Surplus Lines Insurance for Connecticut REIT Properties: Hard-to-Place Risks and the State Rules

Connecticut surplus lines insurance is coverage placed through a licensed surplus lines broker with an eligible non-admitted insurer, used when the regular admitted market does not provide the placement a property needs or when a statutory exception applies. For a REIT with Connecticut property, the first checks are the insured's home state, the broker's license, the insurer's eligibility, the placement-date rules in C.G.S. § 38a-741 (opens in a new tab), the 4% Connecticut premium tax when Connecticut is the home state, the required policy notice in C.G.S. § 38a-745 (opens in a new tab), and the absence of Connecticut Insurance Guaranty Association protection. Public Act 26-69 (opens in a new tab) changed Connecticut's diligent-effort and reporting rules effective October 1, 2026, so the placement date now matters as much as the property.

How REIT insurance programs are built nationally is set out in REIT insurance and, for buildings and rents, REIT property insurance. The rest of a Connecticut REIT's program is in insurance for Connecticut REITs, and the term itself is defined in excess and surplus lines.

What makes a placement surplus lines in Connecticut?

An admitted insurer is authorized to transact its line of business in Connecticut and is regulated as an admitted company. A surplus lines insurer is not admitted. It can still accept Connecticut business when it meets the state's eligibility rules, and only a licensed surplus lines broker can place coverage with it. A surplus lines broker places coverage with a non-admitted carrier after the admitted market has been exhausted, according to the Connecticut Insurance Department (opens in a new tab), and C.G.S. § 38a-794 (opens in a new tab) authorizes that broker to procure policies from insurers not authorized in Connecticut, subject to the statute's limits. One of those limits matters for property owners: the broker cannot place coverage that is available through a residual market mechanism.

Eligibility does not turn a surplus lines insurer into an admitted carrier. The company's rates and forms are not reviewed the way an admitted insurer's are, and the policy says so on its cover. That difference changes the questions a REIT risk manager brings to the policy review, from the wording of exclusions to what happens if the insurer cannot pay.

Commercial real estate reaches this market for many reasons. Connecticut Insurance Department materials name vacant buildings as an example in the surplus lines affidavit instructions (opens in a new tab) and treat flood insurance as an exception to the diligent-effort rule. Coastal wind, redevelopment, aging building systems, environmental exposure, cyber and excess liability layers are other common subjects of placement talks. None of these categories means a particular property cannot obtain admitted coverage; that answer comes from the actual marketing of the risk.

The market is large in Connecticut. Surplus lines premium for Connecticut risks totaled $1,044,681,771 in 2022, including $787,197,041 in fire and allied lines and $151,126,589 in other liability, according to an NAIC 2023 meeting packet (opens in a new tab). Those are 2022 figures, not current volume.

Which state's rules apply to a multistate REIT?

The home state decides whose surplus lines rules and tax apply, and a Connecticut building does not settle that question by itself. Under the federal Nonadmitted and Reinsurance Reform Act, 15 U.S.C. § 8206 (opens in a new tab), the home state is the state where the insured maintains its principal place of business. If 100% of the insured risk sits outside that state, the home state becomes the state to which the greatest percentage of taxable premium for the contract is allocated. When an affiliated group has more than one named insured on a single non-admitted contract, the home state follows the group member with the largest share of the premium.

Connecticut is the home state for an insured with its principal place of business in Connecticut even when part of the risk is located elsewhere, according to CID Bulletin SL-06 (opens in a new tab) (October 10, 2025). A REIT headquartered in another state with a Connecticut office park may answer to its headquarters state instead. Before marketing starts, identify the named insured, the affiliated-group structure, the principal place of business, each location and coverage section, the lender's requirements and the expected placement date, and ask the broker to document how the home state was determined.

Who can place Connecticut surplus lines coverage?

Only a person, firm, association or corporation licensed as a Connecticut surplus lines broker can place the coverage. Under C.G.S. § 38a-794 (opens in a new tab), the applicant must either be domiciled and keep an office in Connecticut or be a nonresident who wants to act in the state, and must be licensed as an insurance producer.

A Connecticut resident needs an active Connecticut Producer Property & Casualty license in good standing, a passing score on the surplus lines examination and an application through NIPR (opens in a new tab), according to the Connecticut Insurance Department (opens in a new tab). No pre-licensing course or bond is required. A nonresident with an equivalent license in another state may receive reciprocity, and a business entity must designate a responsible licensed person. You can confirm any broker's status on the Connecticut insurance license lookup (opens in a new tab) before sharing portfolio details. How a broker's role differs from an agent's is covered in insurance broker vs agent.

