Exam 1 Pard D

Question 1

Surplus Lines

Answer 1

”- Statutory provision in state insurance codes

• Allows insurance buyers access to nonaddmitted/unauthorized insurance companies
• Access via specially licensed brokers when the state’s licensed insurers are unable to fulfill the buyer’s insurance needs”

Question 2

Surplus Lines: Why requirements?

Answer 2

”- Tax

• Providesa an orderly , regulated, legitimate and taxable method of accessing a supplemental outlet
• "”safety valve”” market
• consisting of non admitted/unauthorized carriers”

Question 3

Underwriting Cycles

Answer 3

”- Soft Market

- Hard Market”

Question 4

Soft Market

Answer 4

”- Write many classes - (standard market)

• Flexible with loss history
• Competitive premiums
• Optional coverage available
• Goal is to increase market share”

Question 5

Hard Market

Answer 5

”- Write less classes

• Not flexible w/loss history
• Increased premiums
• Less optional coverages available
• Goal to reduce writings to optimal level”

Question 6

Surplus Lines Broker

Answer 6

”- Specialty broker licensed by the state

- Place or procure insurance from eligible surplus lines insurers”

Question 7

Types of Surplus Lines Brokers

Answer 7

”- Wholesale Insurance Broker

- Retail Broker”

Question 8

Wholesale Insurance Broker

Answer 8

Broker/Producer providing insurance products (usally specialized insurance products) to retail producers

Question 9

Retail Broker

Answer 9

A broker or producer who deals with the public to provide them with insurance products and solve their insurance problems

Question 10

E&S Business Flow

Answer 10

“1) Insured - Retail Agent

2) Retail Agent - Standard Contractor Carrior
3) Standard Contract Carrior declines
4) Retail agent - Wholesale Agent
5) Wholesale Agent - Surplus Carrier”

Question 11

Freedom of Rate & Form

Answer 11

”- Foundation of surplus lines is based on freedom of rate and form from regulation
- Varying risks and limited data = need for freed”

Question 12

Varying Risks for E&S

Answer 12

”- New

• Unique
• Distressed
• High capacity requirements
• Less seasoned”

Question 13

E&S Examples

Answer 13

”- Products liabilityy

• Unbrella/Excess Liability
• Professional Liability
• Environmental
• Catastrophic Property
• Special Events
• Energy and Marine coverages”

Question 14

E&S Risks

Answer 14

”- Cycle Risks

- Catastrophic Exposure”

Question 15

E&S Cycle Risks

Answer 15

Risks that move in and out of the admitted market as the underwriting cycles change

Question 16

E&S Catastrophic Exposure

Answer 16

Varies depending on recent loss exposure/experience, location and type of risk

Question 17

Legal Requirements of a Surplus Lines Placement

Answer 17

“1) Risk must be placed by a specially licensed broker

2) Risk must be placed with eligible companies
3) Risk must first be rejected by licensed market
4) Affidavit must be executed and filed with department
5) Taxes must be admitted to authorities”

Question 18

Legal Requirements of a Surplus Lines Placement

Answer 18

“1) Risk must be placed by a specially licensed broker

2) Risk must be placed with eligible companies
3) Risk must first be rejected by licensed market
4) Affidavit must be executed and filed with department
5) Taxes must be admitted to authorities”