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Georgia Surplus Lines study materials
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Georgia Surplus Lines practice questions

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Question 1Surplus Lines Broker Licensing and Regulation

Under Georgia law, a person must hold a surplus lines broker license in order to place insurance with which of the following?

  1. A domestic mutual insurer holding a Georgia certificate of authority
  2. An admitted insurer domiciled in another state
  3. An unauthorized insurer that is not admitted to transact business in Georgia Correct answer.
  4. A Georgia county farm mutual insurer

Explanation

Surplus lines placement involves insurers not licensed (unauthorized) to transact business in Georgia. Admitted insurers are placed through licensed agents using standard markets, not the surplus lines process. The surplus lines broker license authorizes the licensee to access nonadmitted carriers.

Question 2Surplus Lines Broker Licensing and Regulation

Before the Commissioner of Insurance issues a surplus lines broker license, Georgia requires the applicant to hold which of the following?

  1. A Georgia public adjuster license
  2. A Georgia life and accident and sickness license only
  3. A Georgia claims adjuster license
  4. A valid Georgia property and casualty agent or broker license Correct answer.

Explanation

Georgia requires a surplus lines broker applicant to first be licensed as a property and casualty agent or broker in this state. The surplus lines authority is an add-on to an existing P&C agent or broker license. Adjuster and life-only licenses do not qualify as the prerequisite.

Question 3Surplus Lines Broker Licensing and Regulation

Georgia surplus lines brokers must maintain a bond or deposit in an amount set by statute. What is the primary purpose of this requirement?

  1. To satisfy continuing education requirements
  2. To protect insureds and the state from losses caused by the broker's failure to remit premiums or comply with the law Correct answer.
  3. To pay commissions to the broker's subproducers
  4. To fund the Georgia Insurers Insolvency Pool

Explanation

The bond or deposit requirement secures the broker's faithful performance, including premium remittance and compliance with surplus lines law. It is a consumer and state protection mechanism. It is not a pool funding source or a commission arrangement.

Question 4Surplus Lines Broker Licensing and Regulation

A Georgia surplus lines broker is placing coverage for a commercial insured. Which step must occur before the risk is exported to a nonadmitted insurer?

  1. The insured must sign a waiver of all coverage disputes
  2. The broker must post the policy on the Department's website for public comment
  3. The broker must obtain written approval from the Commissioner for each individual policy
  4. A diligent effort must be made to place the coverage with authorized insurers that declined the risk Correct answer.

Explanation

Surplus lines placement requires a diligent search of the admitted market, documented by declinations, before exporting the risk. The Commissioner does not approve individual surplus lines placements. There is no public comment or dispute waiver requirement.

Question 5Surplus Lines Broker Licensing and Regulation

Georgia's diligent effort requirement for surplus lines is best satisfied by which of the following?

  1. A notation in the broker's calendar that admitted markets were busy
  2. A verbal statement from one admitted carrier's underwriter
  3. Written declinations from authorized insurers or documented contact showing the coverage is unavailable in the admitted market Correct answer.
  4. An email from the insured agreeing to use a nonadmitted insurer

Explanation

The diligent search must be documented, typically through declinations or written evidence that authorized insurers will not accept the risk. Documentation protects the broker and demonstrates compliance. Informal notes or the insured's consent do not establish market unavailability.

Question 6Surplus Lines Broker Licensing and Regulation

Georgia requires that surplus lines policies be procured from which type of insurer?

  1. Any foreign insurer regardless of its status
  2. An insurer that has been denied a certificate of authority in Georgia
  3. A carrier that is in receivership in its domiciliary state
  4. An eligible nonadmitted insurer that appears on the Commissioner's approved list Correct answer.

Explanation

Georgia maintains a list of eligible surplus lines insurers that meet financial and other standards. Placements must be made with insurers on that list. Insurers denied authority or in receivership are not eligible.

Question 7Surplus Lines Broker Licensing and Regulation

A Georgia surplus lines broker places a policy with an eligible nonadmitted insurer. Within what timeframe must the broker file the required report or affidavit with the Department of Insurance?

  1. Never, because surplus lines placements are exempt from reporting
  2. Only at the end of the calendar year
  3. Only if the insured requests it
  4. Within the period specified by Georgia statute and Department rule, generally shortly after the effective date of coverage Correct answer.

