Missouri Surplus Lines flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Chapter 384, RSMo

Missouri's surplus lines statute. It sets eligibility of unauthorized insurers, licensing of surplus lines producers, diligent-search duties, policy notices, recordkeeping, and premium tax collection by the Department of Commerce and Insurance.

Missouri Insurance Director

The regulator who administers Missouri's insurance laws, including surplus lines licensing, insurer eligibility determinations, market conduct examinations, and enforcement of the Unfair Trade Practices Act.

Diligent search record

Documentation a Missouri surplus lines producer keeps showing the required coverage could not be obtained from authorized insurers, typically written declinations, before the risk may lawfully be placed with an unauthorized insurer.

Eligible unauthorized insurer

A non-admitted insurer that meets Missouri's statutory standards for capital, surplus, and financial reporting, making it permissible for a licensed surplus lines producer to use it for Missouri risks.

NAIC Quarterly Listing of Alien Insurers

A quarterly NAIC publication of alien, non-U.S. insurers that meet trust fund and reporting standards; appearance on this list is required before an alien insurer may be used for U.S. surplus lines placements.

Surplus lines policy notice

A required statement, usually on the declarations page, telling the insured the insurer is not licensed in Missouri, is not subject to state rate and form review, and is not protected by a guaranty association.

Missouri guaranty association

The entity that pays certain claims of insolvent licensed insurers in Missouri. It does not cover obligations of unauthorized or surplus lines insurers.

Missouri surplus lines premium tax

A 2% tax on gross surplus lines premium that the producer collects and remits directly to the Missouri Department of Commerce and Insurance, standing in place of premium taxes paid by admitted insurers.

Missouri producer license renewal

Missouri resident producer licenses renew biennially on a cycle tied to the licensee's birth year; a lapsed license must be reinstated before the producer may solicit or place insurance again.

Continuing education requirement

Missouri resident producers generally complete 16 credit hours every two years, including 3 hours of ethics, as a condition of renewing a major lines producer license.

Rebating

Offering anything of value not stated in the policy, such as premium refunds or gifts, to induce a buyer to purchase insurance; Missouri's Unfair Trade Practices Act prohibits the practice.

Actual cash value

A loss valuation method equal to replacement cost minus depreciation. It reflects the used or depreciated value of damaged property at the time of loss rather than the cost to buy new.

Coinsurance penalty formula

Payment equals the limit of insurance carried divided by the limit required, multiplied by the loss; the result is capped at the policy limit, and carrying the full required limit avoids any penalty.

Insurable interest

A financial relationship in which the insured would suffer genuine economic loss from destruction of the property or the happening of the event; it must exist at the time of loss.

Utmost good faith

The principle that both parties to an insurance contract must deal honestly and disclose all material facts; breach appears as concealment, material misrepresentation, or violation of a warranty.

Contract of adhesion

An insurance policy drafted by the insurer and offered on a take-it-or-leave-it basis, so ambiguities are construed against the insurer and in favor of the insured.

Aleatory contract

A contract in which the amounts exchanged are unequal and depend on chance; the insured may pay premiums and receive nothing, or receive a large payment for a small premium.

Proximate cause

The unbroken chain of events, beginning with the insured peril, that directly produces the loss without an intervening event; it determines whether the loss is covered.

Moral hazard

A condition of dishonesty or character in the insured that increases the chance of loss, such as a history of arson or fraudulent claims; insurers screen for it during underwriting.

Facultative reinsurance

Reinsurance of a single risk or specific policy, negotiated separately with the reinsurer, which may accept or decline it; contrasted with treaty reinsurance, which covers a defined class automatically.

Aggregate limit

The maximum amount an insurer will pay for all covered losses during a policy period, regardless of the per-occurrence limit; it caps total recovery available under the policy.

Binder

Temporary evidence of coverage issued before the policy is written; it provides immediate protection and is subject to the terms of the policy that is eventually issued.

Surplus lines insurance

Coverage written by an insurer not licensed in the insured's state, used when the risk cannot be placed with admitted insurers; its rates and forms are not filed with the state.

Non-admitted insurer

An insurer not licensed to transact business in a state. It is not subject to that state's rate and form filing rules, and its policyholders lack guaranty association protection.

Diligent effort requirement

The surplus lines producer's duty to attempt placement with authorized insurers first and document their refusals, preventing use of the unlicensed market merely to obtain lower cost or broader coverage.

Declination

A written refusal by an authorized insurer to write a risk, commonly collected from several insurers to evidence the diligent search required before a surplus lines placement.

Exempt commercial purchaser

A sophisticated commercial buyer meeting NRRA criteria who may be placed with a non-admitted insurer without a diligent search, provided a licensed broker is used and required disclosures are given.

NRRA home state rule

The federal rule that broker licensing, surplus lines premium tax, and regulatory compliance are governed by the insured's home state, with tax allocated to that state.

Surplus lines premium tax

A tax on surplus lines premium remitted to the state; under the NRRA the rate may not exceed the rate applied to admitted insurers in the same state.

Guaranty fund exclusion

Surplus lines and other unlicensed insurers are excluded from state guaranty association protection, so covered claims may go unpaid if the insurer becomes insolvent.

Surplus lines broker fee

A charge separate from premium that a surplus lines producer may collect only when disclosed to the insured and permitted by state law; it is not commission and must be recorded.

Insolvency risk in surplus lines

Because unlicensed insurers are not backed by a guaranty association and face less state financial scrutiny, buyers depend on eligibility standards, the NAIC alien listing, and broker due diligence.