Iowa Surplus Lines Taxation and Reporting
Domain 7 tests the money side of surplus lines: what tax is due, who files, and what protections do not apply.
Premium tax
- Iowa imposes a surplus lines premium tax on gross surplus lines premiums. The rate is 1% under Iowa law; the broker self-assesses and remits it.
- Tax generally applies to the premium charged for the surplus lines coverage, not to the admitted portion of a layered program. Fees and charges may be included if they are part of the premium.
- The annual return is filed with the Iowa Insurance Division, generally by March 1 for the prior calendar year, with a schedule of policies and premiums. Keep supporting records for audit.
Stamping, residual markets, guaranty fund
- Iowa does not use a state stamping office in the manner of some large surplus lines states; the broker files and pays directly. Do not add a stamping fee unless a lawful service fee is separately disclosed.
- Residual markets such as the Iowa FAIR Plan and the Iowa Automobile Insurance Plan are admitted-market mechanisms; surplus lines placements do not qualify for them.
- The Iowa Insurance Guaranty Association does not cover surplus lines policies. The insured bears insurer insolvency risk.
Worked example: A broker writes $200,000 of Iowa surplus lines premium. Reasoning: at 1%, the tax is $2,000, reported on the annual return with the policy schedule; the broker cannot offset admitted-market premium or claim guaranty fund coverage.
Traps: using an admitted premium tax rate; forgetting tax on endorsement premium; assuming a stamping fee is mandatory; telling an insured the guaranty fund applies.