Explanation

Georgia requires surplus lines brokers to file reports and affidavits on a schedule set by statute and Department rule, generally soon after placement. These filings support premium tax collection and regulatory oversight. Annual-only or on-request filing is not the standard.

Question 8Surplus Lines Broker Licensing and Regulation

How is the surplus lines premium tax on a Georgia placement generally collected?

  1. The tax is waived for all commercial insureds
  2. The broker collects the tax from the insured and remits it to the state Correct answer.
  3. The nonadmitted insurer remits it directly to the state without broker involvement
  4. The insured files an annual return with the Department of Revenue

Explanation

Georgia imposes a premium tax on surplus lines transactions, and the surplus lines broker is responsible for collecting and remitting it. The nonadmitted insurer is not directly licensed in the state, so the broker acts as the collection point. There is no general waiver for commercial insureds.

Question 9Surplus Lines Broker Licensing and Regulation

A Georgia surplus lines broker discloses to the insured in writing that the insurer is not admitted and is not protected by the Georgia guaranty fund. This disclosure is required because:

  1. Surplus lines insureds are not covered by the Georgia Insurers Insolvency Pool Correct answer.
  2. The disclosure replaces the diligent search requirement
  3. Surplus lines insurers are always admitted carriers
  4. The disclosure transfers premium tax liability to the insured

Explanation

Nonadmitted insurers are not members of the Georgia Insurers Insolvency Pool, so insureds lack guaranty fund protection. Georgia requires written disclosure of this fact. The disclosure does not replace the diligent search or shift premium tax liability.

Question 10Surplus Lines Broker Licensing and Regulation

Which of the following best describes the Georgia Insurers Insolvency Pool's relationship to surplus lines policies?

  1. It covers surplus lines policies only when the broker is unlicensed
  2. It covers surplus lines policies exactly as it covers admitted policies
  3. It does not cover claims under policies issued by nonadmitted insurers Correct answer.
  4. It covers surplus lines policies only for personal lines

Explanation

The Georgia Insurers Insolvency Pool protects insureds of insolvent member insurers, which are admitted carriers. Nonadmitted surplus lines insurers are not pool members, so their policies are not covered. This is why Georgia requires disclosure to surplus lines insureds.

Question 11Surplus Lines Broker Licensing and Regulation

Georgia law permits a surplus lines broker to place a risk with a nonadmitted insurer that is not on the eligible list under which circumstance?

  1. Whenever the insured signs a consent form
  2. Whenever the premium exceeds a statutory threshold
  3. When the Commissioner grants a specific written exception after a showing that coverage cannot be obtained from eligible insurers Correct answer.
  4. Never, under any circumstance

Explanation

Georgia allows placement with a non-listed nonadmitted insurer only through a specific exception granted by the Commissioner upon a proper showing. Insured consent or premium size alone does not authorize such placement. The default rule is that the insurer must be eligible.

Question 12Surplus Lines Broker Licensing and Regulation

A surplus lines broker in Georgia learns that an eligible nonadmitted insurer has been removed from the Commissioner's list. What is the broker's best course of action regarding existing policies?

  1. Cease new placements with that insurer and arrange replacement or nonrenewal consistent with policy terms and Georgia requirements Correct answer.
  2. Continue placing new business until the insurer formally objects
  3. Ignore the removal because the list applies only to admitted carriers
  4. Cancel all existing policies immediately without notice

Explanation

Removal from the eligible list ends the broker's authority to place new business with that insurer. Existing policies are handled through nonrenewal or replacement in accordance with policy terms and notice requirements. Immediate cancellation without notice is not appropriate.

Question 13Surplus Lines Broker Licensing and Regulation

Which of the following describes the continuing education obligation of a Georgia surplus lines broker?

  1. Continuing education is satisfied by paying the premium tax
  2. Surplus lines brokers are exempt from continuing education
  3. The broker must satisfy the continuing education requirements tied to the underlying agent or broker license Correct answer.
  4. Continuing education is required only in the first license year

Explanation

Georgia ties continuing education to the underlying property and casualty agent or broker license. A surplus lines broker must keep that underlying license in good standing, which includes CE compliance. There is no general exemption or tax-based substitute.

