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Arkansas Surplus Lines study materials
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Arkansas Surplus Lines practice questions

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Question 1Surplus Lines Broker Licensing and Filing

Which of the following is a required qualification for an individual to obtain a surplus lines broker license in Arkansas?

  1. Be sponsored by an eligible surplus lines insurer
  2. Have at least five years of experience in the insurance industry
  3. Hold a resident property and casualty producer license Correct answer.
  4. Pass a separate surplus lines broker examination

Explanation

Arkansas requires a surplus lines broker to first hold a resident property and casualty producer license. There is no separate surplus lines examination, experience requirement, or insurer sponsorship requirement.

Question 2Surplus Lines Broker Licensing and Filing

An Arkansas surplus lines broker license is issued for a term of how many years?

  1. One year
  2. Four years
  3. Two years Correct answer.
  4. Three years

Explanation

Arkansas surplus lines broker licenses are issued for a two-year term and must be renewed biennially. The renewal is tied to the underlying producer license cycle.

Question 3Surplus Lines Broker Licensing and Filing

Before placing a surplus lines policy, an Arkansas surplus lines broker must make a diligent effort to procure coverage from admitted insurers. What is this requirement commonly called?

  1. Market conduct review
  2. Certificate of authority search
  3. Surplus lines affidavit
  4. Diligent search Correct answer.

Explanation

The diligent search (or diligent effort) requires the broker to attempt to place the risk with authorized insurers before using the surplus lines market. The broker must document at least three declinations from admitted insurers unless the risk is exempt.

Question 4Surplus Lines Broker Licensing and Filing

Unless the risk is exempt, how many declinations from authorized insurers must an Arkansas surplus lines broker generally document to satisfy the diligent search requirement?

  1. Five
  2. Two
  3. Three Correct answer.
  4. One

Explanation

Arkansas requires documentation of at least three declinations from authorized insurers for non-exempt risks. Some risks, such as those on the export list, are exempt from the diligent search requirement.

Question 5Surplus Lines Broker Licensing and Filing

An Arkansas surplus lines broker places a policy with an eligible surplus lines insurer. Within how many days after the effective date of the placement must the broker file the required report with the state?

  1. 30 days Correct answer.
  2. 45 days
  3. 60 days
  4. 10 days

Explanation

Arkansas requires surplus lines brokers to file a report of each placement with the state within 30 days after the effective date. The report includes details of the insured, insurer, and premium.

Question 6Surplus Lines Broker Licensing and Filing

Which of the following risks is exempt from the diligent search requirement when placed with a surplus lines insurer in Arkansas?

  1. A standard commercial property risk
  2. A personal auto risk
  3. A workers' compensation risk
  4. A risk on the current export list Correct answer.

Explanation

Risks appearing on the export list are exempt from the diligent search requirement. The export list includes risks for which admitted insurers are not readily available.

Question 7Surplus Lines Broker Licensing and Filing

What is the primary purpose of the surplus lines premium tax?

  1. To pay commissions to surplus lines brokers
  2. To subsidize admitted insurers for unprofitable risks
  3. To replace the premium tax that would have been paid by an admitted insurer Correct answer.
  4. To fund the Arkansas Insurance Department's operating budget

Explanation

The surplus lines premium tax is imposed in lieu of the premium tax that an admitted insurer would pay. It ensures the state receives tax revenue on insurance placed with non-admitted insurers.

Question 8Surplus Lines Broker Licensing and Filing

Who is responsible for collecting and remitting the surplus lines premium tax to the state?

  1. The Arkansas Insurance Department
  2. The insured
  3. The surplus lines insurer
  4. The surplus lines broker Correct answer.

Explanation

The surplus lines broker is responsible for collecting the premium tax from the insured and remitting it to the state. The broker acts as the state's collection agent for this tax.

Question 9Surplus Lines Broker Licensing and Filing

What is the penalty for an Arkansas surplus lines broker who fails to file a required placement report within the specified time?

