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Louisiana Surplus Lines study materials
Louisiana Surplus Lines study resources

Louisiana Surplus Lines: Surplus Lines Law and Regulation

Louisiana Surplus Lines · Work through your exam, one topic at a time.

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Surplus Lines Law and Regulation

Domain focus

Surplus Lines Law and Regulation tests placement of coverage with insurers not authorized in Louisiana. The exam focuses on broker licensing, eligible insurers, diligent effort, disclosure, premium tax, and the NRRA home-state rule.

Core rules

  • A surplus lines broker must hold a Louisiana producer license and a surplus lines broker license. The insurer must be an eligible surplus lines insurer, typically listed on the NAIC Quarterly Listing of Alien Insurers or otherwise approved; placing with an unlisted unauthorized insurer is a violation.
  • Before placing a risk, the broker must document a diligent effort to obtain coverage from authorized insurers. Louisiana expects declinations from authorized carriers; a practical benchmark is at least three declinations, and the file should show dates, insurers contacted, and reasons. Exempt commercial purchasers can be placed without the full search if statutory criteria are met.
  • The broker must give the insured a written disclosure that the insurer is not authorized and is not protected by LIGA, and must keep the signed acknowledgment. Records are retained for the statutory period, commonly at least five years.
  • Premium tax is paid to Louisiana when Louisiana is the home state. Under NRRA, the insured's home state governs licensing and tax; other states cannot demand a separate surplus lines tax on a multistate risk.
  • Surplus lines may not be used merely for convenience; coverage must be unavailable from authorized insurers.

Worked example

A Louisiana manufacturer seeks $5 million property coverage. The broker contacts three authorized insurers; each declines because of wildfire exposure. The broker verifies that the proposed carrier is on the eligible list, obtains a signed disclosure, places the risk, and remits Louisiana premium tax. Because Louisiana is the insured's home state, Louisiana rules apply even though a Texas location is scheduled. If the insurer later fails, LIGA does not respond.

Traps

Confusing a producer license with a surplus lines license; skipping the eligible-insurer check; failing to document declinations; using an unapproved disclosure form; and sending tax to the state where the risk is located instead of the home state.