Indiana Surplus Lines flashcards

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Indiana surplus lines law

Indiana's surplus lines framework is codified in IC 27-5-5 and administered by the Indiana Department of Insurance; it governs licensing, diligent search, eligible insurers, tax, and reporting.

Surplus lines insurance

Coverage placed with an insurer not authorized to transact insurance in Indiana when authorized insurers cannot provide the coverage; it is legal only through a licensed surplus lines producer.

Commissioner oversight

The Indiana insurance commissioner enforces surplus lines statutes, issues licenses, maintains eligible insurer standards, receives reports and taxes, and may penalize noncompliant producers or insurers.

NRRA home-state rule

Under the Nonadmitted and Reinsurance Reform Act, multistate surplus lines premium tax is generally paid to the insured's home state, and that state's eligibility and diligence rules govern.

Guaranty fund exclusion

Surplus lines insurers are not members of the Indiana insurance guaranty association, so policyholders have no guaranty-fund protection if the nonadmitted insurer becomes insolvent.

Unauthorized insurer

An insurer without an Indiana certificate of authority; it may write surplus lines only if eligible and only through a licensed surplus lines producer after required diligence.

Diligent search

Documented effort to obtain coverage from authorized Indiana insurers on the same risk, terms, and conditions before placing the risk with a nonadmitted surplus lines insurer.

Declaration documentation

The surplus lines file should identify authorized insurers contacted and record their declinations or inability to provide the requested coverage, terms, or capacity.

Exempt commercial purchaser

A sophisticated commercial insured meeting statutory size and sophistication tests may allow the producer to waive diligent search, provided required notice and disclosures are given.

Export list placement

Indiana may identify coverages or classes on an export list that can be placed with eligible surplus lines insurers without a full diligent search.

Authorized market available

If an authorized insurer will write the risk on substantially the same terms and conditions, the producer may not place it in the surplus lines market.

Surplus lines producer license

A separate Indiana license authorizing a property and casualty producer to place surplus lines coverage with eligible nonadmitted insurers; it must be current before any placement.

Nonresident reciprocity

A nonresident surplus lines producer may qualify through the producer's home-state license when that state grants reciprocal treatment and the producer meets Indiana requirements.

Diligence file retention

Indiana requires surplus lines producers to keep records of diligent search, declinations, policy details, tax, and disclosures for the statutory retention period, commonly five years.

Record contents

Required records include the policy, premium and tax data, evidence of insurer eligibility, diligent search documentation, disclosure notices, and proof of filing or payment.

Eligibility check duty

Before placement and at renewal, the producer must confirm that the surplus lines insurer is eligible in Indiana and authorized for the line in its domiciliary jurisdiction.

Licensee misconduct

Placing surplus lines without a license, using an ineligible insurer, or failing to document diligence can lead to license suspension, revocation, fines, or other commissioner action.

Surplus lines premium tax

Indiana imposes premium tax on gross surplus lines premiums at the statutory rate, currently three percent; the producer collects and remits it as required by the commissioner.

Tax filing schedule

Surplus lines producers file periodic reports and remit tax on the schedule and forms prescribed by the Indiana Department of Insurance, with penalties for late filing or payment.

Stamping fee

A stamping fee is a separate administrative charge, distinct from premium tax, that may be imposed when a surplus lines association or stamping office processes a policy filing.

Cancellation tax adjustment

When a surplus lines policy is cancelled or premium is returned, the taxable premium and tax are adjusted to reflect the actual earned premium for the coverage period.

Multistate premium allocation

For multistate surplus lines risks, premium is allocated among states and, under NRRA, tax is generally remitted to the insured's home state under that state's rules.

Eligible surplus lines insurer

A nonadmitted insurer that meets Indiana standards for solvency, capital or surplus, domiciliary authorization, and good standing and is permitted to write surplus lines in the state.

Domiciliary authorization

The surplus lines insurer must be authorized in its home jurisdiction to write the same line or class of insurance it proposes to write in Indiana.

Commissioner removal

The Indiana insurance commissioner may suspend or remove an insurer from the eligible surplus lines list for insolvency, failure to meet standards, or other regulatory violations.

Export list

A list of coverages or classes that Indiana treats as eligible for surplus lines placement without full diligent search because the authorized market is limited or nonexistent.

Alien insurer eligibility

An alien surplus lines insurer must satisfy Indiana and NAIC eligibility requirements, including domiciliary regulation and listing on accepted international insurer databases where required.

Nonadmitted insurer notice

Before placement, the producer must give the insured a written notice that the insurer is not admitted in Indiana and is not subject to the state's rate and form filing rules.

Guaranty association disclosure

The insured must be told in writing that the surplus lines insurer is not covered by the Indiana guaranty association and that insolvency protection may be unavailable.

Written acknowledgment

Indiana requires evidence that the insured received and acknowledged the surplus lines disclosure, often through a signed notice retained in the producer's file.

Fee disclosure

Surplus lines producers must disclose separately stated fees or charges and avoid misleading the insured about premium, tax, commission, or other compensation.

Unfair trade practices

Surplus lines transactions remain subject to Indiana insurance unfair trade practice prohibitions, including misrepresentation, false advertising, and improper inducements.