Surplus Lines Fundamentals NAPSLO by liaoguiguo


									Surplus Lines Fundamentals
                       Phoenix AZ
                     October 24, 2009

       Roy Simpson; Manager, Regulatory Compliance
         Endurance Insurance US Los Angeles CA

   Julia Van Buren; Regulatory & Compliance Administrator
          U.S. Risk Insurance Group, Inc. Dallas TX

                    Steve Stephan JD
                 NAPSLO, Kansas City MO
    The Goal of This Class is to:

• Enable you to navigate the complex
  challenges of surplus lines compliance.
• Provide you with resources and references
  to achieve surplus lines compliance.

• Your broking staff must understand responsibilities for
  surplus line compliance is theirs and not the non-
  admitted insurers they use.
• State regulators impose compliance on the surplus lines
  licensees as they often do not have direct
  regulatory/supervisory access to non-admitted insurers.
  This does not mean surplus line carriers are not
  regulated; they are regulated in their state or country of
• Unlike admitted insurance placements, surplus line
  licensees are responsible for completion of surplus line
  filings that notify the state of a surplus line placement
  and remitting the premium tax for the placement.
    We start with a question: why is surplus
         lines compliance so difficult?
• Taken individually, state surplus line regulations are relatively simple
  to understand.
• The complicating factor of multi state exposure placements occurs
  because most states require that licensed Surplus Line Brokers
  follow their regulations even if no transactional activity occurred
  within their state.
• Many state surplus line regulations were written prior to the issuance
  of non-resident surplus line licenses, beginning in the 1800’s.
• While states have achieved (for the most part) licensing reciprocity
  they have not updated surplus line regulations for more uniformity.
           Surplus Lines Insurance

• Also known as “Excess & Surplus” is a class of
  insurance designed to meet the needs of insureds with
  large, unusual and difficult to place insurance risks.
  Examples include earthquake, oil field operations,
  environmental remediation/clean up and medical trials.
  The general public most often hears of the “exotic”
  coverages such as an actors voice, a model’s face, an
  athlete's injury and precious artwork.
• Additionally, increased coverage capacity excess of
  coverage admitted (or non-admitted) insurers can
  provide is a frequent reason for using this market.
        Surplus Lines Insurance

• A major advantage of the surplus lines
  market is the freedom to tailor coverages
  for difficult to cover risks.
• Surplus line insurers are not required to
  file rate and forms with the states as
  admitted carriers must and therefore are
  not confined to the use of their prefiled
  coverage’s “in a box”.
       Surplus Lines Carrier Eligibility

• Surplus lines (“non-admitted”) insurers are not licensed
  (admitted) to transact insurance in a state (or states).
• Surplus line insurers can become eligible for use in a
  state by inclusion on an eligibility list for placements
  made by licensed Surplus Lines Brokers.
• Many states require non-admitted insurers to apply for
  inclusion on their eligibility list (also known generically as
  “white lists”). Other states leave it up to the Surplus
  Lines Broker to use financially stable surplus line
  carriers. Finally some states subscribe to the use of non-
  admitted insurers on the NAIC list of Alien Insurers for
  use by Surplus Line Brokers.
       Surplus Lines Carrier Eligibility
• Be aware that a carrier can be non-admitted in one state
  and admitted in other states of a multi state placement.
• Additionally, while a carrier may be admitted or eligible
  surplus lines in a state (or states), the carrier may not be
  admitted or eligible surplus lines in other states on a
  multi state placement.
• In these instances, the carrier may have to be “fronted”
  by eligible paper or replaced entirely if eligible surplus
  lines or admitted paper cannot be used in lieu of the
  ineligible paper for the state(s) where they are not
  eligible SL or admitted.
    Authorized Placement of Surplus Lines Insurance

