What are the Compliance Guidelines?
What are the Surplus Lines Rules/Regulations?
Please click on the following link to access the rules & regulations as provided by the Surplus Lines Stamping Office of Texas:
What is surplus lines insurance?
Surplus lines insurance is a specialized coverage available from certain insurers not licensed in Texas but eligible as a surplus lines carrier. These companies may be licensed in another state, but just not in Texas. The risk typically must be rejected by admitted carriers pursuant to Article 981.001 of the Texas Insurance Code. Most risks written in the surplus lines market are distressed, complex, unique, or high-capacity commercial coverages. Because they are not licensed in Texas these carriers are not subject to regulation of rate or form, giving them the ability to fit unique situations. These carriers do not participate in the Texas Guaranty Fund against their insolvency, but may be some of the largest insurers in the world.
How is surplus lines insurance sold?
Surplus lines insurance can only be procured by specially licensed Texas surplus lines agents and only from eligible surplus lines insurance companies, approved by the TDI.
How do I find a market for coverage?
If you are the insured, you need to find an agent that will help you access TSLA member markets. We suggest you check the Independent Insurance Agents of Texas website at www.iiat.org. On the right side, "Find an Agent." Work with your agent to summarize your request for consideration by TSLA member firms. Sometimes, this takes time, so planning well ahead of your need is a very wise idea.
If you are the agent, use this site, in the "Markets" tab, to locate a TSLA member firm you are currently doing business with that will write the coverage you need or contact a new wholesaler that is listed for consideration of your risk submission. Usually a complete submission is required.
How do I make filings with the Stamping Office?
A TSLA member that procured a surplus lines policy would make the required filing to the Stamping Office. Most policies are now reported electronically. Look under the "Electronic Filing - EFS" tab on the Stamping Office website www.sltx.org for instructions. Information on filing paper copies of policies can be found on their website under "Agent Information." A TSLA member cannot perform a "courtesy filing" if the member did not actually procure the coverage. Courtesy filings are not legal in Texas.
What is an "eligible" surplus lines insurer?
An eligible surplus lines insurer is an unlicensed insurer in Texas that has met the eligibility requirements established by Chapter 981, Subchapter B, Texas Insurance Code. The Texas Department of Insurance maintains the list and it can be viewed on the Stamping Office website, www.sltx.org. The insurer must show that it meets numerous requirements regarding capitalization, other financial standards, and operating history, to be listed.
Are surplus lines companies as financially stable as admitted companies?
Like admitted carriers, non-admitted carriers must meet regulator financial scrutiny. In fact, surplus lines companies must have $15 million in capital and surplus (Section 981.057) to be an eligible surplus lines company in Texas as opposed to $2 million for admitted insurers (Article 2.02.4). According to AM Best, there have been no surplus line company impairments (court order into conservation, rehabilitation or liquidation) since 2004, while the P&C industry has averaged 17 impairments per year in the same period. And going back to 1977, surplus lines companies have an average annual financial impairment frequency of 0.73, compared to 0.85 in the admitted market (calculated using the number of financial impairments in a given year divided by number of companies operating in the market).
How can an unlicensed insurer become eligible in Texas?
An insurer must file a variety of documents with both the Texas Department of Insurance and the Surplus Lines Stamping Office. U.S. insurers must file by March 31st and non-U.S. insurers by June 1 each year. Required information includes financial statements, an examination report, a copy of the license or certificate of authority, a business plan, an actuarial opinion, and biographical affidavits, along with any other evidence which will allow for a complete evaluation. See the Stamping Office website, https://www.sltx.org/insurers/insurer-filing/how-to-become-eligible/, for more information.
What is the premium tax rate on surplus lines insurance?
The rate is 4.85% of gross premiums, effective since 7/1/89. All policy fees are subject to the tax.
When and to whom are surplus lines taxes paid?
Surplus lines premium taxes are due by March 1st, for the previous year, and are paid to the Texas Comptroller of Public Accounts. However, a tax prepayment is required when accrued taxes due equal or exceed $70,000. This prepayment is due on the 15th day of the month following the month in which accrued taxes total $70,000. For more information see the Comptroller site at: https://comptroller.texas.gov/taxes/insurance/surplus-lines.php
What is the stamping fee?
New Stamping Fee: 0.075% effective 1/1/2021
The new stamping fee rate will apply to each new or renewal surplus lines policy with an effective date on or after January 1, 2021. The new rate will also apply to policy date extensions if effective on or after this date. Policies effective on or before December 31, 2020, will run to expiration, cancellation, or next annual anniversary date (for multi-year policies) at the old rate of .15%. This includes any subsequent endorsements, audits, cancellations, reinstatements, installments, and monthly or quarterly reports.
Filings of Premium Taxes and Policies
The Texas Insurance Code stipulates that surplus lines insurance must be placed through a licensed Texas surplus lines agent, denoting that this agent must actively procure the coverage (Section 981.004). The surplus lines agent who is closest to the company writing the business is responsible for the collection and payment of the surplus lines taxes to the Texas Comptroller of Public Accounts Office and the filing of the policy with the Surplus Lines Stamping Office of Texas.
If you held a surplus lines license at any time during a year and wrote no business for that year, do you still have to file a tax report with the Comptroller?
As long as you held a license for one day during the year, and even if you wrote no business, you are required to file a surplus lines tax return. Please call the Comptroller's office at (512)463-4276 if you have additional questions, or email them at firstname.lastname@example.org.
Does Texas publish an "export list?"
No, Texas does not publish an export list. An export list is a compilation of coverages or risks that can be exported directly to the surplus lines market, because regulators have established through hearings that the state's admitted insurers will not write these coverages.
How do you become a surplus lines agent?
The requirements for becoming a surplus lines agent are defined in Section 981, Subchapter E of the Texas Insurance Code. The application is provided by the TDI. Click here to get more information.
What if I am a non-resident of the state of Texas?
If you are a non-resident agent and need to become licensed to write business in the state of Texas or have general questions about filing policies or paying taxes, here are some helpful websites and phone numbers:
How do I file?
Surplus lines brokers must file with SLTX a copy of each surplus lines insurance contract, as set forth in Section 981.213 of the Texas Insurance Code. Brokers may file either by mail or electronically through the SLTX website. All mailed policies will be audited for compliance upon receipt. For more information, click here: https://www.sltx.org/brokers/broker-filings/how-to-file/.
What are the Compliance Guidelines?
For more information, click here: https://www.sltx.org/compliance/compliance-guidelines/.