  1. License suspension for 30 days
  2. A fine of $50 per day for each day of delay
  3. A fine of $500 per violation Correct answer.
  4. Revocation of the license

Explanation

Arkansas law imposes a fine of $500 for each violation of the surplus lines reporting requirements. The fine is in addition to any other penalties that may apply.

Question 10Surplus Lines Broker Licensing and Filing

An Arkansas surplus lines broker maintains a fiduciary account for surplus lines premiums. Which of the following is a permissible use of funds in that account?

  1. Paying the broker's office rent
  2. Refunding unearned premium to an insured Correct answer.
  3. Making a personal loan to the broker
  4. Investing in the stock market

Explanation

Surplus lines premium funds must be held in a fiduciary capacity and may be used to pay premiums to insurers or refund unearned premiums to insureds. Using the funds for the broker's expenses or personal purposes is prohibited.

Question 11Surplus Lines Broker Licensing and Filing

Which of the following must an Arkansas surplus lines broker provide to the insured at the time of placement?

  1. A copy of the surplus lines insurer's certificate of authority
  2. A guarantee that the surplus lines insurer is financially sound
  3. A list of all admitted insurers that declined the risk
  4. A written disclosure that the insurer is not admitted in Arkansas Correct answer.

Explanation

Arkansas requires surplus lines brokers to disclose to the insured that the insurer is not admitted in the state and is not protected by the state guaranty fund. This disclosure must be in writing.

Question 12Surplus Lines Broker Licensing and Filing

What is the continuing education requirement for an Arkansas surplus lines broker?

  1. 24 hours per two-year license term, including 3 hours of ethics Correct answer.
  2. 30 hours per two-year license term, with no ethics requirement
  3. 12 hours per year, including 3 hours of ethics
  4. No continuing education is required

Explanation

Arkansas requires surplus lines brokers to complete 24 hours of continuing education every two years, including at least 3 hours of ethics. This is consistent with the requirement for property and casualty producers.

Question 13Surplus Lines Broker Licensing and Filing

An Arkansas surplus lines broker is placing a policy for a client. The broker knows that the client could obtain coverage from an admitted insurer but chooses a surplus lines insurer because it offers a lower premium. This action is:

  1. Prohibited, because surplus lines insurers cannot offer lower premiums
  2. Permissible, because the broker has the right to choose the insurer
  3. Permissible, because the insured benefits from the lower premium
  4. Prohibited, because the broker must conduct a diligent search and place with an admitted insurer if possible Correct answer.

Explanation

Surplus lines placement is only permitted when admitted insurers are unable or unwilling to provide the coverage. A broker who bypasses an available admitted market violates the diligent search requirement.

Question 14Surplus Lines Broker Licensing and Filing

Which of the following is an eligible surplus lines insurer in Arkansas?

  1. An insurer that is authorized to transact insurance in another state but not in Arkansas Correct answer.
  2. An insurer that is authorized in Arkansas
  3. An insurer that is not authorized in any state
  4. An insurer that has been denied a certificate of authority in Arkansas

Explanation

An eligible surplus lines insurer is one that is authorized in its domiciliary state but not in Arkansas, and that meets the state's financial and other requirements. Unauthorized insurers that are not eligible cannot be used.

Question 15Surplus Lines Broker Licensing and Filing

What is the maximum penalty for an Arkansas surplus lines broker who willfully violates the surplus lines law?

  1. A fine of $5,000
  2. License revocation and a fine of up to $10,000 Correct answer.
  3. License suspension for 6 months
  4. A fine of $1,000

Explanation

Willful violations of the surplus lines law can result in license revocation and a fine of up to $10,000 per violation. The Insurance Commissioner has discretion to impose these penalties.

Question 16Surplus Lines Broker Licensing and Filing

An Arkansas surplus lines broker collects a $1,000 premium and the surplus lines tax rate is 4%. What amount of tax must the broker remit?

  1. $40 Correct answer.
  2. $60
  3. $20
  4. $100

Explanation

The surplus lines premium tax is calculated by multiplying the premium by the tax rate. 4% of $1,000 equals $40.