Question 14Surplus Lines Broker Licensing and Regulation

A Georgia surplus lines broker's license is up for renewal. Which statement is accurate?

  1. The license must be renewed on the cycle and by the deadline established by the Department, with applicable fees paid Correct answer.
  2. The license renews only if the broker places at least one surplus lines policy that year
  3. The license renews automatically without any action
  4. The license never requires renewal once issued

Explanation

Georgia surplus lines licenses are subject to periodic renewal with fees and deadlines set by the Department. Automatic renewal without action or a production minimum is not the rule. A license is not perpetual after issuance.

Question 15Surplus Lines Broker Licensing and Regulation

Georgia's surplus lines law requires that the broker keep records of surplus lines transactions. Which statement best describes the recordkeeping obligation?

  1. Records may be discarded once the policy is delivered
  2. Records must be maintained for the period required by statute and rule and made available to the Department on request Correct answer.
  3. Records are kept by the nonadmitted insurer alone
  4. Records must be kept only if the insured is a business entity

Explanation

Georgia requires surplus lines brokers to maintain transaction records for a statutory period and produce them for examination. The broker, not the nonadmitted insurer, bears this responsibility. Records cannot be discarded at delivery.

Question 16Surplus Lines Broker Licensing and Regulation

Which of the following would most likely disqualify an applicant from obtaining a Georgia surplus lines broker license?

  1. Residence in a state other than Georgia
  2. A recent felony conviction involving dishonesty, breach of trust, or insurance fraud Correct answer.
  3. Completion of all required continuing education
  4. Ten years of experience as a licensed P&C agent

Explanation

Georgia considers character and fitness, and a recent conviction involving dishonesty, breach of trust, or insurance fraud is a serious disqualifier. Experience, CE completion, and out-of-state residence do not by themselves disqualify an applicant.

Question 17Surplus Lines Broker Licensing and Regulation

A Georgia surplus lines broker wants to share commissions on a surplus lines placement with another producer. Which statement is correct?

  1. Commission sharing requires the Commissioner's approval for each transaction
  2. Commission sharing is prohibited in all circumstances
  3. The sharing must comply with Georgia law, and the other producer must hold the appropriate license Correct answer.
  4. Commission sharing with unlicensed persons is permitted for surplus lines

Explanation

Georgia prohibits sharing commissions with unlicensed persons, so the other producer must be properly licensed and the arrangement must comply with law. Surplus lines does not create an exception allowing unlicensed sharing. Case-by-case Commissioner approval is not required.

Question 18Surplus Lines Broker Licensing and Regulation

Georgia's surplus lines broker license authorizes the licensee to do which of the following?

  1. Act as a claims adjuster for surplus lines claims
  2. Bind coverage with any admitted insurer without an appointment
  3. Place coverage with eligible nonadmitted insurers after a documented diligent search Correct answer.
  4. Issue certificates of authority to nonadmitted insurers

Explanation

The surplus lines license authorizes placement with eligible nonadmitted insurers following a documented diligent search. It does not create authority to bind admitted insurers without appointment or to issue certificates of authority. Claims adjusting is a separate license category.

Question 19Surplus Lines Broker Licensing and Regulation

A surplus lines broker in Georgia places a policy with an eligible nonadmitted insurer. Which document must the broker typically deliver to the insured evidencing the surplus lines nature of the coverage?

  1. A certificate of authority issued by the Commissioner
  2. A power of attorney from the nonadmitted insurer
  3. An admitted-market declination letter from the insured's prior carrier
  4. A written disclosure stating the insurer is not admitted and is not covered by the guaranty fund Correct answer.

Explanation

Georgia requires written disclosure to the insured that the insurer is nonadmitted and that guaranty fund protection does not apply. This disclosure is a core consumer protection in surplus lines. Certificates of authority and powers of attorney are unrelated to this obligation.

Question 20Surplus Lines Broker Licensing and Regulation

An insured in Georgia asks its surplus lines broker whether the policy will be protected if the nonadmitted insurer becomes insolvent. What is the broker's most accurate response?