•    Generally, this class of insurance must be obtained through the services of
     licensed Surplus Lines Brokers.
•    Surplus Line Brokers are heavily regulated by the states and must file
     affidavits with the states advising of the placement(s), collect and pay
     surplus line taxes to the states and pay filing fees (known as “stamping
     fees”) to the state or Surplus Line Association.
•    Surplus Line Brokers are also required to file monthly, quarterly, semi
     annual and/or annual surplus line tax reports with the states, in addition to
     the affidavit filings.
•    “Independently Procured Insurance” - There is an exception to the surplus
     line broker license rule: many (as usual, not all) states allow direct
     procurement of non admitted insurance by insureds. The insured is
     responsible for the filing and payment of the premium tax for the
     “independently procured” insurance premium in these instances.
•    Insureds that directly procure coverage from non-admitted carriers are often
     (not always) exempt from the regulatory requirements surplus line brokers
     must meet.
    Authorized Placement of Surplus Lines Insurance

•    States vary on their definition of “independently procured”.
•    Some states consider a non-admitted placement to be independently
     procured if all of the insurance transaction occurred outside of the state;
     even if a surplus lines licensee in another state made the placement.
•    Other states consider a placement to be independently procured only if no
     broker/producer of any type was involved with the placement – the insured
     must go directly to the non-admitted insurer without any producer
•    Insureds directly procure non-admitted coverage for various reasons such
     as: needing more capacity than the admitted and eligible surplus lines
     market can provide, lower premiums, absence of diligent search
     requirements (with an exception or two), reduced tax liability in some
     instances and unique coverage needs that otherwise cannot be met through
     conventional means.
•    This subject is highly controversial regarding the filing and payment of
     independently procured taxes and great care should be taken with insureds
     when discussing this subject. Insureds should be referred to their own
     attorneys and tax advisors and they alone should make the final decision
     regarding tax filings and payments. (Todd Shipyards & Dow Chemical)
     SL Policy Advisories/Warnings & Stamps
• States require specific notices to insureds be
  affixed to or stamped upon surplus line policies
  advising them the surplus line carrier isn’t
  subject to state regulatory authority and
  guaranty fund protection does not apply (except
• This is a crucial regulatory requirement that must
  be met to avoid errors and omission issues for
  the producer in the event of a surplus line carrier
• Each state has unique advisory language and
  care must be taken to use the exact statement,
  font size, color and placement as required for
  multi state placements.
 A Word About State Insurance Guaranty Funds
• Except for New Jersey, state insurance guaranty
  funds do not apply to surplus line insurers that
  become insolvent.
• As a practical matter, many state insurance
  guaranty funds are not available to all insureds
  (there are exceptions of course). Additionally,
  funds are generally limited in the amount of
  coverage available.
• You can find more information at the National
  Conference of Insurance Guaranty Funds @
• Many states prohibit using the availability of
  guaranty funds to influence an insured’s
  insurance purchases.
                    The Language (definitions)
•   Knowing the terms and players in surplus lines placements is critical to
•   Transact: generally defined as the solicitation, negotiation or selling of
    insurance. A transaction can occur by mail, telephone, email, fax or any
    electronic means in addition to live transactions with an individual.
•   Exposure: refers to the insurance risk in a state or states and is not used
    interchangeably with “transact”. There can be “exposure” in a state without
    a “transaction” occurring there.
•   Admitted: the class of insurers that are licensed in a state (or states).
    Admitted insurers are required to file the forms and rates they will use for
    their placements and are restricted to the use of the form and rates they file.
    There are some exceptions to this rule now. Some states allow admitted
    insurers to go outside of their filed forms and rates under very specific
    circumstances for large “industrial insured’” or commercial policyholders”.
•   Non-admitted: refers to unlicensed insurance companies. Some use this
    term interchangeably with “surplus lines” however there is a distinction
    between the two terms. Non-admitted refers to an unlicensed insurer that
    cannot transact business in a state, or states. “Surplus Lines” is generally
    used as an indicator the insurer is an eligible or authorized surplus line
    insurer that may be used by surplus line licensees for insurance placements
    in a state, or states.
                              Definitions (cont.)
•   Surplus Lines Broker: this is an individual that holds a Surplus Lines license in one or
    more states. The Surplus Lines Broker can go direct to a surplus lines insurer but
    may have to access the market through a “Wholesaler”. See the definition for
    “Wholesaler” below. A Surplus Lines Broker must be licensed as a Property/Casualty
    Producer prior to obtaining a Surplus Lines License. Some states require a separate
    exam for this license while others view the license as an additional “Line of Authority”
    or allow the issuance of the license based upon an application and payment of fee.
•   Retail Broker: this is a Property/Casualty licensed Producer and may be licensed in
    one or more states. The Retail Broker represents the insured and must go through a
    licensed Surplus Lines Broker to access the surplus lines market. To complicate this
    issue a bit, many Retail Brokers are licensed as Surplus Line Brokers so they can go
    directly to surplus line insurers for their placements.
•   Wholesaler: a surplus lines licensee that represents the surplus lines insurer. Retail
    brokers can go to a Wholesaler for surplus lines insurance. A Surplus Lines Broker
    must often go through a Wholesaler because the surplus lines insurer has given
    exclusive rights to the wholesaler for access to their market. This is often referred to
    as “giving the pen” to the Wholesaler to write coverage on behalf of the insurer which
    gives the Wholesaler underwriting and binding authority for them.
                               Definitions (cont.)

