Effective July 21, 2011, the California Insurance Code ("CIC") was amended to conform to the nonadmitted insurer eligibility requirements of the Nonadmitted and Reinsurance Reform Act of 2010 (the "NRRA"). CIC Sections 1765.1 and 1765.2 establish the following three surplus line carrier categories:

List of Approved Surplus Line Insurers (LASLI) carriers are preapproved carriers who have met the standards set forth in CIC Section 1765.2,

Eligible carriers are carriers who have met the standards set forth in CIC Section 1765.1 and the NRRA but the CDI does not pre-approve these carriers, and

File and Use Recognition System carriers were carriers that filed specific documentation set forth in former CIC Section 1765.1(c) with the CDI to be recognized as eligible by the CDI. Assembly bill 2303, Statutes of 2012, repealed CIC Section 1765.1(c). As a result, effective January 1, 2013, the File and Use Recognition System will no longer exist. The File and Use Recognition System was an optional listing. After January 1, 2013, those carriers formally on the File and Use Recognition System should consult the rules of eligibility listed above.

LASLI Carriers

Effective July 21, 2011, the List of Eligible Surplus Line Insurers, ("LESLI"), was replaced by the List of Approved Surplus Line Insurers, ("LASLI"). The LASLI is a voluntary list of nonadmitted insurers that the California Department of Insurance ("CDI") has approved for use by surplus line brokers. All insurers that were on the LESLI at that time were automatically transferred to the LASLI, and thus continued to be eligible for use by surplus line brokers in California.

What brokers should know about LASLI carriers:

• CDI's LASLI list is an optional listing brokers may rely upon for preapproved carriers
• California capitalization levels apply and quality of assets are pre-reviewed
• Officer and director backgrounds are pre-reviewed
• The LASLI list is updated and is posted on the CDI and SLA websites

View the LASLI list.

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Eligible Carriers

LASLI is a voluntary list and insurers may opt off the list. As a result, there may be nonadmitted insurers that are not on LASLI but pursuant to the NRRA and CIC Section 1765.1, are nonetheless eligible for use by surplus line brokers, as long as the broker has determined at the time of placement that the insurer meets specific eligibility criteria.

What brokers should know about eligible carriers:

• Eligible carriers do not need to file any documents with the CDI.
• California capitalization levels apply (for U.S. domiciled insurers only)
• There is no CDI pre-review or approval of capitalization levels or assets
• CDI does not perform officer and director background reviews
• Different eligibility rules apply for U.S. domiciled and non U.S. domiciled carriers

A U.S. domiciled ("foreign") nonadmitted insurer (a U.S. domiciled or Branch of an alien insurer not domiciled in California) must

• be licensed in its state of domicile to write the type of coverage being placed and,
• maintain a minimum of $45 million in capital and surplus (unless excepted).

Exceptions to Capital and Surplus Requirement:

If a foreign insurer has at least four and one-half million dollars ($4,500,000) in capital and surplus, then the carrier may request an affirmative finding of acceptability from the Commissioner based upon factors such as quality of management, capital and surplus of any parent company, company underwriting profit and investment income trends, market availability and company record and reputation within the industry.

If a foreign insurer was listed on the California List of Eligible Surplus Line Insurers Carriers as of January 1, 2011 and did not have at least forty-five million dollars ($45,000,000) in capital and surplus as of January 1, 2011, then it must have at least thirty million dollars ($30,000,000) in capital and surplus. After December 31, 2013, such foreign insurers will be required to have at least forty-five million dollars ($45,000,000) of capital and surplus or satisfy the exceptions to capital and surplus requirements above.

A non-U.S. domiciled ("alien") nonadmitted insurer must

• be on the Quarterly Listing of Alien Insurers issued by the NAIC's International Insurers Department ("IID List").

View the IID List from the NAIC website.

The NAIC has stated that it does not attempt to analyze or consider either the political stability of the domiciliary country or its diplomatic relationship with the U.S. The CDI does not maintain nor does it endorse or control the accuracy of the IID list. If Brokers require more information about the IID List, they should contact the NAIC.

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File and Use Recognition System Carriers

AB 2303, Statutes of 2012 repealed CIC Section 1765.1(c). Effective January 1, 2013, there will be no more File and Use Recognition System.

The Commissioner has the authority pursuant to CIC Section 1765.1(c) to recognize that a nonadmitted insurer is eligible under the criteria set forth in CIC Sections 1765.1(a) and 1765.1(b) if the documents that are specified in CIC Section 1765.1(c) are filed with the CDI by the insurer or a broker on its behalf. Consistent with this authority, the Commissioner has established a File and Use Recognition System List comprised of companies on whose behalf the required documents have been filed with the CDI. In order for the information that is required to be filed to be readily available to the CDI, such filings are strongly encouraged. The File and Use Recognition System List, however, is informational only. Carriers that are not on the File and Use Recognition System List may still be used if they meet the eligibility standards (See above Eligible Carriers). Further, regardless of whether or not a carrier is on the File and Use Recognition List and in accord with CIC Section 1765.1, the broker has a separate duty to determine that a carrier is eligible at the time of each placement.

What brokers should know about the file and use system:

• Brokers and/or carriers make basic filings to get carriers on the CDI File and Use Recognition System List
• California's capitalization levels apply, but CDI does not pre-review or approve capitalization levels or assets
• CDI does not perform officer and director background reviews
• CDI recognition system permits CDI to have information about the carrier and respond to public inquiries

AB 2303, Statutes of 2012 repealed CIC Section 1765.1(c). Effective January 1, 2013 the File and Use Recognition System will no longer exist.

View the File and Use Recognition System List.

Nonadmitted Carrier Ineligibility

If the Commissioner determines that a carrier is not eligible, the Commissioner may issue an order and ask the SLA to notify all surplus line brokers that the carrier is no longer eligible.

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