On March 12, 2019, Nebraska joined the small but growing number of states to adopt “domestic” surplus lines legislation. Illinois was the first state to adopt domestic surplus lines legislation in 1998 but the trend only gained traction over the last few years. A domestic surplus lines insurer is defined under the Nebraska law as a nonadmitted insurer domiciled in Nebraska that has a certificate of authority to operate as a domestic surplus lines insurer there.
Before the adoption of domestic surplus lines legislation, a U.S. domiciled surplus lines insurer was required to be a licensed admitted insurer in its state of domicile. However, in order to write in all states, the surplus lines insurer required a second company to write surplus lines in the primary insurer’s home state, which would require additional capital to do so. Domestic surplus lines legislation solved this issue by permitting one company to write surplus lines in all states including its state of domicile.
Under the Nebraska law, a domestic surplus lines insurer must (a) possesses policyholder surplus of at least fifteen million dollars; (b) is an eligible surplus lines insurer in at least one state jurisdiction other than Nebraska; and (c) is acting pursuant to a resolution passed by the insurer’s board of directors seeking to be a domestic surplus lines insurer in Nebraska. All financial and solvency requirements apply to a domestic surplus lines insurer (unless specifically exempted). Further, policies issued by a domestic surplus lines insurer are not subject to the protections or other requirements of the Nebraska Property and Liability Insurance Guaranty Association Act or the Nebraska Life and Health Insurance Guaranty Association Act.
The Nebraska law specifically provides that a surplus lines licensee may not place coverage with a nonadmitted insurer unless, at the time of placement, the surplus lines licensee has determined that the nonadmitted insurer is a domestic surplus lines insurer or meets the standards required for being licensed in another state.
The law becomes effective three months following adjournment of the legislature. A copy of the law can be found here.
*Locke Lord is proud to publish the Locke Lord Excess and Surplus Lines Manual on an annual basis, located here.