- Illinois does not maintain a list of eligible surplus lines insurers.
- Illinois does have a Surplus Lines Association (see Other Comments section #4).
- Illinois does not have an Export List.
- Illinois does have an industrial insured exemption (see Appendix C) but also recognizes the exempt commercial purchaser exemption under NRRA.
- Surplus lines tax: 3.5%, payable by broker and may be passed on to the insured, plus stamping fee of 0.04% (effective Jan. 1, 2023), and up to 1% fire marshal tax on property premium, depending on specific coverage (see schedule on Surplus Line Association website). All taxes and stamping fees must be rounded to the nearest whole dollar (see “Other Comments” section #11).
- Illinois has not affiliated with any existing compact.
- Illinois does allow domestic surplus lines insurers in the state.
Eligibility and Filing Requirements (Foreign Insurers only):
Licensed surplus line producers may procure surplus line insurance from an unauthorized insurer domiciled in the United States only if the insurer:
(i) is permitted in its domiciliary jurisdiction to write the type of insurance involved; and
(ii) has, based upon information available to the surplus line producer, a policyholders surplus of not less than $15,000,000 determined in accordance with the laws of its domiciliary jurisdiction; and
(iii) has standards of solvency and management that are adequate for the protection of policyholders.
Where an unauthorized insurer does not meet the standards set forth in (ii) and (iii) above, a surplus line producer may, if necessary, procure insurance from that insurer only if prior written warning of such fact or condition is given to the insured by the insurance producer or surplus line producer. The warning format is set forth in the surplus line regulations (50 I11. Admin., Part 2801).
Eligibility and Filing Requirements (Alien Insurers only):
Licensed surplus line producers may procure surplus line insurance from an unauthorized insurer domiciled outside of the United States only if the insurer meets the standards for unauthorized insurers domiciled in the United States (see Foreign Insurer Eligibility, above) or is listed on the Quarterly Listing of Alien Insurers maintained by the International Insurers Department of the NAIC.
Types of Insurance Exempted from Surplus Lines Regulation:
- Insurance of property and operations of railroads or aircraft engaged in interstate or foreign commerce.
- Insurance of vessels, crafts or hulls, cargoes, marine builders’ risks, marine protection and indemnity, or other risks including strikes and war risks insured under ocean or wet marine forms of policies.
Other Comments or Requirements:
- The onus is on the surplus lines producing broker to ascertain that insurers meet the eligibility requirements.
- The Director of Insurance can declare a company ineligible.
- Contact information for the Surplus Line Association of Illinois is as follows:
David Ocasek, Chief Executive Officer
Surplus Line Association of Illinois
222 S. Riverside Plaza, Suite 2220
Chicago, Illinois 60606-6101
Tel.: (312) 263-1993
E-mail: [email protected]
- When making a diligent effort to first place insurance with licensed insurers, a surplus line producer need not get a declination from any residual market (certain exceptions for personal lines).
- Pursuant to Section 215 ILCS 5/445(a) of the Illinois Insurance Code, an insurance company that is domiciled and licensed in Illinois and possessing policyholder surplus of at least $15 million may, pursuant to a resolution by its Board of Directors, and with the written approval of the Director, be designated as a “domestic surplus lines insurer” (DSLI). A DSLI must abide by the Illinois surplus lines laws and may only insure in Illinois risks which are procured from a surplus lines producer pursuant to Section 445 of the Illinois Insurance Code.
- Surplus lines insurance contracts from unauthorized insurers, other than domestic surplus line insurers, shall have stamped or imprinted on the first page thereof in not less than 12-pt. bold face type the following legend: “Notice to Policyholder: This contract is issued, pursuant to Section 445 of the Illinois Insurance Code, by a company not authorized and licensed to transact business in Illinois and as such is not covered by the Illinois Insurance Guaranty Fund.” Insurance contracts delivered under this Section from domestic surplus line insurers as defined in Section 445a shall have stamped or imprinted on the first page thereof in not less than 12-pt. bold face type the following legend: “Notice to Policyholder: This contract is issued by a domestic surplus line insurer, as defined in Section 445a of the Illinois Insurance Code, pursuant to Section 445, and as such is not covered by the Illinois Insurance Guaranty Fund.”
- For further information, contact Illinois Department of Insurance website at http://insurance.illinois.gov/.
- Independent procurement / Industrial Insured tax: 0.5%, plus up to 1% fire marshal tax on property premium, depending on specific coverage (see schedule on Surplus Line Association website), and filing fee of 0.2%. All taxes and filing fees must be rounded to the nearest whole dollar. The tax and filing requirement applies to policies effective January 1, 2015 or later.
To independently procure insurance, the insured must qualify as an “industrial insured” by meeting the “exempt commercial purchaser” definition in the NRRA. Policies must be filed within 90 days of the effective date and taxes and filing fees must be paid within 30 days of the filing.
- Proposals, endorsements, and other documents which are incidental to the insurance but do not affect the premium charged are exempted from filing and countersignature. Brokers do not need to file zero premium endorsements, but will still need to file zero premium semi-annual tax statements in Illinois.
- Illinois surplus line producers must keep records of business transacted under their license for a period of 7 years from the policy effective date.
- The current stamping fee rate of 0.04% (down from 0.075%) became effective January 1, 2023 and applies to policies effective on or after January 1, 2023 and to any endorsement to those policies.
- Illinois enacted legislation in 2018 which decreased the tax rate for insurance independently procured by an industrial insured from 3.5% to 0.5% of gross premium. The tax rate was made effective retroactively to January 1, 2018.
- Effective January 1, 2022, Illinois passed legislation (SB1753) that eliminates the diligent search requirement with respect to commercial insurance contracts and only in those situations where the risk was referred to the surplus lines producer by an Illinois licensed insurance producer who is not affiliated with the surplus line producer. In addition, the bill allows one diligent search to be conducted on an annual basis with respect to group master policies and program business.