Lloyd's to gain surplus lines eligibility in Kentucky
On 7 April 2014, Governor Steve Beshear of Kentucky signed Home Bill 375 (the “Legislation”) into law, permitting Lloyd’s to hold dual status as both an admitted and a surplus lines insurer.
The Legislation, effective on 15 July 2014, allows an association of underwriters (ie Lloyd’s) that is authorised to transact business in Kentucky to qualify as an eligible surplus lines insurer if listed in the National Association of Insurance Commissioners (“NAIC”) quarterly listing of alien insurers (“IID List”).
Federal standards for the eligibility of surplus lines insurers were among the reforms of Nonadmitted and Reinsurance Reform Act (“NRRA”), adopted in 2011 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Previously, eligibility standards had varied significantly by state. The NRRA streamlined eligibility by requiring states to permit IID Listed alien surplus lines insurers (ie non-US domiciled nonadmitted insurers) to transact surplus lines business.
Lloyd’s has been an admitted insurer in Kentucky since the 1930’s when it acquired a licence so that the market could write bloodstock business. After the implementation of the NRRA in 2011 Kentucky continued to take the position that its state law prohibited authorised insurers from also transacting surplus lines business. The enactment of the current Legislation allowing dual status, therefore, represents the achievement of a long-standing goal of Lloyd’s to enable underwriters to write surplus lines business in all US states.
More detailed guidance on the implications of this change for processing and wordings will be issued shortly to the market in the form of a Market Bulletin.