Question 17Surplus Lines Broker Licensing and Filing

Which of the following is a duty of the Arkansas Surplus Lines Association?

  1. To review and approve surplus lines policy forms
  2. To license surplus lines brokers
  3. To collect premium taxes from insureds
  4. To facilitate the placement of surplus lines insurance and provide a market for difficult risks Correct answer.

Explanation

The Arkansas Surplus Lines Association is a market assistance organization that helps brokers place difficult risks with eligible surplus lines insurers. It does not have licensing or regulatory authority.

Question 18Surplus Lines Broker Licensing and Filing

An Arkansas surplus lines broker is required to keep records of surplus lines transactions for how long?

  1. Ten years
  2. Two years
  3. Three years
  4. Five years Correct answer.

Explanation

Arkansas requires surplus lines brokers to maintain records of transactions for at least five years. The records must be available for examination by the Insurance Department.

Question 19Surplus Lines Broker Licensing and Filing

A surplus lines broker in Arkansas is placing a policy for a risk that is not on the export list. The broker obtains two declinations from admitted insurers and places the risk with a surplus lines insurer. This action is:

  1. Proper, because the risk is not on the export list
  2. Improper, because surplus lines insurers cannot be used for risks not on the export list
  3. Improper, because three declinations are required Correct answer.
  4. Proper, because two declinations are sufficient

Explanation

For risks not on the export list, the broker must document at least three declinations from admitted insurers. Two declinations are insufficient.

Question 20Surplus Lines Broker Licensing and Filing

Which of the following statements about the surplus lines premium tax is correct?

  1. The tax rate is uniform across all states
  2. The tax is in addition to the premium charged to the insured Correct answer.
  3. The tax is only imposed on policies written for Arkansas residents
  4. The tax is paid by the surplus lines insurer

Explanation

The surplus lines premium tax is added to the premium and collected from the insured by the broker. It is not paid by the insurer and rates vary by state.

Question 21Surplus Lines Broker Licensing and Filing

What must an Arkansas surplus lines broker do if a policy is canceled and unearned premium is returned to the insured?

  1. Remit the unearned premium to the state
  2. Refund the unearned premium to the insured and adjust the premium tax accordingly Correct answer.
  3. Retain the unearned premium as compensation
  4. Apply the unearned premium to future placements

Explanation

When a surplus lines policy is canceled, the broker must return the unearned premium to the insured and may claim a refund or credit for the corresponding premium tax. The broker cannot retain unearned premium.

Question 22Surplus Lines Broker Licensing and Filing

An Arkansas surplus lines broker is asked to place coverage for a risk that is on the export list. Which of the following is true?

  1. The broker may place the risk without a diligent search Correct answer.
  2. The broker must place the risk with an admitted insurer first
  3. The broker must obtain approval from the Insurance Commissioner
  4. The broker must still obtain three declinations

Explanation

Risks on the export list are exempt from the diligent search requirement, so the broker may place the risk directly with an eligible surplus lines insurer. No declinations are required.

Question 23Surplus Lines Broker Licensing and Filing

Which of the following is a ground for denial of an Arkansas surplus lines broker license?

  1. Having less than one year of experience
  2. Having a felony conviction related to insurance Correct answer.
  3. Not being a resident of Arkansas
  4. Not having a college degree

Explanation

A felony conviction related to insurance is a ground for denial of a surplus lines broker license. Other grounds include fraudulent practices and license revocation in another state.

Question 24Surplus Lines Broker Licensing and Filing

What is the required format for filing the surplus lines placement report in Arkansas?

  1. Fax transmission
  2. Electronic filing through the Insurance Department's system Correct answer.
  3. Paper form mailed to the Insurance Department
  4. Verbal report followed by written confirmation

Explanation

Arkansas requires surplus lines placement reports to be filed electronically through the Insurance Department's designated system. Paper filings are not accepted for routine reporting.

Question 25Surplus Lines Broker Licensing and Filing

An Arkansas surplus lines broker is reviewing a client's policy and notices that the surplus lines insurer is not on the state's eligible list. What should the broker do?

