Michigan Surplus Lines study guide
Michigan Surplus Lines · Work through your exam, one topic at a time.
The Michigan surplus lines license authorizes a licensed property and casualty producer to place coverage with eligible non-admitted insurers when the admitted market cannot or will not write the risk. It serves independent agents and brokers who handle hard-to-place accounts - coastal and inland wind exposure, vacant or distressed property, unusual commercial operations, high-hazard liability, and specialty programs - and who are willing to take on the extra documentation and tax duties that come with the authority. The Michigan Surplus Lines study guide has 9 sections and about 2,921 words.
01Michigan Insurance Law and Regulation
Michigan regulates surplus lines through Chapter 19 of the Insurance Code, MCL 500.1901 et seq. The Director of the Department of Insurance and Financial Services (DIFS) administers the chapter: maintaining the list of eligible unauthorized insurers, licensing surplus lines agents, receiving reports and premium tax, conducting market conduct examinations, and imposing penalties.
346 words, about 2 min02Surplus Lines Definitions and Eligibility
"Surplus lines insurance" is insurance that cannot be procured from authorized insurers in the admitted market. A "surplus lines agent" is a specially licensed producer who may place that coverage with an eligible unauthorized insurer.
356 words, about 2 min03Diligent Search and Declination Requirements
Before placing surplus lines, the surplus lines agent must make a documented diligent search of the authorized market. The file should identify the authorized insurers approached, the dates, the coverage requested, and the reason each declined or could not provide the full coverage.
359 words, about 2 min04Placement and Procurement of Surplus Lines Coverage
The placement must go through a Michigan-licensed surplus lines agent. The insured cannot simply buy directly from an unauthorized insurer.
330 words, about 2 min05Unauthorized Insurers and Trust Fund Compliance
Michigan prohibits transactions with unauthorized insurers except as Chapter 19 permits. Surplus lines is the main exception, and it applies only when the insurer is eligible and the placement complies with search, notice, and tax rules.
332 words, about 2 min06Policyholder Notices, Disclosures, and Documentation
Michigan requires the insured to be told, in writing and prominently, that the policy is issued by an unauthorized insurer, that the insurer is not regulated by DIFS in the same manner as an admitted carrier, and that the policy is not protected by the Michigan guaranty association. The notice should be clear enough that a reasonable buyer understands the lack of guaranty fund protection.
300 words, about 2 min07Premium Tax, Stamping Fees, and Reporting
Michigan imposes a surplus lines premium tax on gross premiums. The surplus lines agent is responsible for reporting and remitting the tax; it is not a commission deduction and is not calculated on net premium after commission.
304 words, about 2 min08Producer Licensing, Commissions, and Conduct
A producer who places surplus lines must hold a Michigan surplus lines agent license in addition to the underlying property and casualty authority. Michigan requires a resident license, qualifying experience or examination, and a surety bond (commonly $50,000) to protect against fiduciary failures.
319 words, about 2 min09Surplus Lines Insurance Principles and Coverages
Surplus lines exists for risks the admitted market will not write on standard terms: unusual occupancies, high limits, catastrophic exposures, emerging liabilities, manuscript forms, and nonstandard insureds. Surplus lines insurers are not bound by the admitted market’s rate and form filing system, so coverage can be tailored.
275 words, about 1 min