Colorado Surplus Lines key terms

Insurance written by an insurer that is not licensed in Colorado, placed only after a licensed surplus lines broker documents that the coverage could not be obtained from admitted insurers.

An insurer that holds a Colorado certificate of authority to write the specific line of insurance, so its rates, forms and financial solvency are regulated by the Division of Insurance.

An insurer that does not hold a Colorado certificate of authority for the line of business being written; it may insure Colorado risks only through the surplus lines process.

An insurer transacting insurance in Colorado without the certificate of authority the law requires. The term reaches both nonadmitted carriers used properly in surplus lines and carriers operating illegally.

A nonadmitted insurer that meets Colorado's financial and other standards, including any required U.S. trust fund, and therefore may be used by a surplus lines broker to insure Colorado risks.

An insurer organized under the laws of a country other than the United States. To be used for Colorado surplus lines, it generally must maintain a U.S. trust fund for the benefit of policyholders.

Assets held in the United States in trust for the protection of U.S. policyholders, required of many alien insurers as a condition of being eligible to write surplus lines business.

A Colorado-licensed producer authorized to place coverage with eligible nonadmitted insurers, who must document a diligent search, disclose the nonadmitted status to the insured, and handle premium tax.

The license the Division of Insurance issues to a producer authorizing surplus lines placements; it is tied to the lines of insurance the producer is qualified to write.

A person licensed by the Colorado Division of Insurance to solicit, negotiate or sell insurance. A surplus lines broker is a producer holding additional authority to use nonadmitted insurers.

The documented effort a broker must make to place coverage with authorized insurers before using the surplus lines market, typically by submitting the risk to several admitted carriers and recording their responses.

An authorized insurer's refusal to quote or bind a risk. A broker records each declination as evidence that the admitted market would not write the coverage.

The written record, signed by the broker, listing the admitted insurers contacted, the dates, and their declinations, kept as proof that the surplus lines placement was justified.

A list of coverages the Commissioner has designated as exempt from the individual diligent search requirement, generally because the admitted market does not write them.

A written statement to the insured explaining that the insurer is not admitted in Colorado, is not protected by the state guaranty fund, and its rates and forms are not approved by the Division.

The entity created by statute to pay certain claims against insolvent admitted insurers. It does not provide protection for policies written by nonadmitted surplus lines carriers.

The state agency, headed by the Insurance Commissioner, that licenses insurers and producers, adopts regulations, examines licensees and enforces Colorado insurance law.

The official appointed to head the Division of Insurance, with authority to license, examine, adopt rules and take enforcement action under Colorado insurance statutes.

Title 10 of the Colorado Revised Statutes, the body of statutory law governing insurance, including the surplus lines provisions that control broker licensing, placement and taxation.

Rules adopted by the Insurance Commissioner and published in the Colorado Code of Regulations, filling in statutory details such as licensing, surplus lines filings and premium tax reporting.

The association recognized as Colorado's surplus lines stamping office; it reviews surplus lines filings, confirms insurer eligibility, and supports premium tax collection and reporting.

An entity that reviews surplus lines policy filings for compliance and records them for regulatory reporting. In Colorado this function is performed by the Surplus Lines Association of Colorado.

A per-policy charge collected by the surplus lines stamping office to fund its review and reporting operations. It is separate from, and additional to, premium tax.

A tax on surplus lines premiums covering Colorado risks, computed as a percentage of gross premium set by statute and remitted to the state on the schedule Colorado law and regulation require.

A tax an insured owes when it buys insurance directly from a nonadmitted insurer without placing the coverage through a licensed surplus lines broker.

The process of dividing a multi-state surplus lines premium among the states where the risk is located, so that Colorado tax applies only to the Colorado portion.

The requirement that a surplus lines broker keep transaction records, including diligent search documentation and policy and premium data, for the period Colorado statute or regulation specifies.

A separate account in which a broker holds funds belonging to insureds or insurers. Commingling those funds with the broker's own money is not permitted.

The document the Division of Insurance issues to an insurer authorizing it to transact specified lines of insurance in Colorado.

Written authorization from an insured naming a particular producer as its broker, allowing that producer to place or service the account, including any surplus lines placement.

An insurer owned by its policyholders and formed under the federal Liability Risk Retention Act to write liability coverage for its members, exempt from many state admission requirements.

A group that buys liability insurance for its members under the federal Liability Risk Retention Act, sometimes from a nonadmitted insurer with relaxed state placement requirements.

The federal 2010 law that made an insured's home state responsible for regulating and taxing surplus lines placements and set minimum standards for diligent search.

A commercial insured meeting statutory size and sophistication tests. When the required disclosures are made, federal standards allow placement with a nonadmitted insurer without a full diligent search.