  1. Not place the coverage with that insurer and find an eligible surplus lines insurer Correct answer.
  2. Cancel the policy immediately
  3. Report the insurer to the Insurance Department and continue the placement
  4. Proceed with the placement because the insurer is authorized in another state

Explanation

A surplus lines broker may only place coverage with an eligible surplus lines insurer. Using an insurer not on the eligible list is a violation of the surplus lines law.

Question 26Surplus Lines Broker Licensing and Filing

What is the primary purpose of the surplus lines broker license in Arkansas?

  1. To allow brokers to place coverage with unauthorized insurers when coverage is unavailable from authorized insurers Correct answer.
  2. To authorize brokers to act as managing general agents for authorized insurers
  3. To allow brokers to adjust claims on behalf of surplus lines insurers
  4. To permit brokers to sell insurance directly to consumers without a producer license

Explanation

The surplus lines broker license enables a licensed producer to place business with nonadmitted insurers when the risk cannot be placed with authorized insurers after a diligent search. It does not authorize direct sales without a producer license, nor does it grant claim adjustment authority.

Question 27Surplus Lines Broker Licensing and Filing

Before placing a risk with a surplus lines insurer, an Arkansas surplus lines broker must make a diligent search. What does this require?

  1. Obtaining a declination from at least one authorized insurer
  2. Receiving written permission from the Insurance Commissioner
  3. Documenting that coverage was sought from authorized insurers who declined the risk Correct answer.
  4. Checking only the surplus lines insurer's eligibility

Explanation

A diligent search requires the broker to attempt to place the risk with authorized insurers and document their declinations. The number of declinations may vary, but the broker must show that authorized insurers were approached and refused.

Question 28Surplus Lines Broker Licensing and Filing

Which of the following is a requirement for an insurer to be eligible as a surplus lines insurer in Arkansas?

  1. The insurer must maintain a trust fund and be authorized in its state of domicile Correct answer.
  2. The insurer must be approved by the Arkansas Surplus Lines Association and the Insurance Commissioner
  3. The insurer must be licensed in Arkansas as an authorized insurer
  4. The insurer must be listed on the NAIC's International Insurers Department (IID) list

Explanation

Eligible surplus lines insurers must meet financial and regulatory standards, including maintaining a trust fund and being authorized in their state of domicile. They are not licensed in Arkansas, and the IID list is only one avenue for eligibility.

Question 29Surplus Lines Broker Licensing and Filing

An Arkansas surplus lines broker collects a premium of $5,000 and the surplus lines premium tax rate is 4%. What is the amount of premium tax the broker must remit?

  1. $100
  2. $50
  3. $500
  4. $200 Correct answer.

Explanation

The premium tax is calculated by multiplying the premium by the tax rate: $5,000 × 0.04 = $200. The broker is responsible for collecting and remitting this tax.

Question 30Surplus Lines Broker Licensing and Filing

Which of the following best describes the Arkansas Surplus Lines Association's role in the surplus lines market?

  1. It provides a market for surplus lines insurance and facilitates compliance Correct answer.
  2. It guarantees payment of claims if a surplus lines insurer becomes insolvent
  3. It sets the premium rates for surplus lines insurers
  4. It licenses surplus lines brokers and collects premium taxes

Explanation

The Arkansas Surplus Lines Association serves as a marketplace for surplus lines insurance and assists brokers with compliance and access to eligible insurers. It does not license brokers, collect taxes, guarantee claims, or set rates.

Question 31Surplus Lines Broker Licensing and Filing

Within how many days must an Arkansas surplus lines broker file a placement report after placing a surplus lines policy?

  1. 90 days
  2. 60 days
  3. 45 days Correct answer.
  4. 30 days

Explanation

Arkansas law requires surplus lines brokers to file a placement report within 45 days after the policy is placed. This report includes details of the placement and the premium tax due.

Question 32Surplus Lines Broker Licensing and Filing

An Arkansas surplus lines broker places a policy with a surplus lines insurer. What must the broker disclose to the insured at the time of placement?