•   Diligent Search: Refers to the requirement to approach a minimum number of
    admitted insurers prior to going to the non-admitted market. This is generally the
    Retail Broker’s responsibility. They are usually required to provide the Surplus Lines
    Broker or Wholesaler with the Diligent Search results and information. The SL broker
    in turn completes the required surplus line filing(s). While several states provide
    exemptions from diligent search requirements, an insured’s direction to omit the
    diligent search usually does not relieve the SL Broker from the requirement. This can
    be a source of friction between a broker and their insured. The best resolution is to
    address the need for the diligent search with the client early in the process.
   Export List: Many states publish a list of coverages that are exempt from Diligent
    Search requirements. These lists are generically referred to as “Export Lists” but the
    term may vary in your particular state. For example, the list is referred to as a
    “Placement List” in Alaska. If the coverage is on an export list, then the Surplus Line
    Broker can go directly to the surplus line market without conducting any type of
    Diligent Search. A complicating factor for multi-state exposures is that not all states
    have an Export List or other exemption for diligent search requirements. Given this, a
    Diligent Search may need to be completed even if your (or your client’s) resident
    state does not require it.
   White List: many states publish a list of eligible or authorized (do not use admitted or
    licensed when referring to surplus line insurers) non-admitted insurers. Surplus Line
    Brokers are restricted to the use of those eligible or authorized non-admitted insurers
    for exposures in those states.
                           Definitions (cont.)
•   Black List: a list of insurers published by some states that may not be used
    under any circumstances by Surplus Line Brokers.
   Independently Procured Insurance – also known as Self Procured or
    Directly Procured. This refers to insurance that insureds obtain directly from
    a non-admitted insurer without the use of a Surplus Line Broker (or any
    broker). Because insureds are not regulated by the insurance departments,
    they usually can go to the non-admitted market without completing a diligent
    search of the admitted market and are not restricted to the use of eligible or
    authorized surplus line insurers. There are exceptions to the diligent search
    requirements and use of authorized surplus line insurers so the non-
    admitted insurer underwriter needs to make certain those requirements are
    met prior to transacting directly with an insured. Additionally, many states
    impose a tax on the premium for such placements that the insured must file
    and pay. A broker should not offer advice to their insured regarding the
    payment of a direct procurement tax beyond assisting them with completion
    of forms. The insured should consult their own tax advisors, or attorney,
    regarding this item. The rules for this type of placement are not universal
    therefore caution is required for direct procurement of non-admitted
    insurance. *All states do not allow independent procurement of non-
    admitted insurance and require the use of a licensed surplus line broker
    when non-admitted insurance is purchased. (for example WA, WY, MT &
                       Definitions (cont.)
 Exempted Coverages: many states (but not all) exempt certain
  coverages from the reporting and payment of surplus line taxes and
  fees. The exemptions must be carefully reviewed and understood
  and applicable licensing requirements followed. The application of
  the “Exempted Coverage” may be limited to certain types of
  insureds, such as “Industrial Insureds” or “Commercial
  Policyholders” in some states. Again, careful review of the
  applicable insurance code(s) is essential. As in all cases involving
  Surplus Lines, an exemption in one state does not apply to
  exposures in other states without the exemption.
 Commercial Insured, Commercial Policyholder, Industrial Insured”:
  these are interchangeable terms describing a class of insured. The
  exact definitions vary by state as does the benefit of being in these
  categories of insured. The terms generally apply to insureds that
  have large, unique or difficult to place risks and spend above a given
  threshold for their insurance premiums and have a full time
  insurance buyer.
                   Definitions (cont.)
• Surplus Lines Affidavit: the generic term for state
  required surplus line filings made by a surplus line broker
  after a surplus line placement is completed. These filings
  may be made through a Surplus Line Association or
  directly with the state Department of Insurance,
  depending on the requirements of the states involved.
 Surplus Lines Tax Report: A separate state required tax
  filing to report surplus line premium and make surplus
