Eligible and Ineligible Surplus Lines Insurers; Trust Funds and Financial Security
Who may be used
Only an eligible surplus lines insurer may be used. The Commissioner maintains the eligibility list; an insurer's home-state license or NAIC number does not automatically put it on North Carolina's list. Eligibility generally requires authorization in its domicile, minimum capital and surplus, satisfactory financial history, and required financial reporting.
Trust funds and financial security
- Alien insurers generally must maintain a U.S. trust fund for U.S. policyholders, often at a statutory minimum, plus satisfactory financial standing.
- The trust fund is a security requirement, not a substitute for being on the Commissioner's eligible list.
- The licensee should verify eligibility at placement and monitor status for renewals; using an ineligible insurer is a licensing violation even if the policy was issued.
- Ineligible insurers include insolvent carriers, insurers not authorized in their domicile, and insurers that have lost required trust-fund or capital status.
Worked example
A producer finds a Bermuda insurer with a $50 million U.S. trust fund and an A rating. It is not on North Carolina's eligible list. Reasoning: the trust fund and rating are favorable but do not create eligibility; the placement is improper unless the Commissioner lists the insurer or grants authority.
Traps
Do not equate "admitted in another state" with "eligible in North Carolina." Do not assume a trust fund cures an eligibility defect. Do not rely on a stale list; check at placement and renewal.