As a surplus lines professional, I'm sure you know that each state has its own process for accepting surplus lines filings and that some states are more challenging than others. Our Filing Services team files hundreds of thousands of policies each year on behalf of agencies across the country. We've identified the "Top 5 Most Challenging States" and compiled tips on what to watch out for in each of these states. Please note we've listed the states in alphabetical order and not necessarily in order of complexity.
California:
Lloyds of London policies are comprised of certain Syndicates that underwrite the coverage, and California requires that all syndicates are reported in the filing.
The Syndicate List (usually one of the endorsements included in the Forms and Endorsements section of the policy) is a required document when submitting the policy. "Only those Lloyd's of London syndicates which appear on the most recent NAIC Quarterly Listing Alien Insurers (maintained by the International Insurers Department of the National Association of Insurance Commissioners) are eligible to transact surplus line insurance in California." (citation: https://www.slacal.com/resources/frequently-asked-questions/insurers)
Consortiums are not allowed to be reported as the consortium numbers are not recognized syndicate numbers. Consortiums are groups of specific syndicates, so you will need to provide the specific breakdown of syndicates included in your consortium.
Stamping fee payments and Surplus Lines Tax payments are calculated based on varying criteria for due dates. Stamping Fees are due based on the month the policy was filed with the Surplus Lines Association. If you have more than $20,000 in taxes the prior year, you must make monthly payments on future taxes due. This is based on the invoice date for the policy. It is possible to have taxes owed on a policy that hasn't been submitted to the SLA yet. (Citation: https://www.slacal.com/resources/broker-taxes-fees)
Kentucky:
Many municipalities in Kentucky charge a Municipal Tax on top of the state taxes and fees. Filing requirements vary by municipality. The state releases a new Municipal Tax chart every year, so you will want to review this regularly to ensure that your KY filings comply with the Municipal Taxes required. (citation: https://insurance.ky.gov/ppc/Documents/LGPT%20Bulletin%202021-2022.pdf)
Louisville is a unique Municipality. Once you file a premium bearing policy in Louisville, you are required to report zero premiums from that point on. (citation: https://insurance.ky.gov/ppc/documents/2021-2022_TaxCodeDescriptions.pdf)
New York:
The Part C and NELP forms must be completed by the retail producer holding the correct BR- type license. When this producer is different from the Surplus Lines Broker, the Part C and NELP forms must be submitted to ELANY for review policy documents. (citations: https://elany.org/elany-says.aspx?h=130&t=131 and https://elany.org/f.aspx?f=85)
ELANY does accept binder filings to stop the clock when a filing is considered past due in order to avoid the late filing penalty. However, ELANY does not consider the filing complete until the dec page has been submitted for stamping. Additionally, the policy is not complete until the stamped dec page has been added to the policy and then presented to the insured. (citation: https://www.elany.org/f.aspx?f=1239)
Pennsylvania:
Accurately completing the 1609 form is essential. Make sure to use the specific language provided by the state for the Type of Coverage and the Description of Insured's Operation to ensure the state does not tag the filing for any discrepancies.
The producer and agency license numbers at the bottom of the 1609 must be the PA P&C License numbers, NOT the Surplus Lines License numbers.
The 1609 filing has a due date based on the filing effective date. Be advised the PSLA will automatically assign a late penalty to the stamping fee if not submitted within 45 days of this date.
The 1620 Monthly Report is prepared with filings based on the Revenue Recognition Date (the date you received payment for the policy). The difference in these two due dates makes knowing which month to add your filing to for the 1620 Report a challenge. (Citation: https://pasla.org/Documents/ProcedureManual.pdf)
Texas:
Texas has specific acceptable coverage codes and class code combinations. There are many of these code combinations that are "restricted." To use these restricted codes, you must first provide the policy for review to Texas. If they deem the restricted code appropriate for your filing, they will enable this selection (often on a short-term basis) for filing purposes. (citation: https://www.sltx.org/brokers/broker-filings/class-coverage/)
Pay attention to your filing due dates! Texas assesses late fees automatically. (citation: https://www.sltx.org/compliance/compliance-guidelines/)
With so many nuances to be aware of, keeping track of the varying requirements, taxes, fees, and due dates can be challenging. For more tips on staying compliant, check out our article, Never Miss a Deadline Again! 5 Tips to Help You Stay Organized.
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