Industry Issues | Surplus Lines Reform

Puerto Rico Rule 28 - Circulation of Risk Prior to Surplus Lines Placement

Did You Know ...

According to Puerto Rico Insurance Rule 28

  1. All excess/surplus lines brokers, prior to placing any insurance of this kind, must offer the risk to be placed using the form designed by the Office of the Commissioner of Insurance for this purpose. The excess/surplus lines broker will make such offer using the risk circulation center to be established and administered for this purpose by the Office of the Commissioner of Insurance.
  2. It will be deemed that the excess/surplus lines broker has failed to comply with the obligation to offer the risk for placement if not all of the information requested in the above-mentioned form is provided or if the information provided is incorrect, ambiguous, vague, or does not allow the insurers among which the risk will be circulated to make an adequate evaluation of the risk.
  3. In administering the risk circulation center the Commissioner of Insurance shall have the 
    obligation
     to:
    1. Circulate risk among at least five authorized insurers or their authorized representatives in Puerto Rico.
    2. Use insurers that normally write the kind of insurance for the kind of risk that is going to be circulated.
    3. Alternate circulation among the greatest number possible of authorized insurers to prevent circulation being restricted to a limited number of insurers.

Excess/surplus lines brokers may not place any risk as excess/surplus lines insurance until such has been rejected by the insurers among whom the risk was circulated. The excess/surplus lines broker may consider that the risk is rejected if an answer is not received from such insurers within five (5) business days from the date on which the risk circulation center received the circulation form.

** This is unlike the diligent search requirements commonly found in the surplus lines insurance laws and regulations in the States, where the duty and obligation to conduct and record any such diligent search of the admitted market is imposed on the licensed surplus lines broker and/or retail agent. **