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Legislation & Regulations - (continued)
Q. What factors do you believe they need to take into account? Under no circumstances will it be considered acceptable for a surplus lines company which has not met the requirements of Regulation Section 2174 to issue policies covering risks in this state. The potential insured must be told that the surplus lines company is not backed by the California Insurance Guarantee Fund, as are admitted companies. Other sources, such as the rating services may be helpful in providing valuable information about a company's financial position. Continuity of coverage and continuity of established relationships are important factors to all of the parties involved, especially the insured. What I would characterize as "out of contract" services such as loss control, safety engineering, and responsible claims handling are critical in developing a positive working relationship between the company and the insured.
Q. Upon expiration of a surplus line policy, is the surplus lines broker required to search the admitted market and treat renewal as if it were new business?
Q. Have your enforcement efforts been effective in reducing abuse in the surplus lines market? |
A. Since Garamendi took office we have banned 80financially shaky companies from doing business here; issued 59 cease and desist orders to unlicensed insurers and their agents, seized 10 insurance entities, and moved to revoke 13 surplus lines brokers licenses.
Additionally, we have assisted local, state and federal prosecutors with several criminal investigations of those persons responsible for fraud occurring in the surplus lines market. These actions along with the implementation of the new legislation and regulation is having an impact. When Regulation 2174 was fully implemented on May 25, 1993, nearly 200 companies, that had been doing business in California during 1993, did not qualify under the Regulation and immediately ceased doing business. Several of these companies were on our "hit list" Of financially unstable insurers. Our sources within the industry tell us that the proliferation of fraudulent offshore companies doing business in California has come to screeching halt. Obviously, we still have a lot of work to do in this area. We have several pending investigations and legal actions which must be initiated and concluded to bring to justice those individuals and entities who have subjected California insurance consumers to severe abuse andfinancial loss. However, we are committed to following through on each of these actions.
John Garamendi |