Surplus Lines General Information

The surplus lines market was established to provide insurance for unique or hard-to-place risks. Oregon regulates the surplus lines market through Oregon Revised Statutes 735.400 to 735.495.

There are six areas in which the surplus lines market cannot be used to provide coverage: reinsurance, wet marine and transportation, independently procured insurance, life, health and annuities.

Oregon does not maintain an active or "white" list of surplus lines insurers. Surplus lines insurers become "eligible" insurers if they meet limited minimum standards. Oregon currently has approximately 300 eligible surplus lines insurers. For an insurer to become "eligible" for surplus lines placements it must:

1. Establish satisfactory evidence of good repute and financial integrity,
2. Qualify as either a U.S.- domiciled insurer possessing at least $5 million in policyholder surplus, or a non-U.S.- domiciled insurer possessing at least $5 million in policyholder surplus, and
3. Maintain a U.S. trust account of at least $1.5 million. (See ORS 735.415 for more details.)

A list of surplus lines insurers is available on the Web site of the Surplus Line Association of Oregon. Click on Surplus Line Insurance in Oregon, then the Insurer List tab at the top of the page.

Oregon is a "producer-controlled" state for surplus lines. This means that the surplus lines licensee is responsible for:

• Ensuring the soundness and qualification of the insurer used to provide the coverage,
• Paying state premium tax on the business,
• Conducting "due diligence" before placing the coverage to make sure the coverage is not available in the regular licensed market,
• Making regulatory filings concerning the coverage, and
• Accepting legal service of process against the insurer in certain circumstances.

The surplus lines licensee cannot place the coverage if the full amount or kind of insurance can be obtained from the licensed market. A report must be filed for each piece of business stating the identity of the insured, location of risk, type of coverage, insurer providing coverage, premium amount and applicable taxes and business. The tax rate is 2 percent; Fire Marshal tax is 1 percent on fire coverages. The surplus lines service charge is $15.00 beginning June 1, 2009. The report also confirms that the surplus lines licensee advised the insured that this placement of business is in the surplus lines market and is not covered by the Oregon Insurance Guaranty Association in the event of insolvency.

Surplus lines licensees are subject to an examination by the Insurance Division every five years. Licensees are required to keep all records and transactions of any surplus lines business in Oregon open at reasonable times for examination by the Insurance Division for five years after cancellation of the policy.

The Surplus Line Association of Oregon (SLAOR) is a non-profit corporation organized at the request of the Insurance Division. Oregon law recognizes SLAOR as an advisory organization to the Insurance Division and allows the association to collect surplus lines taxes for the division. As part of that process, the association reviews the diligent search documents for completeness as well as reasonableness of the placement.