  1. That the insurer is not licensed in Arkansas and is not subject to its supervision Correct answer.
  2. That the broker will handle all claims on behalf of the insurer
  3. That the policy is guaranteed by the Arkansas Insurance Guaranty Association
  4. That the insured has a right to cancel within 10 days for a full refund

Explanation

Arkansas requires surplus lines brokers to disclose to the insured that the insurer is not licensed in the state and is not subject to the state's insurance regulation. This informs the insured of the lack of guaranty fund protection.

Question 33Surplus Lines Broker Licensing and Filing

An Arkansas surplus lines broker is placing a policy for a client. The broker knows that the client could obtain coverage from an authorized insurer but prefers the surplus lines insurer's broader coverage. What must the broker do?

  1. Place the coverage with the surplus lines insurer without further action
  2. Refuse to place the coverage because authorized coverage is available
  3. Document the client's preference and proceed with the surplus lines placement Correct answer.
  4. Obtain approval from the Insurance Commissioner before placing the coverage

Explanation

If the client insists on surplus lines coverage despite the availability of authorized coverage, the broker may place the risk but must document the client's preference and the declinations from authorized insurers. The broker should not refuse solely because authorized coverage exists.

Question 34Surplus Lines Broker Licensing and Filing

An Arkansas surplus lines broker collects a $2,000 premium and the surplus lines tax rate is 4%. How much tax must the broker remit?

  1. $80 Correct answer.
  2. $20
  3. $40
  4. $200

Explanation

The tax is calculated as $2,000 × 0.04 = $80. The broker must remit this amount to the state.

Question 35Surplus Lines Broker Licensing and Filing

An Arkansas surplus lines broker is reviewing a client's policy and notices that the surplus lines insurer is not on the eligible list. What should the broker do?

  1. Report the insurer to the Insurance Commissioner
  2. Cancel the policy and return all premiums
  3. Replace the insurer with an eligible surplus lines insurer Correct answer.
  4. Continue the policy because the insurer is financially stable

Explanation

A surplus lines broker must place coverage only with eligible surplus lines insurers. If an insurer is not eligible, the broker must replace it with an eligible insurer to comply with the law.

Question 36Surplus Lines Broker Licensing and Filing

A surplus lines broker in Arkansas is placing a policy for a risk that is not on the export list. The broker obtains two declinations from authorized insurers. What else must the broker do to satisfy the diligent search requirement?

  1. Notify the Insurance Commissioner of the declinations.
  2. Nothing else; two declinations are sufficient.
  3. Document the declinations and retain them in the file. Correct answer.
  4. Obtain a third declination.

Explanation

The broker must document the declinations from authorized insurers and retain them as part of the diligent search record. The number of declinations may vary, but the documentation is essential.

Question 37Surplus Lines Broker Licensing and Filing

An Arkansas surplus lines broker maintains a fiduciary account for surplus lines premiums. Which of the following is a permitted use of the account?

  1. Holding premiums pending remittance to the insurer Correct answer.
  2. Paying the broker's office rent
  3. Loaning funds to the broker's affiliated agency
  4. Investing in stocks for the broker's benefit

Explanation

A fiduciary account for surplus lines premiums must be used to hold premiums until they are remitted to the insurer or used to pay premium taxes. It cannot be used for the broker's operating expenses or personal benefit.

Question 38Surplus Lines Broker Licensing and Filing

An Arkansas surplus lines broker moves to a new office across town. Within what period must the broker notify the Insurance Commissioner of the address change?

  1. Within 30 days of the change Correct answer.
  2. Only at the next license renewal
  3. Within 10 days of the change
  4. Within 90 days of the change

Explanation

Arkansas requires a licensed surplus lines broker to report a change of business or mailing address to the Commissioner within 30 days. The notice keeps the licensing record current so official filings and correspondence reach the broker. Waiting until renewal leaves the Department with stale contact information.

Question 39Surplus Lines Broker Licensing and Filing

Which individual is eligible to be licensed as an Arkansas surplus lines broker?

