Surplus Lines Insurers
- Various lists are available for download, including Surplus Lines, Purchasing Groups, Accredited and Trusteed Reinsurers, Risk Retention Groups, and Life Settlements ( Surplus Lines and Syndicates Disclaimer: TDI does not license the insurers on this list, nor does the department have the duty to monitor their financial condition. Further, these insurers are not members of the Property and Casualty Insurance Guaranty Association created under Chapter 462 of the Texas Insurance Code.)
- Other filing requirements are located in Filing Smart
- The NAIC's Consumer Information Source (CIS) provides information about insurance companies. Access key information about insurance companies, including closed insurance complaints, licensing information and key financial data.
The Company Licensing and Registration Office is responsible for registering surplus lines insurers. By definition, surplus lines companies are not licensed to sell insurance in Texas. To be eligible, however, they must be licensed in their home country or home state to sell the kind of insurance they sell in Texas. Surplus lines insurers are registered under the Texas Insurance Code, Chapter 981 and regulations are found in Texas Administrative Code, Chapter 15.
Most of the insurance written in Texas is underwritten by insurance companies licensed by the Texas Department of Insurance, referred to as the authorized/admitted market. These insurers are subject to regulation, including some rate and form filing requirements and participation in the Texas Property & Casualty Guaranty Association (which pays claims in the event the insurer becomes insolvent). In the event an insured cannot obtain coverage from the licensed insurers, the surplus lines market is available.
Only licensed surplus lines agents can place coverage with surplus lines companies. An agent must pass a special examination to qualify for a surplus lines agent´s license as well as have a General Lines Property & Casualty license or Managing General Agent License, except as permitted for certain non-resident agents which are exempted from holding an underlying license as described under TIC 981.203.
By law, an agent can place a risk with a surplus lines company only after making a "diligent effort" to find an admitted carrier to issue the policy, in accordance with TIC 981.004. The only exception to having to perform the diligent effort is for those who qualify as an Exempt Commercial Purchaser as described under TIC 981.0031.
The commissioner of insurance may deem a foreign or alien insurer to be eligible if they meet the requirements established under the Texas Insurance Code.
- Original Application for Eligibility - Foreign Insurers
- Original Application for Eligibility - Alien Insurers
- Annual and Quarterly Filing Requirements for Surplus Lines Insurers (Foreign and Alien)
- What is an unauthorized insurer?
- What kinds of insurance are written in the surplus lines market?
- What kinds of insurance can´t be written by surplus lines carriers?
- What is the Surplus Lines Stamping Office of Texas?
- How is Surplus Lines insurance regulated?
- Who is responsible for determining that a surplus lines insurer is financially sound?
- What are the minimum financial requirements for surplus lines insurers?
- Is there a tax on surplus lines premiums?
- TDI Form FIN422, Foreign Insurers Filing Requirements Checklist (foreign meaning U.S. domiciled)
- TDI Form FIN423, Alien Insurers Filing Requirements Checklist (alien meaning entities not domiciled in the U.S. and non-IID listed
Foreign surplus lines insurers are required to file financial statements with the National Association of Insurance Commissioners (NAIC) on an annual and quarterly basis, including CPA reports, Actuarial Opinions and Management Discussion and Analysis information by the due dates prescribed by the NAIC. To remain eligible, foreign surplus lines insurers must maintain the minimum level of capitalization as required by TIC 981.057. Financial documents filed with the NAIC are not required to be filed directly with this department if they are timely filed with the NAIC. The insurer should notify the department within 30 days of any changes to its status, name, or address and provide evidence of the change such as the Certificate of Authority.
Alien Surplus Lines Insurers are required to file annual financial statements with the NAIC International Insurance Department (IID) and do not file anything directly with this department.
Grandfathered Non-IID alien insurers are required to file in accordance with TIC 981.058 as it existed prior to the enactment of Senate Bill 951. See TDI Form FIN 423, Alien Insurers Filing Requirements Checklist.
It is an illegal insurance operation. Specifically, it is a company, agent or other business that sells or attempts to sell insurance in Texas when it is not licensed, eligible or registered to do so. These fraudulent operations, often claiming to be licensed in another country, sometimes deceive customers by claiming to be eligible surplus lines carriers. Unlike legitimate surplus lines companies, they have not established eligibility by demonstrating financial soundness and meeting other consumer protection requirements.
Surplus lines business consists primarily of property and casualty coverages. These include commercial general liability insurance, fire insurance, mobile home policies, insurance for special events, property and liability for oil and gas refineries and hazardous material transportation.