  1. The policy is fully protected by the Georgia Insurers Insolvency Pool
  2. The policy is protected because the broker holds a surplus lines license
  3. The policy is protected only if the premium exceeded a statutory amount
  4. The policy is not protected by the Georgia Insurers Insolvency Pool because the insurer is nonadmitted Correct answer.

Explanation

The Georgia Insurers Insolvency Pool covers policies of member admitted insurers, not nonadmitted surplus lines carriers. A surplus lines license does not extend pool protection. Premium amount is irrelevant to guaranty fund eligibility.

Question 21Surplus Lines Broker Licensing and Regulation

Georgia's eligible surplus lines insurer list is maintained for which purpose?

  1. To identify nonadmitted insurers that meet the state's standards for surplus lines placements Correct answer.
  2. To list admitted insurers authorized to write workers' compensation
  3. To register insurance producers
  4. To publish consumer complaints against insurers

Explanation

The eligible insurer list identifies nonadmitted carriers that satisfy Georgia's financial and regulatory standards for surplus lines. Brokers may place business only with listed insurers absent a specific exception. The list is not a producer registry or complaint log.

Question 22Surplus Lines Broker Licensing and Regulation

A Georgia surplus lines broker uses an unlicensed individual to solicit surplus lines business. What is the primary regulatory concern?

  1. The concern applies only if a claim is later denied
  2. The concern applies only to admitted insurers
  3. Soliciting insurance without a license violates Georgia licensing law and may subject the broker to discipline Correct answer.
  4. There is no concern because surplus lines is unregulated

Explanation

Georgia requires licensure to solicit insurance, and use of unlicensed solicitors can result in discipline against the broker. Surplus lines activity is regulated, not exempt. The violation exists regardless of later claim outcomes.

Question 23Surplus Lines Broker Licensing and Regulation

Which of the following best describes how Georgia treats a surplus lines broker's responsibility for premium tax when the insured fails to pay the broker?

  1. The broker remains responsible for remitting premium tax based on the transaction as required by law Correct answer.
  2. The broker is excused from premium tax if the insured does not pay
  3. The tax is automatically waived
  4. The nonadmitted insurer becomes responsible for the tax

Explanation

The surplus lines broker is the party responsible for premium tax collection and remittance under Georgia law. The insured's failure to pay the broker does not eliminate the statutory obligation. The nonadmitted insurer is not the Georgia taxpayer for this purpose.

Question 24Surplus Lines Broker Licensing and Regulation

A Georgia surplus lines broker discovers that a placement was made with an insurer that was not eligible at the time of binding. What is the most appropriate compliance response?

  1. Notify the Department and remediate the placement promptly, including replacing the coverage if necessary Correct answer.
  2. Wait until renewal to correct the insurer
  3. Bill the insured an additional fee to cure the defect
  4. Conceal the error to avoid discipline

Explanation

Placing with an ineligible insurer is a compliance failure that should be disclosed and corrected promptly, often by replacing coverage. Concealment aggravates the violation. Waiting until renewal leaves the insured exposed and the violation uncured.

Question 25Surplus Lines Broker Licensing and Regulation

Georgia's surplus lines statutes are enforced primarily by which authority?

  1. The Commissioner of Insurance through the Department of Insurance Correct answer.
  2. The Georgia Attorney General's consumer division
  3. Local county superior courts
  4. The federal Department of Labor

Explanation

The Commissioner of Insurance administers and enforces Georgia insurance law, including surplus lines regulation, through the Department of Insurance. Other agencies and courts may hear related matters but do not administer the licensing scheme. Federal labor authorities have no role here.

Question 26Surplus Lines Broker Licensing and Regulation

Georgia's surplus lines law defines a surplus lines broker as a licensee who places coverage with nonadmitted insurers for insureds whose risks cannot be procured from admitted carriers. What must happen before a surplus lines broker may lawfully place a risk with a nonadmitted insurer?

  1. The broker must secure a reinsurance commitment from an admitted carrier
  2. The broker must obtain written approval from the Commissioner for each individual placement
  3. The broker must document a diligent effort to place the risk with authorized insurers that declined or could not write it Correct answer.
  4. The broker must first offer the risk to the Georgia Insurers Insolvency Pool

Explanation

Georgia's surplus lines framework rests on the diligent-effort doctrine: nonadmitted insurers are a market of last resort, so the broker must first show that authorized insurers declined or were unable to write the coverage. That search is documented in the broker's records rather than approved case by case by the Commissioner.

