COVID-19 is impacting all facets of the insurance industry, and while the surplus lines market is somewhat inoculated from the impact of various state orders and emergency regulations, many states as well as the National Association of Insurance Commissioners (“NAIC”) are subjecting surplus lines insurers and brokers to their mandates. This article provides a sample of various state and NAIC requests and orders in recent weeks with applicability to the surplus lines industry, including but not limited to moratoriums on cancellation/nonrenewal, orders to return premium with respect to insurance policies where COVID-19 has altered the nature of the underlying risk, and various data calls:
Arkansas: On May 11, the Arkansas Department of Insurance issued Bulletin No. 21-2020 directed at all admitted and surplus lines insurance carriers, providing policyholders an additional 45-day moratorium on the cancellation or nonrenewal of personal lines policies if they have been diagnosed/tested positive for COVID-19 or have been unable to pay their premiums due to a job loss caused by COVID-19.
California: On May 15, the California Department of Insurance (the “CA DOI”) issued a notice requesting admitted and non-admitted insurers extend the grace period for the payment of insurance premiums until July 14, 2020. The notice indicates that the grace period is not a waiver or forgiveness of premium but rather only an extension of time to pay premiums.
In addition, on April 13, the CA DOI issued Bulletin 2020-3, which directs property and casualty carriers to adjust premiums on policies written in the state where risks thereunder have become substantially overstated as a result of COVID-19. The CA DOI informally acknowledged, however, that while they “expect” surplus lines insurers to comply with the bulletin, they do not have authority to order surplus lines insurers to comply.
Maine: On April 15th, Superintendent Eric Cioppa issued Bulletin 444 to property and casualty insurers, producers with property or casualty authority, surplus lines insurers, and surplus lines brokers, providing guidance on how to implement premium reductions and refunds in compliance with Maine law. The Bulletin states that the Superintendent will not consider prospective reductions in premium, or refunds of premium made to accommodate COVID-19-related changes in exposure or risk profile, to be an unfairly discriminatory rating practice or otherwise violate anti-inducement or anti-rebating laws to the extent that they are reasonable and consistently applied. These guidelines will apply until July 1, 2020.
NAIC: On May 7, the NAIC International Insurers Department instituted a data call applicable to alien (non-U.S.) surplus lines insurers on the NAIC Quarterly Listing of Alien Insurers related to COVID-19 exposures. The data call must be completed by June 5, 2020.
Additionally, the NAIC has rolled out an additional “COVID-19 Property/Casualty Data Call” with the first round of submissions due May 22; however, such data call is only applicable to U.S.-based companies and not alien (non-U.S.) surplus lines insurers.
New Jersey: On May 12, the New Jersey Department of Banking and Insurance (“NJ DOBI”) issued Bulletin 20-22, to all licensed, admitted and surplus lines insurers transacting property and casualty insurance in New Jersey regarding premium refunds, credits and reductions in response to the COVID-19 pandemic. According to the Bulletin, the NJ DOBI is requiring premium reductions as to certain policies by June 15, 2020 and instituting a monthly data call. Despite being directed at surplus lines insurers, the NJ DOBI indicated last month that it does “not directly regulate surplus lines insurers” but that it is their hope that surplus lines insurers will comply. There on ongoing industry discussions regarding whether the NJ DOBI intends to require surplus lines insurers to adhere to Bulletin 20-22.
New York: On March 30, New York Governor Andrew Cuomo issued Executive Order No. 202.13 that, among other things, imposes a moratorium on an insurer cancelling, non-renewing, or conditionally renewing any insurance policy issued to an individual or small business or, in the case of a group insurance policy, insuring certificate holders that are individuals or small businesses, for a period of 60 days for any such policyholder that faces a financial hardship as a result of the COVID-19 pandemic. Pursuant to Excess Line Association of New York Bulletin No. 2020-28, the order only applies to personal excess and surplus lines policies as well as commercial fire policies; the order does not apply to excess lines, commercial non-fire policies.
North Carolina: On March 27, North Carolina issued Bulletin 20-B-06 to all insurance companies, including surplus lines insurers, notifying insurers that the Insurance Commissioner has issued an order activating the state of disaster automatic stay of proof of loss requirements, and premium and debt deferrals in North Carolina. Bulletin 20-B-07 notifies the industry of the extension of this order until at least May 27.
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Again, these are just a sampling of the myriad of various bulletins and orders promulgated in the last two months imposing (or attempting to impose) duties and obligations on the surplus lines industry as a result of COVID-19. There have been, of course, a number of other non-COVID-19 bulletins and data calls throughout the United States applicable to the surplus lines industry that are not within the purview of this article. We continue to monitor various updates applicable to surplus lines insurers and brokers and we will periodically report on updates as they become available.