When Surplus Lines Brokers Are Off the Hook: Connecticut Department Issues Bulletin on New Diligent Effort Exception
On October 10, 2025, the Connecticut Department of Insurance (the Department) issued Bulletin SL-6 (the Bulletin) to restate the requirements generally applicable to surplus lines placements, and to advise that the diligent effort exception established by Public Act 25-87, effective October 1, 2025, only applies to surplus lines brokers when they procure insurance coverage through an unaffiliated wholesale broker. The Bulletin additionally supersedes and rescinds Connecticut Bulletins SL-3 and SL-5.
Public Act 25-87
Effective October 1, 2025, Public Act 25-87 amended the diligent effort requirement to create a limited exception for “placements in the surplus lines market where the surplus lines broker acts as the retail agent and accesses such market through an unaffiliated wholesale surplus lines broker.” The Bulletin provides important guidance on the Connecticut diligent search requirement as it now stands. See below for more detail on the Bulletin and the new exception.
Bulletin SL-6 Key Takeaways
- Restatement of the General Diligent Effort Requirements: The diligent effort requirement in Connecticut is promulgated by Conn. Gen. Stat. §38a-741. The Bulletin emphasizes that a presumption exists that a diligent effort has been made to place a risk in the admitted market if:
“(1) the line, sub-line or class of insurance sought is considered generally unavailable through admitted insurers or a residual market mechanism and, as such, is included in the Department’s Exportable List, as published by the Commissioner from time to time; or
(2) in connection with each placement (including the renewal of a prior placement), the risk has been declined by three authorized insurers that customarily write the type of insurance at issue.”
The Department also reminds surplus lines brokers that they must maintain the requisite documentation of a diligent effort search for the policy term plus a year.
The Department specifies their position that “Although surplus lines brokers are required to maintain and produce to the Insurance Commissioner upon request a record of the required declinations, (…) the responsibility to fulfill the diligent search requirement falls upon the insured’s producer (i.e., retail agent).”
- Public Act 25-87 Creates a Limited Exception to Those Requirements: Public Act 25-87 amended the Connecticut diligent effort requirements to exempt “brokers” when a policy is “procured or placed through an unaffiliated wholesale surplus lines insurance broker.” The Bulletin specifies that this exemption for “brokers” applies only to surplus lines brokers and not “producers,” meaning when the surplus lines broker is the retail agent.
- Flood Insurance and Exempt Commercial Purchasers: The Bulletin reiterates Conn. Gen. Stat. §38a-741(b) which exempts flood insurance from the diligent effort requirement, and additionally reminds that the NRRA exempts brokers from diligent effort requirements when “[A] surplus lines broker procures or places nonadmitted insurance on behalf of an “exempt commercial purchaser,” provided that the (1) the broker has disclosed to the exempt commercial purchaser that insurance may or may not be available from the admitted market that may provide greater protection with more regulatory oversight, and (2) the exempt commercial purchaser has subsequently requested in writing for the broker to procure from or place such insurance with an unauthorized insurer.”
Conclusion
The diligent search requirement of Conn. Gen. Stat. §38a-741 has been the impetus for multiple actions by the Department in recent years, including the Bulletin. The Bulletin provides guidance on the recent exception to the diligent search requirement for policies “procured or placed through an unaffiliated wholesale surplus lines insurance broker.”
*Matt Cossu also contributed to this article. He is not licensed to practice law in any jurisdiction; bar admission pending.