Question 27Surplus Lines Broker Licensing and Regulation

A Georgia surplus lines broker maintains a separate account for funds received from insureds on surplus lines placements. Which statement best describes the handling of funds held in that fiduciary capacity?

  1. The funds may be retained as advance commission before the premium is remitted
  2. The funds may be commingled with the broker's operating account if a running balance is kept
  3. The funds must be forwarded to the Commissioner until the policy is delivered
  4. The funds must be held in trust and may not be used for the broker's own purposes Correct answer.

Explanation

Premium collected on a surplus lines placement is held in a fiduciary capacity for the insured and the insurer, so it must be segregated and cannot be diverted to the broker's own use. Commingling with operating funds and drawing unearned commission from trust money both breach that duty.

Question 28Surplus Lines Broker Licensing and Regulation

Which entity in Georgia is charged with administering the surplus lines law, including maintaining the list of eligible nonadmitted insurers?

  1. The Office of the Commissioner of Insurance and Safety Fire Correct answer.
  2. The state Department of Revenue
  3. The Georgia Insurers Insolvency Pool
  4. The Georgia Surplus Lines Association

Explanation

The Commissioner of Insurance and Safety Fire administers the surplus lines statutes, including the eligibility list of nonadmitted insurers and disciplinary authority over licensees. The Department of Revenue handles tax collection mechanics, but it does not administer the licensing or eligibility provisions.

Question 29Surplus Lines Broker Licensing and Regulation

A Georgia-licensed surplus lines broker is approached by an insured whose commercial property risk has been declined by several admitted insurers. The broker wants to place the coverage offshore. Which requirement applies to the nonadmitted insurer the broker selects?

  1. It must be owned by a Georgia-domiciled holding company
  2. It must post a surety bond with the state treasury
  3. It must appear on the Commissioner's list of eligible nonadmitted insurers Correct answer.
  4. It must be licensed in at least one other U.S. state

Explanation

Georgia requires surplus lines placements to be made with nonadmitted insurers that the Commissioner has determined to be eligible, which generally means meeting capital, solvency, and reporting standards. A license in another state or a bond posted with Georgia does not substitute for placement on that list.

Question 30Surplus Lines Broker Licensing and Regulation

An insured's surplus lines policy is issued with a binder effective immediately, but the broker delays issuing the required written disclosure. What is the broker's regulatory exposure?

  1. The placement is automatically void and the premium must be refunded
  2. None, because the disclosure obligation is satisfied by the policy jacket language
  3. The broker has violated the disclosure requirement and may face disciplinary action Correct answer.
  4. None, because disclosure is required only for personal lines placements

Explanation

Georgia requires the surplus lines broker to give the insured written notice that the insurer is nonadmitted and not protected by guaranty-fund coverage. Failing to deliver that notice is a licensing violation subject to Commissioner discipline, though it does not automatically void the policy.

Question 31Surplus Lines Broker Licensing and Regulation

How does Georgia treat a surplus lines broker's duty to remit premium tax when the broker collects premium from the insured but the insured later disputes the amount?

  1. The broker's tax obligation is unaffected by the private dispute and the tax must be remitted when due Correct answer.
  2. The broker must remit the tax only after the insurer confirms receipt of premium
  3. The broker may withhold the tax indefinitely until the dispute is resolved
  4. The broker may shift the tax obligation to the insured by contract

Explanation

Premium tax on a surplus lines placement is the broker's statutory responsibility and is not suspended by a billing dispute between broker and insured. The broker must remit the tax on the statutory schedule and pursue the disputed balance separately.

Question 32Surplus Lines Broker Licensing and Regulation

A Georgia surplus lines broker's license lapses for nonrenewal. What is the effect on the broker's authority to continue servicing existing surplus lines policies?

  1. The broker may continue all activities until the next license cycle
  2. The broker's authority continues if the eligible insurer agrees in writing
  3. The broker's authority ends entirely and continued activity may constitute unlicensed insurance activity Correct answer.
  4. The broker may service existing policies but may not place new surplus lines business

Explanation

Once the license lapses, the person no longer holds surplus lines authority, and continuing to transact that business can be treated as unlicensed activity subject to penalty. Servicing existing business does not create an exception unless the broker holds a valid license or a limited authority recognized by the Commissioner.