  line payments to the state. These tax reports are due on
  different schedules; monthly, quarterly, semi annual and
  annual. Some states require the reports even if no
  surplus line premium was generated in their state (a/k/a
  “zero reports”).
• Domestic Insurer: An insurer that is domiciled in the
  regulating state. For example; if the insurer is domiciled
  in New York, the insurer is considered a “domestic
  insurer” by New York regulators.
                    Definitions (cont.)
• Foreign Insurers: an insurer that is domiciled in a state
  other than the broker’s or insured’s state.
 Alien Insurers: an insurer that is domiciled outside of the
• Courtesy/Accommodation Filing: are surplus line filings
  made by a surplus lines licensee that had no
  involvement with the placement for another broker that
  does not have the required surplus lines license for their
  placement. Most states no longer allow this type of filing
  and require a properly licensed surplus line broker to
  actually be involved in a placement to be in compliance
  with state regulations. Keep in mind if a courtesy filing is
  submitted in a state that still allows the practice, the
  submitting surplus line broker will assume responsibility
  for meeting state compliance as though they actually
  placed the business.
                     Definitions (cont.)
• Surplus Line Association (AKA: “Stamping Offices &
  Service Offices”) – there are 16 states with surplus line
  broker supported Surplus Line Associations. Except for
  Colorado, Surplus Line Brokers file their affidavits for
  surplus line placements with the Surplus Line
  Associations. In addition to providing training to Surplus
  Line Brokers, the Associations also act as an
  intermediary between the Surplus Line Broker and state
  Department of Insurance. The Associations are
  supported by collection of a “stamping” or filing fee from
  the broker based on a percentage of the premium filed or
  a flat fee for each policy filed. A side note; the term
  “stamping fee” comes from the action only a few Surplus
  Lines Associations still perform; stamping of the actual
  policy verifying it was filed. Fortunately, most states
  currently do not require the policy be stamped, greatly
  reducing the paper flow.
                            US IRS Excise Tax
   US IRS Excise Tax - Another tax that may be applicable when using non-
    admitted insurers is the US IRS Excise Tax. The tax is 4% of the premium
    (1% for reinsurance, life, annuity contracts and sickness & accident policies)
    and is filed quarterly using IRS multi-purpose Form 720. The tax may apply
    to premiums paid to Alien (IRS uses the term “foreign”) insurers for US
    risks. The alien insurer premium may be exempt from the IRS excise tax if
    they have a “closing agreement” with the IRS or pay US tax through a US
    subsidiary or parent company. Alien insurer premium may also be exempt if
    they are domiciled in a country that has a treaty with the IRS exempting
    them from the tax. Unfortunately the IRS does not publish a list of alien
    insurers that are exempt from the excise tax (although many are). If in doubt
    ask the alien insurer to provide a copy of the closing agreement with the
    IRS or prove domicile in a country with a qualified, or unqualified, treaty that
    exempts the premium from the excise tax. This issue is much too
    complicated to go onto detail here; basic information can be found at the US
    IRS website at:,,id=186963,00.html or consult
    your internal tax department. While the IRS looks to “the last entity to touch
    the premium in the US” to file and pay the excise tax, they will pursue
    payment with any of the parties in the transaction, including any US broker
    involved with the placement.
         Canada, Puerto Rico & Virgin Islands
• Canada, Puerto Rico and Virgin Island surplus line placements.
  Canadian provinces do issue non-resident licenses but may be
  restricted to US border state producers. Additionally, not all
  Canadian provinces issue a “special broker” license (for surplus line
  placements) to non-residents. Failure to use a properly licensed
  resident or non-resident broker for Canadian placements can result
  in provinces applying monetary penalties up to 60% of the Canadian
  premium depending on the location of the risk. If in doubt about the
  licensing status of a US broker (or brokers) when making a
  placement with Canadian exposure, a properly licensed resident
  Canadian broker must be involved PRIOR to binding.
• Puerto Rico and the Virgin Islands do license non-residents as
  surplus line brokers however, a corporate entity license must be
  obtained first. If the placing US broker is not properly licensed in
  Puerto Rico or the Virgin Islands, a resident broker must be used for
  the placement PRIOR to binding. Resident brokers in Canada,
  Puerto Rico and the Virgin Islands cannot assist after binding has
  occurred to bring the placement into compliance.
