Missouri Surplus Lines cheat sheet

Missouri's surplus lines law is codified in Chapter 384, RSMo, and is administered by the Director of the Missouri Department of Commerce and Insurance (Division of Insurance).

A surplus lines placement is permitted only when the full amount of insurance required cannot be procured from authorized insurers after a diligent effort; the producer must be able to document that effort.

Only an eligible unauthorized insurer may be used: the insurer must meet statutory capital, surplus, and financial reporting standards, and alien insurers must appear on the NAIC Quarterly Listing of Alien Insurers.

Every surplus lines policy must carry the required notice, typically on the declarations page, stating that the insurer is not licensed in Missouri, is not subject to state rate and form review, and is not protected by a guaranty association.

The Missouri property and casualty guaranty association covers claims against insolvent licensed insurers only; it never responds to obligations of unauthorized or surplus lines insurers.

Surplus lines premium tax in Missouri is 2% of gross premium, collected by the surplus lines producer and remitted directly to the Department; Missouri has no stamping office intermediary.

Surplus lines producers must keep records of each placement, including the diligent-search evidence, and make them available for examination by the Director.

Missouri resident producer licenses renew biennially on a cycle tied to the licensee's birth year, and resident producers complete 16 hours of continuing education per term, including 3 hours of ethics.

Missouri's Unfair Trade Practices Act prohibits misrepresentation, twisting, rebating, boycott or coercion, unfair discrimination, and unfair claim settlement practices; insurers must acknowledge claim notice within 10 days.

Actual cash value = replacement cost minus depreciation; it measures the depreciated value of the damaged property rather than the cost to buy new.

Property coinsurance penalty: payment = (limit carried / limit required) x loss, with the result never exceeding the policy limit; carrying the required limit removes the penalty.

Elements required for a valid insurance contract: offer and acceptance, consideration, competent parties, and a legal purpose, plus insurable interest in the subject matter.

Standard policy structure: declarations, insuring agreement, exclusions, conditions, and definitions; endorsements amend the base form and control over conflicting printed text.

Risk management techniques: avoidance, retention, reduction (loss control), sharing, and transfer; insurance is the transfer technique.

Hazard types: physical (tangible conditions), moral (dishonest intent), morale (carelessness or indifference), and legal (court-awarded damages).

Negligence elements in liability claims: duty owed, breach of that duty, proximate cause, and actual damages.

Reinsurance basics: a ceding insurer transfers part of a risk to a reinsurer; facultative covers one risk at a time, while treaty reinsurance automatically covers a defined class of business.

Utmost good faith breaches appear as concealment, material misrepresentation, or breach of warranty, and may allow the insurer to rescind or deny coverage.

Surplus lines is the placement of coverage with a non-admitted insurer when the risk cannot be placed in the admitted market; it is a supplemental market, not a price-shopping alternative.

Non-admitted insurers are not licensed in the state, do not file rates and forms with the state, and their policyholders have no guaranty association protection.

The diligent search must be documented with written declinations or other evidence of the authorized market's refusal before the risk is exported.

Required disclosures: the insured must be told the insurer is unlicensed and unprotected by a guaranty fund; broker fees must be separately disclosed and permitted by state law.

Federal NRRA rule: the insured's home state governs broker licensing, tax allocation, and regulatory compliance, even when the risk is placed in another state or offshore.

Exempt commercial purchaser placement (NRRA): no diligent search is needed if a licensed broker is used, the required disclosure is given, and the non-admitted insurer meets the greater of home-state minimum capital or $15 million surplus.

Alien insurers used for any U.S. surplus lines placement must be listed on the NAIC Quarterly Listing of Alien Insurers, which requires qualifying trust funds and financial reporting.

Surplus lines premium tax is paid on gross premium, is in lieu of the admitted-market premium tax, and may not exceed the rate applied to admitted insurers in the same state.

Because there is no guaranty fund backstop and less state financial oversight, the producer's due-diligence duties center on insurer eligibility, solvency review, and complete documentation.