BRokERS
MUST BE
ALERT To
CoMPLEx
US RULES
Alan Waring President
Crump International Ltd.
Alan Waring looks at the demands that E&S
brokers face when doing business in the US.
International capacity for US risks has been critical to US brokers approved non-admitted carriers or alien carriers. Placements into
and their clients, right back to the creation of the United States in such carriers are governed by the surplus lines regulations. These
the 1700s. However, historically, this has been principally restricted to regulations are specific to each state and so there are effectively 50
placements into Lloyd’s of London. different versions of the rules governing how placements should be
Since the 1992 Lloyd’s crisis, and the massive Hurricane Andrew
made into such carriers.
(1993), World Trade Center (2001) and Hurricane Katrina (2005)
While the marketplace has become ‘global’, much of the business
market losses, the international options have changed dramatically.
transacted between client, retail broker and wholesale broker remains
Apart from Lloyd’s, carriers now exist in London, Bermuda, Dublin
‘local’. As a result, there has for some years been a need to provide
and throughout Europe that will write US risks.
greater communication between the US surplus lines community and
Additionally, there are various other jurisdictions, such as the Cayman
the international marketplace, so that all parties can fully understand
Islands, where one or more carriers exist or where there are captive
how to effectively and legally use international carriers.
insurance companies writing third-party risks. To provide a perspective
Within the surplus lines industry in the US, the National Association
on the changes, the increase in premium volume into the Bermuda
of Professional Surplus Lines Offices (NAPSLO) is one of the
market is a good reference. The total value of the Bermuda re/insurance
principal organisations responsible for representing the interests of
market was approximately $15 billion in 1995, including reinsurance
carriers and brokers in the sector. In 2006, NAPSLO recognised the
premiums. By 2007, this had increased to more than $110 billion. By
need for greater international awareness and established the NAPSLO
far the majority of this rise was in respect of US risks. Such numbers
international committee, with Matt Nichols of All Risks, Ltd. as
clearly demonstrate the vast rise in importance of the international
initial chairman, reporting to the NAPSLO board. Members of the
marketplace to the US insurance industry and its clients.
international committee were selected based on their having a good
For direct insurance purposes, all of these international markets are spread of representation from underwriters and brokers in various
considered to be ‘surplus lines’ and fall into the category of either jurisdictions, including London and Bermuda.
Bermuda Re/insurance . September 2009 49
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