In the early 2000's, many of the carriers writing insurance agent's errors and omissions insurance inserted an insolvency exclusion in their policy. The typical insolvency exclusion requires that the carriers utilized by an agent have a rating at a certain level or higher from a specific rating agency at the time of policy issuance, if the agent is to have coverage against exposure created by the insolvency of the issuing carrier.
Today, insurers earning a Financial Stability Rating® (FSR) of A or better from Demotech, Inc. are finding a significant number of insurance agent's errors and omissions insurance carriers are recognizing their assigned FSR and providing coverage for insolvency. Visit Insurance Risk Management Institute for independent insight. Demotech has secured specific acceptance of FSRs from several fine carriers including NAMICO Insurance Company, Allied World Assurance Company, Century Surety Company, Gotham Insurance Company as well as other providers of insurance agent's errors and omission insurance.
To level the playing field for producers whose insurance agent's errors and omissions insurance carriers have not yet made the necessary modifications to their insolvency provision, Demotech will assist producers and carriers by contacting a producer's errors and omissions insurance carriers to secure exceptions to the insolvency exclusion. For insurers that are seeking a global solution to the challenge, Demotech developed an insolvency gap coverage. The insolvency gap coverage mitigates the impact of the insolvency exclusion. It addresses the exclusion of insolvency coverage. Specifically, the peril covered by the policy is the liquidation of the designated insurance company. In the event of liquidation, the insolvency gap coverage will pay or defend claims. The policy authorizes payment of the claim or defense on behalf of a covered agent. The insureds of the designated insurance company have their claim paid or defended, thereby avoiding litigation with the producer or agent. Demotech, Inc. is the financial underwriter of this fully insured program that is offered by Century Surety Company. A similar coverage is offered by Gotham Insurance Company.