What is a D1 Form and why is it used?

Phrases like “not licensed” and “financial solvency” on a commercial insurance D1 form can cause some concern, especially if you don’t have a lot of experience with the surplus lines marketplace.
Let’s take a closer look at what the required D1 disclosure is saying.
Section One.
“The insurance policy that you are applying to purchase is being issued by an insurer that is not licensed by the State of California. These companies are called “non-admitted” or “surplus line” insurers.”
The terms “admitted” and “non-admitted” refer to certain insurance products and how carriers who sell them are regulated by the states in which they are sold.  The non-admitted market was created to cover risks that the admitted market would not cover.
Section 2.
“The insurer is not subject to the financial solvency regulation and enforcement that apply to California licensed insurers.”
The non-admitted, excess and surplus lines carriers are instead regulated by the State Surplus Lines Office.
When a product is admitted the commissioner has approved the rates and forms of the insurance product that is being sold to the public in your state.
Section 3.
“The insurer does not participate in any of the insurance guarantee funds created by California law. Therefore, these funds will not pay your claims or protect your assets if the insurer becomes insolvent and is unable to make payments as promised.”
Excess and surplus lines carriers are subject to the same financial strength ratings as the admitted markets are. A non-admitted carrier with a strong A. M. Best Rating is just as strong as an admitted carrier with the same rating.
The meat of the D1 disclosure form in sections 4,5,6 & 7 shows you where and how to look up the carriers to verify their status as an insurer in your state.
At the end of the disclosure section eight explains that if the insured did not receive the D1 Form and request for signature until after coverage became effective then the insured has the right to cancel the policy within 5 days of when they received the disclosure.
This will waive the minimum earned premium required by the policy and will be pro-rated instead. Along with that, any broker fees that were charged for the policy will be returned.
Remember, there’s nothing to be worried about while signing a D1 disclosure form as long as the policy has been underwritten correctly, the carrier has a strong financial rating, and is capable of meeting the ongoing policy obligations.
Please contact us with further questions on this or any other risk management topic. We will see you again soon!