What changed in Connecticut on October 1, 2026?

Public Act 26-69 (opens in a new tab) amended C.G.S. § 38a-741(b) (opens in a new tab) effective October 1, 2026. The amendment removes the former text that required the insured and the licensee to make the prior diligent-effort showing, and it gives the insurance commissioner authority to require annual reports from surplus lines brokers. It keeps exceptions for flood insurance, for exempt commercial purchasers and for placements made through an unaffiliated wholesale surplus lines broker.

Placements made under the earlier rules followed Bulletin SL-05 (opens in a new tab) (October 4, 2023). Diligent effort was presumed when the line appeared on the Exportable List or when three authorized insurers that customarily wrote the coverage had declined the risk. Each declination record had to give the specific reason, the date and the declining underwriter's name and title, and the records were kept through the policy period and for one year after it.

The Department lists Bulletin SL-07 as superseding SL-06 effective October 1, 2026. Because a renewal can straddle the change, ask the broker which version of § 38a-741 (opens in a new tab) applies on your placement date and what records the broker is keeping under the current bulletin.

When does a search of the admitted market still matter?

The search still shapes the file, even where the 2026 amendment lightens it. The Exportable List covers lines or components the Department treats as generally unavailable from licensed insurers, and under the earlier rules a line on that list was presumed to meet the diligent-effort requirement. Flood insurance is a statutory exception to the diligent-effort rule; zones and coverage for REIT buildings are covered in flood insurance for Connecticut REIT properties.

A large REIT may qualify as an exempt commercial purchaser. Under 15 U.S.C. § 8206 (opens in a new tab), the purchaser must employ or retain a qualified risk manager, must have paid more than $100,000 in aggregate nationwide commercial property and casualty premiums in the prior 12 months, and must meet at least one additional test, such as the statute's net-worth, revenue, employee, public-entity budget or municipality test.

Connecticut added a disclosure step for that exception. Under Bulletin SL-06 (opens in a new tab), the broker disclosed that admitted insurance may or may not be available and may provide greater regulatory oversight, and the purchaser then asked in writing for placement with an unauthorized insurer. With SL-07 in force from October 1, 2026, confirm the current procedure with the broker for the placement date, and keep the signed request with the policy file.

How do you check that the insurer is eligible?

A U.S.-domiciled insurer must show it is authorized in its home jurisdiction and holds at least $15 million in total capital and surplus, under the Connecticut Insurance Department eligibility standard (opens in a new tab) revised January 2022. It also files Form SL-2, a power of attorney and a $1,000 application fee. An alien insurer, one domiciled outside the United States, needs a U.S. manager or representative and must appear on the NAIC Quarterly Listing of Alien Insurers.

Once the Department finds the requirements met, the insurer can appear on Connecticut's list of licensed companies, approved reinsurers and surplus lines insurers (opens in a new tab). An NAIC listing is part of alien-insurer eligibility, but it does not show that every policy, line or transaction meets Connecticut's requirements. Ask the broker for the insurer's eligibility confirmation and financial information, and compare the policy form, endorsements, exclusions and conditions with the admitted form you were offered or expected.

How does Connecticut's 4% surplus lines tax work?

Connecticut taxes surplus lines premium at 4% of the gross premium charged to the insured, according to the Connecticut Insurance Department surplus lines FAQ (opens in a new tab). Broker, service and policy fees are not subject to the tax. The tax applies when Connecticut is the home state, and C.G.S. § 38a-743 (opens in a new tab) governs payment and allocation. That section also exempts policies issued to the State of Connecticut, a Connecticut town or agency, or a special taxing district named in the policy and responsible for its premiums. For an older policy period, confirm the rate that applied then with the Connecticut Insurance Department or the statute in force at the time.

The surplus lines broker files and pays through OPTins (opens in a new tab) using the SL-9 process. SL-8 forms no longer need to be collected or sent with quarterly filings, and a quarter with no activity does not need a filing. The due dates follow the calendar quarter:

Independently procured insurance, bought directly from a non-admitted insurer without a Connecticut surplus lines broker, follows a separate Department of Revenue Services process on Form 115A. On the invoice, ask the broker to show the gross premium, each fee and the 4% tax on separate lines, and to say who files the SL-9 and when.

What notice must appear on the policy?