Question 33Surplus Lines Broker Licensing and Regulation

Which statement best describes the standard a Georgia surplus lines broker must meet when exporting a risk to the nonadmitted market?

  1. The broker must show that the full coverage sought could not be procured from authorized insurers Correct answer.
  2. The broker must show that the nonadmitted premium is lower than any admitted quote
  3. The broker must show that the insured requested nonadmitted coverage in writing
  4. The broker must show that no other surplus lines broker would accept the risk

Explanation

The export test is about availability of the coverage from authorized insurers, not price or consumer preference. The broker documents the authorized-market search, and a mere written request from the insured does not substitute for that showing.

Question 34Surplus Lines Broker Licensing and Regulation

A Georgia surplus lines broker is reviewing the eligible insurer list and finds that an insurer it has used for years is now shown as ineligible. Which action is required for future placements?

  1. Place new business only if the insured signs a waiver
  2. Place no new business with the insurer unless eligibility is restored Correct answer.
  3. Continue placing business with the insurer until existing policies expire
  4. Place new business only if the insurer posts additional capital with Georgia

Explanation

Once an insurer is removed from the eligible list, a Georgia surplus lines broker may not place new business with it; eligibility must be restored before further placements. Existing policies are typically handled through cancellation or replacement in accordance with the policy terms and applicable law.

Question 35Surplus Lines Broker Licensing and Regulation

Which of the following is a core purpose of Georgia's requirement that surplus lines brokers be separately licensed rather than operating under a general producer license alone?

  1. To require Commissioner approval of every surplus lines policy form
  2. To guarantee that surplus lines premiums are lower than admitted-market rates
  3. To ensure placements are made only with eligible insurers and that the special disclosure and tax duties are met Correct answer.
  4. To limit surplus lines placements to personal lines coverage

Explanation

Separate surplus lines licensing exists because placements with nonadmitted insurers carry distinct risks for consumers, so the state imposes eligibility, disclosure, recordkeeping, and tax duties on the licensee. Those duties are not part of the ordinary producer license framework.

Question 36Surplus Lines Broker Licensing and Regulation

A Georgia surplus lines broker delegates routine clerical tasks to an unlicensed assistant. Which task may the assistant lawfully perform?

  1. Negotiating the premium with the nonadmitted insurer on the broker's behalf
  2. Soliciting new surplus lines accounts by telephone
  3. Filing and mailing documents under the broker's supervision Correct answer.
  4. Explaining coverage terms and recommending a surplus lines insurer to a prospective insured

Explanation

Unlicensed staff may perform clerical and administrative functions such as filing and mailing under supervision, but they may not solicit, negotiate, or advise on insurance. Those activities require a license because they involve transacting the business of insurance.

Question 37Surplus Lines Broker Licensing and Regulation

An insured asks a Georgia surplus lines broker to place coverage with a specific nonadmitted insurer that is not on the Commissioner's eligible list. The insurer is highly rated by a private rating service. What is the broker's proper response?

  1. Decline to place with that insurer unless it becomes eligible under Georgia standards Correct answer.
  2. Place the coverage but disclose the insurer's ineligibility to the insured
  3. Place the coverage because the private rating satisfies Georgia's eligibility standard
  4. Place the coverage only if the insured is a large commercial account

Explanation

A private rating does not substitute for the Commissioner's eligibility determination, so a Georgia broker may not place new business with an insurer that is not on the list. The size or sophistication of the insured does not create an exception.

Question 38Surplus Lines Broker Licensing and Regulation

Which statement accurately describes the relationship between a Georgia surplus lines broker's license and the broker's ability to place business with admitted insurers?

  1. The surplus lines license authorizes placement with both admitted and nonadmitted insurers without further authority
  2. The surplus lines license authorizes only personal lines surplus placements
  3. The surplus lines license authorizes placement only where no admitted insurer exists in any state
  4. The surplus lines license authorizes placement with nonadmitted insurers, while admitted-market placements require the appropriate producer authority Correct answer.