  1. A person who holds only a life insurance producer license
  2. A person holding a current Arkansas property and casualty producer license Correct answer.
  3. A person licensed only as a public adjuster
  4. A person with no insurance license who has ten years of banking experience

Explanation

Surplus lines authority in Arkansas is built on top of an existing producer license for the relevant lines, typically property and casualty. The broker must already be licensed to transact the underlying kinds of insurance before surplus lines authority is granted. Life-only or adjuster licenses do not supply the required base authority.

Question 40Surplus Lines Broker Licensing and Filing

An Arkansas surplus lines broker is licensed but lets the license lapse by failing to renew. What is the broker's status regarding surplus lines placements during the lapse?

  1. The broker may not transact surplus lines business until the license is reinstated Correct answer.
  2. The broker may place up to five policies during the lapse period
  3. The broker may continue placing business while a reinstatement application is pending
  4. The broker may place business if the insurer agrees in writing

Explanation

Surplus lines authority exists only while the license is in force, so a lapsed broker cannot lawfully make new placements. A pending reinstatement application does not restore authority. Any placement made during the lapse is an unlicensed transaction.

Question 41Surplus Lines Broker Licensing and Filing

An Arkansas surplus lines broker earns a fee from the insured in connection with a surplus lines placement. How must the broker handle that fee?

  1. Disclose the fee to the insured and keep it separate from premium funds Correct answer.
  2. Pay the fee to the surplus lines insurer as additional premium
  3. Report the fee only if it exceeds the premium amount
  4. Combine the fee with premium in the same account and remit tax on the total

Explanation

Fees charged to the insured must be disclosed, and because they are not premium they should be accounted for separately from fiduciary premium funds. Keeping fee money distinct prevents it from being treated as taxable premium. Disclosure lets the insured know the total cost of the placement.

Question 42Surplus Lines Broker Licensing and Filing

An Arkansas surplus lines broker is preparing the annual or periodic tax remittance. Which statement describes the broker's obligation?

  1. The insured must remit the tax directly to the state
  2. The broker must remit the tax collected on surplus lines premiums on the schedule set by the Commissioner Correct answer.
  3. The tax is due only when the insured files a claim
  4. The surplus lines insurer pays the tax through its own annual statement

Explanation

Arkansas places the collection and remittance duty on the surplus lines broker, who reports and pays the applicable tax on a schedule the Commissioner prescribes. The tax is tied to premium written, not to claims activity. Insureds and insurers do not assume this filing duty for a broker-placed surplus lines policy.

Question 43Surplus Lines Broker Licensing and Filing

An Arkansas surplus lines broker is told by a client that the client signed a statement declining available admitted-market coverage. What is the broker's responsibility regarding that statement?

  1. Retain the signed statement as part of the transaction records supporting the placement Correct answer.
  2. Send the original to the Commissioner with the placement report
  3. Forward it to the surplus lines insurer and keep no copy
  4. Discard it once the policy is issued

Explanation

Documentation showing that admitted coverage was unavailable or declined is part of the diligent-effort record the broker must maintain. Retaining it lets the broker demonstrate compliance if the placement is later reviewed. The record belongs in the broker's files rather than being discarded or transferred away.

Question 44Surplus Lines Broker Licensing and Filing

Which best describes how Arkansas treats a surplus lines broker's authority to place coverage for exempt commercial purchasers?

  1. Exempt commercial purchasers are prohibited from buying surplus lines coverage
  2. Diligent-search requirements may be relaxed for exempt commercial purchasers who meet specified criteria Correct answer.
  3. Exempt commercial purchasers must still obtain three admitted-market declinations for every policy
  4. Exempt commercial purchasers must place all coverage through the Arkansas Surplus Lines Association

Explanation

Arkansas recognizes exempt commercial purchaser status, which allows a streamlined placement when the purchaser meets the statutory criteria and acknowledges the absence of admitted-market protection. The relaxed search does not eliminate the broker's other duties, such as disclosure and tax remittance. Not every commercial risk qualifies for this treatment.