                     “Commercial Deregulation”
•   The following information is not related to surplus line insurance but pertains solely to
    ADMITTED (licensed) insurance placements (no surplus line license is required).
•   Many states have implemented insurance regulations that allow admitted insurers to
    quote or place business using forms, or rates, which are not subject to prior filing and
    approval with the department of insurance. This is generically referred to as
    “commercial deregulation” but terminology varies among the states (see reference
    to “NY Free Trade Zone” below).
•   This allows an admitted carrier underwriter to compete more effectively with non-
    admitted insurers that do not have to file the rates and forms they use.
•   This type of insurance placement is typically reserved for large commercial insureds
    and do have their own set of criteria that must be met by both the policyholder and
    the carrier. As always, the criteria varies by state and must be reviewed individually to
    confirm the placement is in compliance with state regulations.
•   New York is an example of one state that provides for this type of exception to the
    use of filed rates and forms and is referred to as the “New York Free Trade Zone”.
    Specific information can be found at the NY Department of Insurance website under
    Information for Agents & Brokers, “Frequently Asked Questions, Industry”, then look
    under Free Trade Zone. The NY insurance law can be reviewed by seeing Article 63
    of the Insurance Law and Insurance Department Regulation No. 86 (11 NYCRR 16).
•   As this type of placement is not a “surplus lines” placement, there is no surplus line
    tax to file and pay. The admitted carrier is responsible for payment of applicable
    admitted taxes to the state(s) with exposure.
        Payment of Surplus Line Taxes and Fees
•   Surplus line brokers are generally responsible for payment of surplus line
    taxes and fees to the state(s) and Surplus Lines Association(s) with
    exposure for their placements.
•   Who pays if more than one surplus lines licensee is involved with a
•   It is generally considered the responsibility of the surplus lines licensee
    closest to the surplus lines insurer to file and pay SL taxes and fees. As a
    practical matter, the states are most concerned with the receipt of surplus
    line taxes than who filed them.
•   For example; PA insurance law requires the broker closest to the insured to
    file and pay the surplus line tax (PA statute 1617).However PA generally
    does not make an issue of whether or not the insured’s broker files or the
    wholesaler files; just as long as the taxes are filed and paid.
•   Currently, many retail brokers file and pay the SL taxes even though it may
    technically be the wholesalers responsibility to do so.
•   These are generally business decisions made by the retail broker and not
    necessarily based on state insurance regulations.
•   A complex placement may have multiple wholesalers/surplus lines
    licensees with some agreeing to file while others don’t; therefore it is less
    complicated for the retail broker to make all the filings and remit the taxes.
Insured Reimbursement of SL Taxes to the Broker.
•   Insured reimbursement of surplus line taxes to the broker:
•   Be aware that while many states are not concerned that a surplus line broker collect
    the taxes and fees from the insured (they just want them paid), several states require
    the taxes and fees to be collected from the insured.
•   Failing to collect the taxes and fees from an insured is viewed as rebating by the
    states that require the insured to reimburse the broker for the taxes. Rebating is
    prohibited in all states, except California. Florida does allow rebating but only under
    very specific circumstances – a broker can offer rebates but only if they do it for ALL
    of their insureds (not a likely scenario).
•   Using the two states mentioned as examples of the differing requirements:
•   California requires the surplus line broker to file and pay the surplus line tax
    regardless if it is collected from the insured or not.
•   Florida requires the surplus line broker to collect the surplus line tax from the insured
    and is prohibited from remitting the tax without doing so. Florida considers the
    payment of the tax by the broker to be rebating if they do not collect the tax from the
    insured (FL Statute 626.932).
•   The many states (CA for example) that do not codify a requirement to collect surplus
    line taxes and fees from an insured are generally silent on this subject. In these
    instances, brokers collect the taxes and fees from their insureds by contract or
    custom and practice. Keep in mind; states ultimately will hold the surplus line broker
    responsible for the surplus line taxes whether collected from the insured or not.
      Insured Exemption(s) From Payment of Surplus Line Taxes

