Exemptions & Limited Exemptions

In accordance with the federal NRRA, Illinois law recognizes that certain insureds can qualify as an exempt commercial purchaser (“ECP”). Provided certain notification procedures are followed, the law permits surplus line placements for ECPs without first making the required diligent effort to procure the insurance from authorized insurers.  In order to qualify:

  • the insured must meet the definition of exempt commercial purchaser in paragraph 1 of the Illinois Surplus Line Law; and
  • the producer must disclose to the ECP that the requested insurance may or may not be available from authorized insurers that may provide greater protection with more regulatory oversight; and
  • the ECP must subsequently in writing request the producer to procure the insurance from an unauthorized insurer.

Paragraph 7 of the Illinois Surplus Line Law requires the surplus line producer to keep their surplus line records for a period of 7 years. For exempt commercial purchasers, these records should include:

  1. a record of how the ECP determination was made;
  2. a copy of the notice; and
  3. the ECP’s written request to procure surplus line insurance.

Paragraph 1.5(f) of the Illinois Surplus Line Law says that when a commercial risk is referred to an Illinois wholesale surplus line producer by an unaffiliated Illinois-licensed producer, the transaction is exempt from the diligent effort requirements.

Paragraph 1.5(g) of the Illinois Surplus Line Law says that, for master policies, only an annual diligent effort is required, rather than a diligent effort for each insured added during the policy period.  The diligent effort must be performed annually, even if the policy period is greater than 12 months.  The diligent effort must include all variable provisions of the master policy.

Paragraph 1.5(h) of the Illinois Surplus Line Law says that, for program business, only an annual diligent effort is required for the program, rather than a diligent effort for each contract written under the program. The diligent effort must be performed annually, and must include all variable provisions of the program.