Industry Issues | Surplus Lines Reform

NAIC Surplus Lines Task Force Advances Guideline on Nonadmitted Accident and Health Coverages

NAIC Update - Surplus Lines Task Force

The NAIC Surplus Lines (C) Task Force met by teleconference on November 7, 2018. During this call, the Task Force members finalized discussion and adopted its Guideline on Nonadmitted Accident and Health Coverages

This guideline is intended to provide assistance to states that may consider updating laws and establishing procedures to allow certain accident and health coverage to be procured in the nonadmitted - surplus lines - market, either independently or through surplus lines brokers. The document offers guidance on the review of existing laws, regulations, and procedures, with particular attention to whether existing insurance laws, tax laws, or regulations expressly prohibit the export of accident and health coverage, contain restrictive definitions with a similar effect, or include substantive provisions that specifically refer in some manner to property and casualty insurance.  

According to the Guideline, the types of accident and health coverage that some states are permitting in their nonadmitted market include but are not limited to the following: short term medical, international major medical, excess disability, high-risk disability and other similar coverages. It should be noted that comprehensive health plans, Medicare supplement insurance and standard disability insurance coverage are not suitable for the nonadmitted market.

During the NAIC fall 2018 national meeting on November 17, the Property Casualty Insurance (C) Committee received and adopted the Guideline (see attachment), which will be slated for the agenda of the Executive (EX) Committee and Plenary at the spring 2019 national meeting for consideration of final adoption.

Additionally, of related but separate news, the NAIC Producer Licensing (D) Task Force met on November 15, and discussed a referral and recommendation from the Surplus Lines (C) Task Force related to the underlying licensure requirement to qualify for a surplus lines license. (see attachment).

The Accident & Health Drafting Group for the aforementioned Guideline identified that per the NAIC State Licensing Handbook, Page 220, Standard 39 - Surplus Lines Standards indicates, "States shall require an underlying property and casualty license prior to the issuance of a resident surplus lines license."

The Guideline on Nonadmitted Accident & Health Coverages, Section 2 - Background, outlines certain types of A&H coverages where a producer may be required to hold an Accident & Health license. That producer may not possess a property and casualty license, and therefore, not qualify for a surplus lines license based on the language in the Handbook.

The SLTF therefore requests that the Producer Licensing (D) Task Force consider whether the requirement of an underlying property and casualty license needed to qualify for a surplus lines license should also allow an Accident & Health license to fulfill the requirement - for placement of A&H coverage in the surplus lines market. If it is determined that the underlying licensure requirement to qualify for a surplus lines license should be expanded to include or allow for an Accident & Health license, it is recommended that State Licensing Handbook, Standard 39 - Surplus Lines Standards be changed to reflect the inclusion.

The members of the Producer Licensing Task Force held preliminary discussion and voted to expose the referral for comment from regulators and interested parties.