• Some insureds are exempt from the payment of the surplus line tax
  under very specific circumstances which may leave the broker
  without recourse for the collection of the tax from the insured. The
  surplus line broker cannot avoid payment of the surplus line tax by
  claiming their insured’s exemption. While this situation does not
  occur often it can obviously impose a severe financial burden upon
  the surplus line broker when it does. Additionally, conflicts arise
  when a state requires the insured to remit the tax to the broker and
  these situations need to be resolved PRIOR to binding.
• Examples of exempt insureds can be; Indian Reservations, public
  works projects such as former military post conversions to public
  use and military installations. Again, the exemptions are not
  applicable in all states and careful review is required to determine
  the applicability of the insured’s tax exemptions (or not) for surplus
  line taxes.
• The irony of these insured exemptions from the payment of surplus
  line taxes is they do pay admitted premium tax as it is included in
  the premium. Given that it is a seamless transaction, the payment
  goes unnoticed.
                           The Insurance Cycle
•   The insurance business is cyclical as business is in general.
•   Insurance premiums, insurer profits & coverage availability rise and fall during the
•   We see insurers tighten underwriting standards during a “hard market” resulting in
    higher premiums for their product.
•   A “soft market” results in relaxed underwriting standards and lower premiums.
•   The use of surplus line insurers generally rises in a hard market as admitted insurers
    decline more of the business submitted to them.
•   As the market “softens”, the non-admitted market declines and the admitted market
    rises based on increased availability of admitted products as underwriting standards
•   A reminder; the cyclical nature of the insurance business is somewhat softened for
    surplus line insurers based on the types of coverage’s they write and the classes of
    business they insure.
•   E&O (errors & omissions), environmental impairment/remediation liability, K&R
    (kidnap & ransom), excess liability, quake & flood, DIC (differences in condition),
    automobile racing and event cancellation are examples of coverages the surplus lines
    market is willing to write.
•   Airports, railroad operations, harbor facilities, tattoo parlors, security services
    (especially armed services) and medical/drug/alcohol treatment centers are examples
    of the type of businesses that surplus line insurers are more willing to write than
    admitted insurers.
•   Coverage in the non-admitted market is generally obtained through the use of a
    surplus lines broker or, if permissible, direct procurement by insureds as previously
   Surplus Line Associations & Stamping Offices
• The two terms are often used interchangeably, but can (or not) refer
  to the same thing;
• “Stamping Offices” are generally considered the source for
  submitting surplus line affidavits, and in some instances copies of
  the policy, for recording and “stamping” of the policy.
• Stamping offices are supported and paid for by a fee for the service
  the surplus lines broker pays.
• “Surplus Lines Associations” are usually informational associations
  formed by surplus line brokers. Surplus line filings are not filed with
  this type of organization but they can provide direction for proper
  surplus line compliance.
• There is overlap for the use of the two terms: Many stamping/filing
  offices are identified as “Surplus Lines Association” such as “The
  Surplus Lines Association of California”, “Excess Lines Association
  of New York” and the “Pennsylvania Surplus Lines Association” and
• There are currently 14 “stamping offices” in the US. They are in: AZ,
  CA, FL, ID, IL, MN, MS, NV, NY, OR, PA, TX, UT and WA.
• Surplus line affidavits (if required) are submitted directly to the state
  Department of Insurance in the remaining states.
           The Surplus Line Filing Process

