Iowa Guaranty Associations and Surplus Lines Insurance

What IID actually does

It helps to know the full scope of IID’s authority because exam questions sometimes ask which activity falls within state regulation:

• Licensing insurers by issuing Certificates of Authority and policing solvency on an ongoing basis.
• Licensing producers and adjusters, including suspending or revoking licenses for cause.
• Reviewing rates and forms to ensure premium rates are not excessive, inadequate, or unfairly discriminatory, and that policy language is not unfair or deceptive.
• Conducting financial examinations of insurers’ books and reserves on a regular cycle.
• Conducting market conduct examinations.
• Handling consumer complaints through IID’s Market Regulation Bureau, which reviews, investigates and responds to complaints from the public about insurers and producers (Iowa Admin Rule 191-1.6(5)).
• Enforcing the Insurance Code through fines, cease-and-desist orders, license discipline, and criminal referrals.

The Iowa Life and Health Insurance Guaranty Association — ILHIGA (Iowa Code Chapter 508C)

The Iowa Life and Health Insurance Guaranty Association (ILHIGA), created by Iowa Code Chapter 508C, is a separate association for life, health and annuity policies: it protects policyholders and others covered under those policies and contracts when the member insurer that issued them becomes impaired or insolvent, subject to limits the statute sets (Iowa Code 508C.2, 508C.6).

The Iowa Insurance Guaranty Association (Iowa Code Chapter 515B)

P&C insolvencies are handled by a separate Iowa guaranty association under Iowa Code Chapter 515B — distinct from ILHIGA, which covers only life, health, and annuities. Its main features:

• Membership. Every insurer licensed in Iowa under Chapter 515 or 520 is a member (Iowa Code 515B.2(5), 515B.3). Not members: county and state mutual insurance associations (Chapters 518 and 518A), fraternal benefit societies, nonprofit service plan corporations (Chapter 514), life insurance companies and life, accident or health associations (Chapter 508), and “those professions under chapter 519”.
• Funding. Member assessments after insolvency, not pre-funded reserves (Iowa Code 515B.5).
• Coverage. Pays covered claims of insolvent admitted P&C insurers, with limits set by statute (Iowa Code 515B.5(1)(a)).
• Eligibility. A claim qualifies when the claimant or the insured is an Iowa resident at the time of the insured event, or when it is a first-party claim for damage to property permanently located in Iowa (Iowa Code 515B.2(4)(a)). Surplus lines coverage and reinsurance are not covered. The part of a claim within the insured’s deductible, and fines, penalties and punitive damages, are not covered claims (Iowa Code 515B.2(4)(b)).
• Cannot be used as a sales tool (Iowa Code 515B.18). No one may advertise or publish, in connection with selling a policy, that its claims are subject to Chapter 515B or will be paid by the association.

Insurance notices and documents — electronic delivery (Iowa Code 505B.1)

Iowa law permits insurers to deliver insurance notices, documents, and policy materials electronically — provided certain consumer-consent and accessibility requirements are met (Iowa Code 505B.1):

• Consent. The recipient must have consented to electronic delivery in a manner that reasonably demonstrates the recipient can access the electronic record.
• Withdrawal of consent. The consumer must be able to withdraw consent at any time, and the insurer must honor that withdrawal.
• Disclosure. The insurer must disclose the right to receive paper copies and how to obtain a paper copy of a document delivered electronically.
• Format. The electronic record must reasonably permit retention by the consumer for later reference.
• Defective delivery. If the insurer attempts electronic delivery and has a reasonable basis to believe the notice or document was not received, or learns that the party’s email address is no longer valid, it must deliver by another method permitted by law other than electronic means (Iowa Code 505B.1(13)).

Surplus lines framing (Iowa Code 515I.2(8), (18); Iowa Admin Rule 191-21.1 through .9) — P&C exams only

Surplus lines is the regulated market for coverage placed through a surplus lines producer with an eligible surplus lines insurer — a non-admitted insurer, one that does not hold an Iowa Certificate of Authority, or a domestic surplus lines insurer the commissioner has authorized. Iowa’s framework appears on Property, Casualty, Commercial Lines, and Personal Lines exams, and is detailed further in the dedicated Excess and Surplus Lines exam outline:

• Surplus lines insurance defined (Iowa Code 515I.2(18)). Property and casualty insurance on Iowa risks placed through a surplus lines producer with an eligible surplus lines insurer.
• Eligible surplus lines insurer (Iowa Code 515I.2(8)). A non-admitted insurer that meets Iowa’s eligibility standards — typically minimum capital and surplus requirements and listing by the NAIC’s International Insurers Department (for alien insurers) or by IID. A domestic surplus lines insurer, an Iowa insurer the commissioner has authorized to do business as one, is also an eligible surplus lines insurer (Iowa Code 515I.2(7), (8)(c)).
• Diligent search. Before placing a risk with a nonadmitted insurer or a domestic surplus lines insurer, the surplus lines producer must make a diligent search and find that the full amount or type of insurance cannot be obtained from an admitted insurer (Iowa Code 515I.3(1)(c)). The search is not required when the producer tells an exempt commercial purchaser (a large commercial buyer that meets the tests in Iowa Code 515I.2(9)) that the coverage may be available from an admitted insurer and the purchaser then asks in writing for the surplus lines placement (Iowa Code 515I.9).
• Excess and surplus lines line of authority required on the producer license (Iowa Code 522B.6(2)(g); Iowa Admin Rule 191-10.4(7)).
• No guaranty fund protection. Surplus lines coverage is NOT backed by the Iowa Insurance Guaranty Association. That includes a policy from a domestic surplus lines insurer, an Iowa-domiciled insurer approved to write only surplus lines business: neither Iowa guaranty association covers it (Iowa Code 515I.4A(5)).