Arizona Surplus Lines flashcards
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32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Surplus lines insurance
- Coverage from an insurer not authorized in the state, placed through a licensed surplus lines broker when authorized insurers decline the risk.
- Diligent effort
- Documented search among authorized insurers showing they declined the risk, required before placing surplus lines coverage.
- Eligible surplus lines insurer
- A nonadmitted insurer that meets state financial and regulatory requirements and is approved to write surplus lines in Arizona.
- Surplus lines broker
- A licensed producer authorized to place coverage with nonadmitted insurers and responsible for tax remittance and recordkeeping.
- Premium tax
- A tax on surplus lines premiums collected by the broker and remitted to the state, currently 3% in Arizona.
- Quarterly report
- A filing by the surplus lines broker listing surplus lines transactions and taxes due, submitted to the state each quarter.
- Guaranty fund exclusion
- Surplus lines policies are not covered by the state guaranty association; the insured must acknowledge this in writing.
- Market of last resort
- Surplus lines is used only when coverage cannot be obtained from authorized insurers in the standard market.
- Recordkeeping requirement
- Surplus lines brokers must keep records of each transaction and diligent effort for at least five years.
- Unauthorized insurer
- An insurer not licensed to transact insurance in Arizona; it may write surplus lines only through a licensed surplus lines broker.
- Arizona Director of Insurance
- The official who regulates insurance in Arizona, including licensing surplus lines brokers and conducting examinations.
- Surplus lines license
- An Arizona license allowing a producer to place surplus lines coverage; requires a property and casualty license and meeting experience or education requirements.
- Examination authority
- The Director may examine surplus lines brokers and insurers; domestic insurers are examined at least every five years.
- Disclosure requirement
- Surplus lines brokers must inform the insured in writing that the insurer is unauthorized and not protected by the guaranty fund.
- Premium tax rate
- Arizona imposes a 3% tax on surplus lines gross premiums, remitted quarterly by the surplus lines broker.
- Record retention period
- Arizona requires surplus lines brokers to maintain transaction records for at least five years and make them available to the Director.
- Eligible insurer list
- A list maintained by the state of nonadmitted insurers that meet requirements and are permitted to write surplus lines.
- Guaranty fund
- A state fund that pays claims of insolvent authorized insurers; surplus lines insurers are not members, so policies are not protected.
- Producer licensing
- Arizona requires individuals to be licensed to sell insurance; surplus lines brokers need an additional surplus lines license.
- Insurable interest
- A financial interest in the subject matter of insurance; required at time of loss for property and at application for life.
- Indemnity principle
- Insurance restores the insured to approximately the pre-loss financial position, not to a better position.
- Utmost good faith
- Both parties must disclose material facts; breach by the insured may allow the insurer to rescind the policy.
- Adhesion contract
- The insurer drafts the contract; ambiguities are construed against the insurer under the principle of contra proferentem.
- Aleatory contract
- The amounts exchanged are unequal and depend on chance; premiums are paid regardless of whether a loss occurs.
- Subrogation
- The insurer's right to recover from a negligent third party after paying the insured, preventing double recovery.
- Coinsurance clause
- A property insurance penalty clause reducing the claim if the insured carries less than the required percentage of value.
- Proximate cause
- The dominant, efficient cause of a loss; it must be an insured peril for coverage to apply.
- Law of large numbers
- A principle that allows insurers to predict losses more accurately as the number of similar exposure units increases.
- Risk pooling
- Combining many similar risks to spread the cost of losses and make premiums more predictable.
- Hazard
- A condition that increases the chance or severity of a loss, such as physical, moral, or morale hazard.
- Peril
- A cause of loss, such as fire, windstorm, or theft, that may be covered by an insurance policy.
- Speculative risk
- A risk involving the chance of loss or gain, such as gambling or investing; generally not insurable.