Explanation

Surplus lines authority is specific to nonadmitted insurers; placing business with admitted carriers requires the applicable producer license. The two authorities are distinct even when held by the same person.

Question 39Surplus Lines Broker Licensing and Regulation

A Georgia surplus lines broker places a policy and later discovers that the insured misrepresented a material fact on the application. Which statement best describes the broker's regulatory position?

  1. The broker's duty to maintain accurate placement records and disclosures continues regardless of the insured's conduct Correct answer.
  2. The broker may alter the application to correct the misrepresentation after binding
  3. The broker must report the misrepresentation to the Commissioner within a set statutory period
  4. The broker is automatically liable for the insurer's claim costs

Explanation

The broker's recordkeeping, disclosure, and tax duties are independent of the insured's honesty, and the broker remains accountable for accurate documentation of the placement. Altering an application after binding would itself be a recordkeeping violation.

Question 40Surplus Lines Broker Licensing and Regulation

Which of the following best describes how Georgia's surplus lines broker records must be maintained?

  1. They must be filed with the Commissioner each quarter
  2. They must be kept for the period required by statute and made available to the Commissioner on request Correct answer.
  3. They may be discarded once the policy is delivered to the insured
  4. They must be kept only if the premium exceeds a statutory threshold

Explanation

Georgia requires surplus lines brokers to keep records of each placement for the statutory retention period and to produce them for examination by the Commissioner. Discarding them after delivery or filing them quarterly with the state does not match the statutory scheme.

Question 41Surplus Lines Broker Licensing and Regulation

A Georgia surplus lines broker wants to pay a portion of the commission on a surplus lines placement to a licensed Georgia producer who did not participate in the placement. Which statement is accurate?

  1. Commission sharing is permitted with any licensed producer regardless of participation
  2. Commission sharing with an unlicensed person is permitted if disclosed to the insured
  3. Commission sharing is prohibited in all circumstances for surplus lines placements
  4. Commission sharing is permitted only with licensed persons and must comply with the applicable compensation rules Correct answer.

Explanation

Sharing surplus lines compensation is limited to properly licensed persons and must follow the rules governing compensation and disclosure. Paying an unlicensed person for the placement would amount to sharing commissions with someone not authorized to transact insurance.

Question 42Surplus Lines Broker Licensing and Regulation

What is the consequence under Georgia law for a surplus lines broker who knowingly places coverage with an insurer that is not eligible?

  1. The insured must pay a double premium tax
  2. The broker is subject to disciplinary action, including license suspension or revocation and monetary penalties Correct answer.
  3. The Commissioner must automatically issue a new license to the insurer
  4. The placement is valid but the broker forfeits the commission only

Explanation

Placing business with an ineligible insurer is a violation of the surplus lines statutes, exposing the broker to Commissioner discipline such as suspension, revocation, or fines. The violation does not transform the insurer into an eligible one or create a special tax on the insured.

Question 43Surplus Lines Broker Licensing and Regulation

An insured with a Georgia surplus lines policy asks whether the Georgia Insurers Insolvency Pool will pay a claim if the nonadmitted insurer fails. What is the accurate answer?

  1. The Pool covers surplus lines claims up to the same limits as admitted policies
  2. The Pool does not protect surplus lines policies, which is why written disclosure of that fact is required Correct answer.
  3. The Pool covers surplus lines claims only if the broker paid the premium tax
  4. The Pool covers surplus lines claims only for personal lines insureds

Explanation

The Georgia Insurers Insolvency Pool backs claims of insolvent admitted insurers, not nonadmitted insurers, and the surplus lines broker must disclose that lack of guaranty-fund protection in writing. Payment of premium tax does not extend Pool coverage to surplus lines policies.

Question 44Surplus Lines Broker Licensing and Regulation

A Georgia surplus lines broker is preparing for a market conduct examination. Which set of records is most directly relevant to demonstrating compliance with the diligent-effort requirement?

  1. The broker's own advertising materials
  2. Documentation of declinations or insufficient capacity from authorized insurers for the risk Correct answer.
  3. The nonadmitted insurer's annual report to its domiciliary regulator
  4. The insured's financial statements

Explanation

Compliance with the diligent-effort requirement is shown by records of the authorized-market search, such as declinations or evidence that admitted insurers lacked capacity for the risk. Advertising and third-party financial documents do not demonstrate that search.