Question 45Surplus Lines Broker Licensing and Filing

An Arkansas surplus lines broker is completing a placement and must provide the insured with a written notice. Which element belongs in that disclosure?

  1. A statement that the insured may cancel without any premium obligation
  2. A statement that the policy is fully covered by the state guaranty fund
  3. A statement that the insurer is not protected by the Arkansas guaranty association Correct answer.
  4. A statement that the broker guarantees the insurer's solvency

Explanation

Surplus lines policies are written by insurers that generally do not participate in the state guaranty association, and the insured must be told this in writing. The notice also typically identifies the insurer and the lack of admitted-market protection. The broker cannot promise solvency or guaranty fund coverage.

Question 46Surplus Lines Broker Licensing and Filing

An Arkansas surplus lines broker places a policy with an eligible surplus lines insurer and later learns the insurer has been removed from the eligible list. What is the most appropriate action?

  1. Transfer the policy to any admitted insurer without the insured's consent
  2. Cancel the existing policy immediately without notifying anyone
  3. Continue renewing the policy because the original placement was lawful
  4. Notify the insured and avoid placing new or renewal business with that insurer Correct answer.

Explanation

Eligibility is assessed at the time of placement, so an existing policy is not automatically void when the insurer leaves the list. However, the broker should inform the insured and stop using that insurer for new or renewal placements. Unilateral cancellation or reassignment without the insured's involvement is not appropriate.

Question 47Surplus Lines Broker Licensing and Filing

An Arkansas surplus lines broker is reviewing a placement file and finds the diligent-search documentation is incomplete for a non-exempt risk. What is the primary compliance concern?

  1. The insured's policy is automatically void
  2. The placement may not satisfy the requirement that admitted insurers first declined the risk Correct answer.
  3. The insurer must be removed from the eligible list
  4. The broker owes additional premium tax on the policy

Explanation

For risks that are not exempt and not on the export list, the broker must show that admitted insurers declined or did not offer the coverage. Missing documentation undermines the basis for the surplus lines placement. The deficiency concerns eligibility for surplus treatment, not tax rates or the insurer's standing.

Question 48Surplus Lines Broker Licensing and Filing

An Arkansas surplus lines broker is deciding whether a particular risk may be placed on the export list. What is the effect of a risk appearing on the export list?

  1. The broker must still obtain three declinations before placing the risk
  2. The broker must obtain the Commissioner's prior written approval for each placement
  3. The broker may place the risk without first obtaining declinations from admitted insurers Correct answer.
  4. The broker may place the risk only with an admitted insurer

Explanation

The export list identifies coverages for which the diligent-search requirement is waived because admitted markets are recognized as unavailable. For those risks the broker may proceed directly to an eligible surplus lines insurer. The waiver does not eliminate disclosure, recordkeeping, or tax duties.

Question 49Surplus Lines Broker Licensing and Filing

Which of the following is a continuing obligation of an Arkansas surplus lines broker after a policy is placed?

  1. Maintaining records of the transaction that are available for examination by the Commissioner Correct answer.
  2. Obtaining a fresh declination each time the insured files a claim
  3. Reapplying for licensure each time the insurer changes its name
  4. Filing a new diligent search for every premium installment

Explanation

Surplus lines brokers must keep records of each transaction and make them available to the Insurance Department on request. This recordkeeping duty continues after the policy is issued. It does not require repeated searches, claim-based declinations, or new license applications.

Question 50Surplus Lines Broker Licensing and Filing

An Arkansas surplus lines broker wants to advertise surplus lines services. Which approach is consistent with licensing rules?

  1. Implying the broker is an admitted insurer
  2. Advertising under the licensed broker's name and license information Correct answer.
  3. Advertising under a fictitious name never filed with the Department
  4. Promising coverage regardless of eligibility

Explanation

Advertising must accurately identify the licensed broker and must not mislead the public about the broker's status or the nature of surplus lines coverage. Using an unfiled fictitious name or implying admitted-insurer status is deceptive. Promising coverage without regard to eligibility is also improper.