Nearly a decade ago, states slowly began making progress in addressing the question of why an insurer that wanted to write surplus lines business in all 50 states had to create two companies.
Before the inception of domestic surplus lines insurer (DSLI) laws, an insurer that wanted to write in all states would have a primary company licensed in a state as an admitted insurer that could then be eligible to issue surplus lines policies in the other 49 states. Then, additional capital would be raised and a secondary admitted insurance company would be created and domiciled in a different state so that it could write surplus lines insurance in the state where the primary company was located.
In 1998, Illinois became the first state to enact a statutory provision that allowed an Illinois-domiciled insurer to be issued a certificate of authority that designates the carrier as a DSLI authorized to write insurance in the state in accordance with Illinois surplus lines law. A key distinction is that the DSLI is not authorized to transact insurance in the state, but is authorized to write insurance in the state as an eligible surplus lines insurer with which a licensed surplus lines producer or broker is authorized to place insurance.
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