Every surplus lines policy issued or renewed on or after January 1, 2015, must carry this notice on its cover in at least 12-point boldface capital letters, under C.G.S. § 38a-745 (opens in a new tab):

"NOTICE

THIS IS A SURPLUS LINES POLICY AND IS NOT PROTECTED BY THE CONNECTICUT INSURANCE GUARANTY ASSOCIATION OR SUBJECT TO REVIEW BY THE CONNECTICUT INSURANCE DEPARTMENT. IT IS IMPORTANT THAT YOU READ AND UNDERSTAND THIS POLICY."

The notice covers two separate points: the absence of guaranty association protection and the policy's exclusion from Department review. A lender reviewing evidence of insurance may ask about both, so it helps to have the policy's cover page in the closing file.

What happens if a surplus lines insurer fails?

The Connecticut Insurance Guaranty Association does not protect surplus lines policies. The statutory notice says so, and the Department's consumer safety-net publication (opens in a new tab) lists surplus lines insurers, unauthorized insurers and insurers not licensed to sell property and casualty insurance in Connecticut as excluded from property and casualty guaranty protection.

For a REIT, that puts more weight on the insurer's financial information, the claims-handling arrangement and the lender's acceptance of the carrier. Ask who administers claims, where a loss is reported, and whether the loan documents name any requirement the insurer must meet. Loan-document insurance clauses for Connecticut properties are covered in Connecticut REIT lender insurance requirements.

What should a REIT ask before binding?

Bring these questions to the broker handling the placement:

• Is the broker licensed as a Connecticut surplus lines broker, and who is the business entity's designated responsible licensed person?
• How was the home state determined, and which entity and premium allocation support it?
• Is the insurer on Connecticut's eligible surplus lines list, and if it is alien, is it on the NAIC Quarterly Listing of Alien Insurers?
• If the insurer is U.S.-domiciled, does its eligibility record show the required capital and surplus?
• Which version of C.G.S. § 38a-741 (opens in a new tab) applies on the placement date?
• Does the placement rely on an Exportable List, flood, exempt commercial purchaser or wholesale-broker exception, and what written disclosures and records are being kept?
• How do the policy form, endorsements, exclusions and conditions differ from the admitted form under discussion?
• What is the gross premium, which fees are separate, and how is the 4% tax shown?
• Who files the SL-9, and by which date?
• What is the claims-reporting address, and who is the claims administrator?
• Does the policy carry the statutory notice?
• Has the lender accepted the insurer, the policy form, the cancellation terms and the evidence of insurance?

Complaints about a licensed broker or an insurance company go to the Connecticut Insurance Department Consumer Affairs Division (opens in a new tab). Tax questions about independently procured insurance go to the Connecticut Department of Revenue Services.

Frequently asked questions

Is a surplus lines insurer licensed in Connecticut?

No. A surplus lines insurer is non-admitted, although it must meet Connecticut's eligibility requirements before a licensed surplus lines broker can place Connecticut business with it. Eligibility does not subject its rates and forms to Department review.

Does Connecticut still require three declinations?

The rule changed on October 1, 2026, when Public Act 26-69 (opens in a new tab) amended C.G.S. § 38a-741(b) (opens in a new tab) and gave the commissioner authority to require annual broker reports. The three-declination presumption in Bulletin SL-05 described the earlier rules, so the statute and Department procedure on the placement date control.

Who pays the Connecticut surplus lines tax?

For broker-placed business with Connecticut as the home state, the surplus lines broker files and pays through OPTins, and the tax is 4% of the gross premium charged to the insured. Independently procured insurance is handled separately through the Department of Revenue Services on Form 115A.

Can a REIT headquartered outside Connecticut have Connecticut as its home state?

Generally not, because the home state follows the principal place of business. The exception arises when all of the insured risk sits outside the headquarters state; then the state with the greatest share of taxable premium becomes the home state, which could be Connecticut.

Can flood insurance be placed in surplus lines without a diligent search?

Yes. Flood insurance is one of the exceptions Connecticut keeps in C.G.S. § 38a-741 (opens in a new tab), alongside exempt commercial purchasers and placements through an unaffiliated wholesale surplus lines broker. The policy still carries the statutory notice and the 4% tax when Connecticut is the home state.

Your next step

Gather the entity chart, the location schedule, the lender's insurance clauses and any declinations or written requests already in the file, and take the questions above to a licensed broker or agency. You can find agencies by city and category in the Riskado directory of Connecticut insurance agencies, and check any broker's license on the Connecticut insurance license lookup (opens in a new tab) before you share portfolio details.