Question 45Surplus Lines Broker Licensing and Regulation

Which statement best describes the Georgia Commissioner's authority over the eligible nonadmitted insurer list?

  1. The list may be changed only by an act of the General Assembly
  2. The list is maintained by the NAIC without state involvement
  3. The list is fixed by statute and cannot be changed by the Commissioner
  4. The Commissioner may add or remove insurers based on statutory eligibility standards Correct answer.

Explanation

The Commissioner maintains the eligible insurer list and may add or remove insurers as eligibility standards are met or lost. The list is administrative rather than statutory or controlled by an outside body.

Question 46Surplus Lines Broker Licensing and Regulation

A Georgia surplus lines broker accepts a risk that an admitted insurer was willing to write at standard rates. What is the broker's primary regulatory problem?

  1. The broker failed to establish that the coverage could not be procured from authorized insurers Correct answer.
  2. The broker failed to notify the Insolvency Pool
  3. The broker failed to charge a surplus lines surcharge
  4. The broker failed to obtain the Commissioner's prior written consent

Explanation

Surplus lines placement requires that the coverage could not be procured from authorized insurers, so exporting a risk that an admitted insurer would write at standard rates violates the diligent-effort requirement. There is no Commissioner consent step or Insolvency Pool notice for ordinary placements.

Question 47Surplus Lines Broker Licensing and Regulation

Which of the following best describes the continuing education obligation of a Georgia surplus lines broker?

  1. No continuing education is required once the surplus lines license is issued
  2. Continuing education is satisfied automatically by paying premium tax on time
  3. The licensee must satisfy the continuing education requirements applicable to the license, including any surplus lines-specific hours Correct answer.
  4. Continuing education must be completed only in the first license term

Explanation

Georgia licensees must meet continuing education requirements each renewal cycle, including any surplus lines-specific component the Commissioner requires. Timely tax payment and completion of the first term do not satisfy or excuse the obligation.

Question 48Surplus Lines Broker Licensing and Regulation

A Georgia surplus lines broker is asked to place coverage on a risk located outside Georgia for an insured domiciled in Georgia. Which consideration most directly affects the broker's regulatory obligations?

  1. The broker may ignore Georgia requirements because the risk is out of state
  2. The location of the risk may bring the placement under the surplus lines laws of another state, affecting tax and eligibility duties Correct answer.
  3. Only Georgia law applies because the insured is domiciled in Georgia
  4. The placement is prohibited unless the Commissioner approves it in advance

Explanation

Surplus lines regulation generally follows the location of the risk, so a multi-state placement can trigger another state's eligibility, disclosure, and tax rules in addition to Georgia's. Domicile of the insured does not override the risk-location principle, and no advance Commissioner approval is required.

Question 49Surplus Lines Broker Licensing and Regulation

Which of the following best describes a Georgia surplus lines broker's obligation when the broker receives a written complaint from an insured about a nonadmitted insurer's claims handling?

  1. The broker must respond to the insured and cooperate with any Commissioner inquiry into the matter Correct answer.
  2. The broker must refer the complaint to the Insolvency Pool
  3. The broker must adjudicate the claim and pay it if the insurer refuses
  4. The broker must immediately surrender the surplus lines license

Explanation

The broker's role is to respond to the insured and cooperate with regulatory inquiries, not to adjudicate claims or act as the insurer. Surrendering the license or referring the matter to the Insolvency Pool is not the required response to a claims complaint.

Question 50Surplus Lines Broker Licensing and Regulation

Georgia's surplus lines framework treats the nonadmitted market as a supplement to the admitted market. Which statement best reflects that principle?

  1. Surplus lines insurers must offer rates comparable to the admitted market
  2. Surplus lines placements must be approved by the insured's lender
  3. Nonadmitted insurers may write any risk without restriction once they are eligible
  4. Surplus lines placement is appropriate only when the admitted market cannot provide the coverage sought Correct answer.

Explanation

The surplus lines market is a residual market that fills gaps when authorized insurers cannot or will not write a risk; eligibility does not give nonadmitted insurers unrestricted freedom. Rate comparability and lender approval are not conditions of a lawful surplus lines placement.