Florida Surplus Lines key terms

The possibility of loss or the uncertainty about whether a loss will occur; insurance works by pooling many similar risks so the cost of losses can be predicted and shared.

The actual cause of a loss, such as fire, windstorm, theft, or collision. A policy usually lists covered perils and excludes others.

A condition that increases the chance or severity of a loss, such as oily rags, poor housekeeping, or careless driving. Hazards are often classified as physical, moral, or morale.

A situation with only two outcomes: loss or no loss. There is no possibility of gain, which is why pure risks are generally insurable.

A financial stake in the person or property insured such that a loss would cause genuine economic harm. It helps prevent gambling and is required for an enforceable policy.

The principle that insurance should restore the insured to roughly the same financial position as before a loss, without allowing a profit from the loss.

The tendency for people or businesses with greater-than-average risk to seek insurance more eagerly, which can raise costs for insurers unless underwriting and pricing control it.

A statistical principle holding that the more similar exposure units an insurer pools, the more accurately it can predict losses and set rates.

An arrangement in which an insurer transfers part of its risk to another insurer in exchange for part of the premium, protecting the ceding insurer against large or unusual losses.

The mutual assent step in forming a contract: one party proposes terms and the other agrees to them, creating a binding agreement when the other elements are present.

The value each party gives in a contract. In insurance, the insured gives premium and complies with conditions, while the insurer gives the promise to pay covered claims.

A contract prepared by one party, usually the insurer, with little negotiation by the other. Ambiguities are generally interpreted against the party that drafted the policy.

A contract in which the amounts exchanged are unequal and depend on an uncertain event. The insured may pay small premiums and receive a large claim payment, or receive nothing.

The duty of both insured and insurer to deal honestly and disclose material facts. Concealment or misrepresentation can give the insurer grounds to rescind coverage.

A statement or condition in an insurance contract that is guaranteed to be true. A material breach may allow the insurer to deny a claim or void the policy.

A statement made by an applicant during underwriting that is believed true to the best of the applicant's knowledge. It must generally be material to affect coverage.

The voluntary giving up of a known right under a policy, such as an insurer ignoring a late notice without objecting. Waiver can prevent later enforcement of that right.

A legal doctrine that prevents a party from asserting a right after its conduct led another party to rely on that conduct and suffer harm.

A temporary agreement that provides immediate insurance coverage until the formal policy is issued. It is usually oral or written and subject to the policy terms.

The insurer's right, after paying a claim, to step into the insured's shoes and seek recovery from the responsible third party. It helps prevent double recovery.

Provisions that list losses or situations the policy does not cover. Exclusions narrow the insuring agreement and may be offset by endorsements or separate coverage.

A license issued by Florida's Office of Insurance Regulation that authorizes an insurer to transact insurance in the state as an admitted insurer.

The state agency that regulates insurers, approves policy forms and rates, licenses certain entities, and determines which nonadmitted insurers are eligible surplus lines insurers.

The state agency that licenses insurance agents and agencies, handles consumer complaints, and investigates insurance fraud and other violations.

A state guaranty association that pays certain claims of insolvent admitted insurers. Surplus lines policies written by nonadmitted insurers are not covered by FIGA.

Prohibited insurance business conduct such as misrepresentation, false advertising, unfair discrimination, rebating, and coercion. Florida law allows penalties and licensee discipline for violations.

A tax imposed by the state on insurance premiums. Insurers and surplus lines agents collect or remit it, and the rate and filing rules depend on the type of insurance.

A credential issued by Florida's Department of Financial Services that authorizes a person to sell or negotiate insurance. A separate surplus lines license is required to place surplus lines business.

Coverage placed with a nonadmitted insurer when authorized insurers cannot provide the coverage. Florida allows it only under specific eligibility, diligent effort, and reporting rules.

An insurer that is not authorized by a certificate of authority to transact insurance in Florida. It may still write Florida surplus lines business if it is an eligible surplus lines insurer.

A nonadmitted insurer approved by Florida's Office of Insurance Regulation to write surplus lines in the state after meeting capital, surplus, and other financial requirements.

An insurer that is not authorized to transact insurance in Florida. Placing business with one is generally prohibited unless the insurer is an eligible surplus lines insurer and the placement follows surplus lines law.

A Florida-licensed insurance agent who also holds a surplus lines license and is authorized to procure coverage from eligible surplus lines insurers for hard-to-place risks.

The documented search by a surplus lines agent among authorized insurers to determine whether the risk can be placed in the admitted market before using a nonadmitted insurer.

A refusal by an authorized insurer to write a particular risk. Several declinations, or an export-list exception, help document the diligent effort required for surplus lines placement.

A list of coverages or risk classifications that Florida has exempted from the diligent effort requirement, allowing surplus lines placement without first obtaining admitted-market declinations.

The statutorily created office that receives and validates surplus lines policy data, reports premium and tax information, and supports compliance with Florida surplus lines law.

A sworn statement by the surplus lines agent confirming that the placement met Florida requirements, including diligent effort or an export-list exemption, and identifying the eligible insurer.

A fee a surplus lines agent may charge for placing a surplus lines policy, subject to Florida limits and disclosure requirements. It is separate from premium and premium tax.

A state tax on surplus lines premiums. The surplus lines agent typically collects and remits it, and the rate is separate from the tax on admitted insurers' premiums.