Louisiana Surplus Lines key terms

Coverage placed with an eligible, non-admitted insurer when no admitted carrier in Louisiana will write the risk. It is lawful only after a diligent search of the admitted market and is regulated differently from standard admitted business.

An insurer not licensed by the Louisiana Department of Insurance to transact that line of business in the state. It does not participate in guaranty fund protection and may be used only through the surplus lines process.

A non-admitted insurer that meets Louisiana's standards for financial strength, management, and reporting and appears on the Commissioner's approved list, making it acceptable for surplus lines placements in the state.

A Louisiana-licensed producer holding the surplus lines authority who may place business with eligible non-admitted insurers. The broker must document the diligent search, remit premium tax, and keep records of each placement.

The documented search of admitted insurers authorized to write the class of business before placing coverage with a non-admitted carrier. Louisiana requires a written record showing declinations or lack of coverage from admitted markets.

A list of classes of business the Commissioner has determined may be placed with eligible surplus lines insurers without a separate diligent search for each individual risk, simplifying placement for hard-to-place exposures.

A tax imposed on surplus lines premium written in Louisiana, collected by the surplus lines broker and remitted to the state on the required schedule. The rate and reporting rules are set by Louisiana law.

Insurance placed with an insurer that is neither admitted nor eligible as a surplus lines carrier in Louisiana. Such placements are generally unlawful and can expose the producer and insured to penalties and lack of protection.

The elected official who heads the Louisiana Department of Insurance, enforces the Insurance Code, issues licenses, examines insurers, and adopts rules governing admitted and surplus lines markets.

The state agency that regulates the business of insurance in Louisiana, including licensing producers and insurers, market conduct and financial examinations, consumer complaints, and enforcement of the Insurance Code.

The body of Louisiana statutes governing insurance, found primarily in Title 22 of the Louisiana Revised Statutes. It sets licensing, solvency, policy form, rating, and market conduct requirements.

The license issued by the Commissioner that authorizes an insurer to transact specified lines of insurance in Louisiana. Without it, an insurer is non-admitted for those lines.

An insurer holding a Louisiana certificate of authority for the line of business being written. Admitted insurers are subject to rate and form filing rules and are backed by the state guaranty association.

The credential issued by the Commissioner allowing a person to sell, solicit, or negotiate insurance in Louisiana. It is line-specific and must be maintained through continuing education and timely renewal.

The formal notice an insurer files with the Department of Insurance authorizing a licensed producer to act on its behalf. A producer generally may not submit business for an insurer without a valid appointment.

Required periodic instruction Louisiana licensees must complete to renew a producer license, including ethics hours and line-specific coursework, intended to keep agents current on law and products.

A statutory entity that pays covered claims of insolvent admitted insurers doing business in Louisiana, funded by assessments on member insurers. It does not cover surplus lines or non-admitted insurers.

Prohibited conduct in the business of insurance, such as misrepresentation, twisting, rebating, and unfair claim settlement, enforced by the Commissioner under Louisiana law with penalties and license action.

Offering part of a producer's commission or anything of value to an insured as an inducement to buy insurance, when not specified in the policy. Louisiana generally prohibits it as an unfair trade practice.

A producer's obligation to hold premiums and other funds belonging to insurers or insureds in trust and account for them properly. Misuse of premium funds can lead to license revocation and criminal exposure.

A liability insurance company owned by its insureds, formed under federal law and chartered in one state, that may operate in Louisiana subject to registration requirements rather than standard admitted licensing.

An insurer organized under the laws of a country other than the United States. In Louisiana it must meet trust and eligibility standards, and may write surplus lines only if approved as an eligible insurer.

An insurer organized under the laws of a state other than Louisiana, as opposed to a domestic insurer formed in Louisiana. Foreign insurers must be authorized or eligible to write Louisiana business.

An insurer incorporated or organized under Louisiana law. Domestic insurers are examined and regulated directly by the Commissioner and must maintain the capital and surplus required by statute.

The amount an insured pays an insurer for coverage, calculated from rates applied to exposure units. In surplus lines, premium is subject to state premium tax and broker recordkeeping rules.

The price per unit of insurance exposure that, multiplied by the number of units, produces the premium. Admitted insurers file rates with the state; surplus lines rates are not filed.

Incurred losses divided by earned premium over a period, expressed as a percentage. It indicates underwriting profitability and helps explain why admitted markets may decline a risk.

The process of evaluating an applicant's risk, deciding whether to accept it, and setting terms, conditions, and premium. Underwriters may decline risks that then seek surplus lines coverage.

A financial stake in the preservation of the person or property insured, such that loss would cause the insured economic harm. Coverage is generally unenforceable without it at policy inception.

The principle that insurance restores the insured to approximately the financial position held before a loss, without allowing profit from the loss. It underlies property valuation and recovery rules.

The mutual duty of insured and insurer to deal honestly and disclose material facts. Breach by the insured, such as concealment on an application, can allow the insurer to rescind coverage.

A false statement on an insurance application that would affect an insurer's decision to accept the risk or set premium. It may give the insurer grounds to void the policy.

A policy condition or promise by the insured that must be met for coverage to apply. Louisiana law generally treats warranties more leniently than common law, focusing on materiality.

A property policy provision requiring the insured to carry coverage equal to a stated percentage of value or face a reduced claim payment. It penalizes underinsurance at the time of loss.

A property loss valuation method equal to replacement cost less depreciation. It is a common basis of settlement and usually produces a lower recovery than replacement cost coverage.

A valuation method that pays to repair or replace damaged property with new property of like kind and quality, without deducting depreciation, subject to policy limits and conditions.

An accident or continuous exposure to harmful conditions that causes bodily injury or property damage during the policy period. It is the trigger used in most general liability policies.

A liability policy that covers claims first made against the insured during the policy period, often with a retroactive date, rather than claims arising from occurrences during that period.

A standard liability policy covering third-party bodily injury, property damage, and personal and advertising injury arising from business operations, premises, and completed products or work.