• Affidavits and filing deadlines vary but there are
  requirements and information generally needed
  for all surplus line filings:
• A coverage document be it a binder, covernote
  or dec page, a copy is generally required with
  the submission of an affidavit .
• Policy number and the premium being filed.
• Surplus lines licensee and license number.
• Diligent search information (unless exempted).
• Type of coverage.
• Location of risk.
                   Surplus Line Filing Process
•    Filing deadlines range from 30 days from the policy effective date to a year
    – some states no longer require a submission at all.
•   Complete the affidavit/diligent search report completely and accurately. Use
    the correct and proper names of insurers, especially when completing the
    diligent search report. For example; using “Lex” or “AIG” is not permissible
    as “Lex” is not the full and correct name for Lexington Insurance Company.
    “AIG” isn’t even the name of an insurance company but refers to the parent
    company of a group of insurers. Also, ensure you are not given a non-
    admitted insurer name (such as Lexington) to use for a diligent search
    report as this should reference only admitted insurers.
•   Obtain the proper signatures for the filing forms.
•   After the complete filing package is complete and submitted you may
    receive a “tag” in response to your filing.
•   Tags are notices advising you of a deficiency in the submitted filing and
    usually a correction is required. Tags occur because of incorrect, or
    insufficient, information, late filings, unsigned forms, lack of a proper
    coverage document etc.
•   Tags must be responded to within the time requested (unless advisory
    only). A report may be sent to the appropriate department of insurance if the
    surplus line broker fails to respond.
            Surplus Line Filing Process
• Endorsements evidencing additional or return
• Endorsements must be filed in order to remit
  additional surplus lines tax or receive a refund of
• State requirements vary: some are as simple as
  submitting a copy of the endorsement reflecting
  the AP or RP and the appropriate additional or
  return tax.
• A few states do have filing forms for
  endorsements but are not as complex as the
  original filings may have been.
           Surplus Line Filing Process
• Stamping Fees: Stamping offices (and some
  states) charge a fee for processing and
  recording submitted surplus line affidavits.
• A stamping fee invoice is sent to the surplus
  lines broker based on the volume of premium
  filed and are due upon receipt of the invoice.
• Surplus Line Taxes are usually paid as a
  separate transaction by submitting tax reports as
  required. This will be covered in more detail in
  the Taxation & Reporting section of the

To top