losses under this policy will not be paid by any State insurance guaranty or solvency fund.”
2. For nonadmitted domestic surplus lines insurers: “The insurer with which this coverage has been placed is domiciled and authorized by the State of North Carolina and is subject to its supervision. However, in the event of the insolvency of the insurance company, losses under this policy will not be paid by any State insurance guaranty or solvency fund.”

The original of this document must be retained in the files of the surplus lines licensee and available for inspection by the Commissioner for a period of at least five (5) years.

View a downloadable version of the Compliance Acknowledgement.

G.S. 58-21-15 governs diligent search requirements for the placement of surplus lines insurance in North Carolina.  The statute is broad in scope and does not require a specified number of declinations from admitted insurers before insurance is placed with an authorized surplus lines insurer.

NCDOI has maintained the position that the producing agent is responsible for conducting a diligent search for the placement of insurance with admitted insurers in North Carolina.  In the event that insurance cannot be placed with an admitted insurer in North Carolina, it is the responsibility of the surplus lines licensee to confirm that the diligent search was conducted by the producing agent.

North Carolina insurance laws, including the Surplus Lines Act, are silent as to the type of documentation that the surplus lines licensee may use as confirmation of the diligent search by the producing agent.  This decision regarding acceptable documentation confirming the diligent search can be determined by the surplus lines licensee.

View a downloadable version of the NCDOI Due Diligent Requirements.

View a downloadable version of G.S. 58-21-15.

North Carolina General Statute §58-21-45(f) requires that every surplus lines policy placed by a surplus lines licensee bear the name of the licensee and the following legend in 12-point type and in contrasting color or in 12-point type and underlined and in bold print.

1. For nonadmitted insurers:
   “The insurer with which this coverage has been placed is not licensed by the State of North Carolina and is not subject to its supervision. In the event of the insolvency of the insurance company, losses under this policy will not be paid by any State insurance guaranty or solvency fund.”
2. For nonadmitted domestic surplus lines insurers:
   “The insurer with which this coverage has been placed is domiciled and authorized by the State of North Carolina and is subject to its supervision. However, in the event of the insolvency of the insurance company, losses under this policy will not be paid by any State insurance guaranty or solvency fund.”

Please refer to North Carolina General Statute §58-21-75, Records of surplus lines licensee. Records can be kept either electronically or a hard copy and must be maintained for five (5) years.

View a downloadable version of G.S. 58-21-75.

One of the functions of the North Carolina Surplus Lines Association is to facilitate compliance. In keeping with our statutorily required duties, the NCSLA Compliance Review program was developed to help ensure fairness and conformity with the North Carolina surplus lines laws by monitoring and evaluating data submissions.

North Carolina General Statute 58-21-40 (a) (1)

• The North Carolina Surplus Lines Association (NCSLA) shall serve as the regulatory support organization of surplus lines licensees and shall carry out the following functions:
• Facilitate and encourage compliance by resident and nonresident surplus lines licensees with the laws of this State and the rules and regulations of the Commissioner relative to surplus lines insurance

Compliance reviews will be completed on resident and nonresident North Carolina surplus lines licensees at least once every three (3) years. Reviews include a basic verification of information such as the named insured, policy premiums, tax, fees, policy dates, statutorily required disclaimers, insurer, identity of procuring broker, and surplus lines licensee information, etc.

Purpose

The purpose of the review is to ensure compliance by the surplus lines licensees relative to the export of surplus lines insurance contracts, to provide educational assistance to surplus lines agents where needed, and to measure the quality of service provided in the marketplace.

Notice of Intent to Review

A notice of intent to review records is forwarded to each licensee via email, as advanced notice of an impending review. Within 5-7 days of notification of intent to review, the agent is contacted to schedule the review date. Once a review date is established, an analyst forwards a detailed list of surplus lines policies selected for review. The review is designed to verify information that the surplus lines licensee is responsible for reporting to NCSLA, as well as other information required to be maintained in order to comply with the surplus lines law.

Review Requirements

It is the surplus lines licensees’ responsibility to make specific records available for the review. As requested, but not limited to, the compliance review will include a review of the following items made available by the surplus lines agent: Policy declarations page including name of insured, policy number, insurer, type of coverage, policy period, premium amount, taxes charged, fees charged, endorsements as requested, page displaying the North Carolina Disclaimer language, invoice to the insured or sub agent, name of procuring broker, surplus lines licensee information, and any fee amounts that are not displayed on the declarations page.

Frequency

The NCSLA may review all, but not limited to, the information filed with the office as part of the compliance review process. All resident and nonresident North Carolina licensed surplus lines agents will be subject to a compliance review at least once every three (3) years or as deemed necessary by NCSLA.

Final Report

Within thirty (30) days of the review, the surplus lines agent will receive a final report from NCSLA. The surplus lines agent may be required to submit, within thirty (30) days of receipt of the final report, a response/corrective action plan to address any non-compliance issues noted in the final report.