North Carolina Surplus Lines flashcards

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

Surplus lines eligible insurer list

The Commissioner of Insurance maintains a published list of unauthorized insurers approved to write surplus lines in North Carolina; placement is lawful only with an insurer currently on that list.

Diligent search defined

A documented effort to obtain coverage from authorized insurers actively writing the class of business before placing the risk with a surplus lines insurer, retained in the placement file.

Declination documentation

A written or recorded refusal from an authorized insurer, showing the date, the insurer or producer contacted, and the reason given, kept in the surplus lines file.

Guaranty association exclusion

Surplus lines policies are not covered by the North Carolina Insurance Guaranty Association, so the insured must be told in writing that insolvency claims may be unpaid.

Required surplus lines disclosure

A written notice stating the insurer is not licensed in North Carolina, is not fully regulated by the state, and is not protected by the guaranty association.

Premium tax remittance

The surplus lines licensee collects tax on gross premiums for North Carolina risks and remits it to the Department on the schedule set by rule, with interest on late payment.

Stamping fee distinguished

A processing charge imposed by the surplus lines stamping office, separate from the state premium tax, and disclosed separately to the insured on the transaction.

Five-year record retention

Surplus lines licensees must keep placement, disclosure, and tax records available for Department examination for at least five years after policy expiration or cancellation.

Surplus lines license scope

A North Carolina surplus lines license authorizes soliciting and placing coverage with eligible unauthorized insurers; a property and casualty license alone does not.

NCIUA Beach Plan

North Carolina's residual market association providing coastal property wind and hail coverage; producers should check availability before using the surplus lines market.

NCJUA residual market

The companion residual market association for property coverage outside coastal areas, administered with the NCIUA and backed by the guaranty association.

Unfair claim practice

Prohibited conduct including refusing to pay without reasonable investigation, unreasonable delay, and failing to explain a denial in writing to the claimant.

Commissioner enforcement powers

The Commissioner may examine licensees, investigate complaints, issue cease-and-desist orders, impose civil penalties, suspend or revoke licenses, and order restitution.

Eligibility verification timing

The licensee must confirm the insurer appears on the eligible list as of the binding date and record that confirmation in the placement file.

Exempt commercial purchaser acknowledgment

A written acknowledgment from a sophisticated insured meeting statutory net-worth thresholds, which can reduce diligent search obligations when retained in the file.

Binder contents

A surplus lines binder must identify the insurer, effective dates, coverage limits, exclusions, premium, and fees, and be followed by the policy.

Premium trust fund rule

Premiums held for surplus lines insurers must be kept in a fiduciary capacity and may not be commingled with the licensee's operating funds.

Multi-state premium allocation

For policies covering risks in several states, the North Carolina tax applies only to the premium allocated to North Carolina, supported by file documentation.

Chapter 58 Article 21

The North Carolina statute governing surplus lines placement, licensing, eligibility, taxation, and reporting, administered by the Commissioner of Insurance.

Independent procurement

Direct placement by an insured with an unauthorized insurer must still go through a licensed surplus lines producer, and applicable premium tax must be reported and paid.

Insurer removal from list

An insurer removed from the eligible list may not be used for new placements; existing policies continue to expiration unless the Commissioner orders otherwise.

Policy delivery documentation

The file should record the date the surplus lines policy was delivered after binding, along with any endorsements changing coverage, insurer, or premium.

Tax return contents

The premium tax return reports gross premiums, cancellations and returns, tax due, and credits, and must reconcile with premiums actually collected.

Licensee change notification

Surplus lines licensees must notify the Department of changes in name, address, or licensing status within the period required by statute.

Misrepresentation prohibition

Licensees may not state or imply that a surplus lines insurer is licensed in North Carolina or that its policies carry guaranty association protection.

Claim acknowledgment duty

Insurers must acknowledge and investigate claims promptly and communicate coverage positions in writing, without unreasonable delay in paying covered claims.

Residual market documentation

The placement file should show whether the risk was submitted to the NCIUA or NCJUA and the response received, especially for coastal property risks.

Authorized alternative rejection

When an authorized insurer offers coverage at higher premium or restricted terms, the file must document the offer and the insured's rejection before surplus lines placement.

Eligibility financial standards

Surplus lines insurers must meet minimum capital and surplus, solvency, and reporting standards set by statute and rule to remain on the eligible list.

Department examination duty

Licensees must produce placement, claim, and tax records to the Department on request; obstructing an examination is itself a violation.

NCIUA underwriting rules

The residual market associations apply their own coverage limits, eligibility guidelines, and premium structures, which producers must follow when assessing availability.

Surplus lines rule title

Title 11 of the North Carolina Administrative Code contains the Commissioner's rules supplementing the surplus lines statute on filing and reporting.