Surplus Lines Placement: Diligent Search, Eligible Risk, and Eligible Insurers
The diligent search
Oregon requires a documented search of authorized insurers before a surplus lines placement. The file should show the risk, coverages sought, dates, insurers contacted, and declinations. For non-export risks, expect at least three declinations unless the Director’s rules or OSLA procedures allow otherwise.
Eligible risk and eligible insurer
The risk must be one that admitted insurers decline or cannot write. The nonadmitted insurer must meet Oregon standards: licensed in its home jurisdiction, solvent, minimum capital and surplus, in good standing, and not disqualified. Placement must go through an Oregon-licensed surplus lines producer.
Worked example
A contractor seeks $3 million excess liability. The producer contacts three admitted insurers; all decline because of the contractor’s high-risk work. The producer documents dates, underwriters, and reasons, then places the risk with an eligible nonadmitted insurer. Reasoning: the declinations show the risk was not procurable in the admitted market, and the insurer meets Oregon eligibility standards.
Traps that cost marks
One verbal declination is not a file. Do not place a risk with a nonadmitted insurer just because it is cheaper. Do not use an unlicensed producer or an insurer that fails Oregon standards. Do not skip the search because the insured requests a particular nonadmitted insurer.