Colorado Surplus Lines cheat sheet

C.R.S. Title 10, Article 5, Part 8 is the Colorado Surplus Lines Insurance Law; it governs licensing, placement, disclosure, taxation, and records for nonadmitted insurance.

The Colorado Commissioner of Insurance, through the Division of Insurance, administers and enforces surplus lines statutes and regulations.

A person must hold a Colorado surplus lines broker license to procure insurance from a nonadmitted insurer for a Colorado insured.

Surplus lines placement is permitted only when the required coverage cannot be procured from authorized insurers.

Surplus lines brokers act as intermediaries between insureds and eligible nonadmitted insurers and must comply with statutory disclosure duties.

The Commissioner may examine books and records, issue orders, suspend or revoke licenses, and impose civil penalties for violations.

Unauthorized insurers may not transact insurance in Colorado except as permitted by the surplus lines law through a licensed broker.

Colorado statutes require surplus lines brokers to collect premium tax and file reports with the Division of Insurance.

Division of Insurance regulations implement the surplus lines statutes and address licensing, diligent search, disclosures, policy stamping, reporting, and record retention.

Surplus lines broker license applications and renewals are processed through the Division; applicants must meet producer licensing and character requirements.

Nonresident surplus lines brokers may qualify under reciprocity when licensed in their home state and compliant with NRRA uniform standards.

Regulations require the surplus lines policy or declaration page to carry conspicuous notice that the insurer is not authorized in Colorado.

The broker must document the diligent search and retain supporting declinations; the file is subject to examination by the Division.

Surplus lines brokers must satisfy Colorado producer continuing education requirements for license renewal.

Division rules set the annual premium tax return content, due date, and reconciliation requirements.

Failure to comply with Division regulations can result in license suspension, revocation, fines, and tax penalties.

Insurance transfers pure risk from an insured to an insurer in exchange for premium; the insurer spreads risk across a pool.

Insurable interest requires the insured to suffer financial loss from loss of the subject matter; without it, the contract is unenforceable.

Indemnity restores the insured to approximately the pre-loss financial position and prohibits profiting from loss.

An admitted insurer holds a state certificate of authority; a nonadmitted insurer does not and is regulated differently.

A binder is temporary evidence of insurance that binds coverage before policy issuance if the agent has authority.

Representations are statements believed true; warranties are promises or conditions; material misrepresentation can void coverage.

Limits may be per occurrence, per claim, or aggregate; deductibles and self-insured retentions allocate loss to the insured.

Subrogation lets an insurer pursue a third party after paying a loss, preventing double recovery by the insured.

Placement begins with identifying the insured's risk, required coverage, limits, and any special exposures.

The broker must conduct a diligent search of the admitted market and document authorized insurers' declinations or insufficient capacity.

Surplus lines may not be used solely because a nonadmitted insurer offers a lower premium than an authorized insurer.

Before placement, the broker must verify the proposed insurer is eligible and authorized in its domicile.

The insured must receive written disclosure that the insurer is not licensed in Colorado and is not protected by the guaranty association.

The surplus lines policy must be stamped or endorsed with the required nonadmitted-insurer notice.

For multistate risks, the insured's home state governs surplus lines regulatory compliance and premium tax under NRRA.

The broker must retain the diligent-search file, disclosure, policy, and tax records for the statutory retention period.

An eligible surplus lines insurer must be authorized in its domicile and meet Colorado's capital and surplus requirements.

Colorado recognizes eligible alien insurers listed on the NAIC International Insurers Department Quarterly Listing.

A nonadmitted insurer may write Colorado surplus lines only through a licensed Colorado surplus lines broker.

Surplus lines insurers are not members of the Colorado guaranty association; insureds bear insurer insolvency risk.

The insurer must consent to service of process in Colorado, commonly through the Commissioner as attorney for service.

The broker must confirm eligibility at placement and maintain evidence of the insurer's eligible status.

Placing coverage with an ineligible or unauthorized insurer violates Colorado law and may expose the broker to discipline.

Colorado imposes a surplus lines premium tax equal to 3% of gross premiums on surplus lines policies.

The surplus lines broker collects the tax from the insured and remits it to the Division of Insurance.

The annual premium tax return and payment are due March 1 for the preceding calendar year.

Tax is computed on gross premiums less return premiums; the broker remains liable for remittance even if the tax was not collected.

Late payment or late filing triggers statutory penalties and interest and may result in license action.

Under NRRA, only the insured's home state may tax a multistate surplus lines transaction; Colorado taxes when it is the home state.

A broker with no surplus lines activity may still be required to file a zero return or report as directed by the Division.

Surplus lines brokers must keep records of each transaction for at least five years.

The transaction file includes the diligent search, declinations, disclosure, policy, premium, tax, and insurer eligibility evidence.

Records must be made available to the Commissioner on request during examinations or investigations.

Electronic records are acceptable if legible, retrievable, and producible in a form acceptable to the Division.

Records must support the annual premium tax return and reconcile premiums reported and tax paid.

Failure to maintain or produce required records is a violation subject to penalties and license discipline.

Records for policies canceled or expired remain subject to the retention period.