Most surplus lines policies are sold to businesses. A small percentage of the surplus lines market consists of individual consumers who can't find residential property or automobile physical damage coverage from the admitted market.
By law, a workers' compensation insurance policy must be written by an admitted carrier. Automobile liability policies required by Texas law must be placed through the Texas Automobile Insurance Plan Association if insurers won´t accept an applicant.
The Surplus Lines Stamping Office of Texas (SLSOT) is a non-profit association that that receives funding for their operations from a surplus lines stamping fee. The stamping fee is charged on each Texas surplus lines insurance policy and collected by the surplus lines agents.
The stamping office is responsible for receiving, recording and reviewing surplus lines policies. The surplus lines agents must file all new and renewal policies within 60 days of the effective date or issue date of the policies, whichever is later, in accordance with TIC 981.105. The stamping office reviews the policies for required information and disclosures. The policies are recorded and activity reports are submitted to the Texas Department of Insurance for review. In addition, the stamping office provides reports to the department for both surplus lines agents and surplus lines insurer identifying kind and class of coverage and premiums written in Texas. The stamping office assists the department with the review of surplus lines insurers and makes recommendations for eligibility to the commissioner.
The Texas Department of Insurance by law does not regulate surplus lines insurers as they do the authorized insurers. The rates and policy forms are not subject to TDI review or to most Texas insurance laws. This gives surplus lines insurers maximum flexibility to provide a market for unusual, large or hard-to-place risks.
TDI exercises oversight of the surplus lines market by:
- Licensing and regulating surplus lines agents, who may place business only with eligible surplus lines carriers.
- Determining whether non-admitted companies are legally eligible to operate in Texas.
- Maintaining a list of eligible surplus lines companies.
- Reviewing surplus lines insurer and surplus lines agent activity reports provided by the SLSOT to ensure compliance with all surplus lines laws and regulations.
- Reviewing financial statements of all eligible surplus lines insurers for compliance with Texas financial requirements.
- Overseeing the SLSOT and appointing the stamping office board of directors.
- Participating in educational seminars with the SLSOT and Comptroller of Public Accounts to provide information regarding insurance regulation, tax regulation and filing information to all surplus lines agents and insurers.
- Coordinating surplus lines regulatory issues and tax issues with the Comptroller of Public Accounts.
- Providing surplus lines agent information to the Comptroller of Public Accounts to establish a taxpayer identification account for collection of surplus lines taxes.
- Participating in all SLSOT board meetings through appointed TDI liaison.
- Participating in Texas Surplus Lines Association Regulatory Liaison Committee through official TDI liaison along with the Comptroller of Public Accounts to share concerns and issues with the industry.
- Participating in National Association of Insurance Commissioners (NAIC) task forces affecting the surplus lines industry to stay abreast of the industry trends.
- Providing support to other state agencies by providing financial information to ensure compliance with other state regulatory requirements.
- Promoting and encouraging compliance with Texas laws.
To a great extent, Texas law requires a surplus lines agent to make a "reasonable effort" to ascertain a surplus lines insurer's financial condition before placing coverage. TDI produces a List of Eligible Surplus Lines Insurers that is available to the surplus lines agents and the general public. This list can be accessed on the Data Look Up Main Page and includes surplus lines insurers and Lloyds syndicates. Monthly updates to reflect additions and deletions of insurers are also published on the SLSOT website at www.slsot.org . Most U.S. companies on TDI's eligible list have financial strength letter grades from A.M. Best and other rating services. Financial information on all eligible surplus lines insurers is available from TDI and the SLSOT also has some financial information available on their website.
Surplus lines insurers must have at least $15 million in combined capital and surplus, or meet the minimum in their domiciliary jurisdiction, whichever is higher, to conduct business in Texas.
In addition, an alien insurer, one based in a foreign country, must have a trust fund of at least $5.4 million in a Federal Reserve member bank to protect its U.S. policyholders. Surplus lines insurers must submit annual financial statements to the NAIC. The department and SLSOT analyze the financials for signs of trouble. A company can lose its eligibility if it falls below minimum standards.
Yes. The surplus lines tax is 4.85 percent of the gross premium, in accordance with TIC 225.004. The surplus lines agent is responsible for collection of the tax and filing an annual tax report and payment to the Comptroller of Public Accounts. The surplus lines tax must be shown on the policy's "declarations page" along with the premium, fees, and the surplus lines stamping fee.
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Last updated: 01/14/2015