North Carolina Surplus Lines key terms

Coverage placed with an insurer not licensed in North Carolina when no authorized insurer will accept the risk. It is lawful only after a documented diligent search and is regulated under the state's surplus lines statutes.

A nonadmitted insurer that meets North Carolina's standards for capital, surplus, and financial reporting and has been approved to write surplus lines business in the state. Placement with a non-eligible insurer is generally prohibited.

An insurer not holding a North Carolina certificate of authority to transact that line of insurance. It may still lawfully write surplus lines business if it qualifies as an eligible surplus lines insurer.

An insurer licensed or admitted by the North Carolina Department of Insurance to transact specified lines in the state. Its declination of a risk is a prerequisite to a surplus lines placement.

The documented effort to place a risk with authorized insurers before turning to the surplus lines market. It requires contacting an adequate number of admitted markets and recording each declination or insufficient quote.

An authorized insurer's refusal to write a risk, or its offer of coverage on terms the insured will not accept. Each declination must be recorded with the insurer name, date, and reason to support the diligent search.

The producer's record showing which authorized insurers were approached, the dates, the coverage requested, and why each declined. It must be retained and available for examination by the Department of Insurance.

A provision allowing a risk already placed on a surplus lines basis to be renewed or continued with the same or another eligible insurer without a new diligent search, for a limited period, typically three years.

A list of coverages that may be placed with eligible surplus lines insurers without individual diligent search documentation because the admitted market is recognized as not offering them.

A licensed North Carolina producer holding the surplus lines authority required to place business with nonadmitted insurers. The producer is responsible for the diligent search, disclosures, tax remittance, and recordkeeping.

The additional authority a North Carolina resident or nonresident producer must hold to negotiate and place surplus lines insurance. It is separate from the underlying property, casualty, or other line license.

The insurer's notification to the state that a producer is authorized to act on its behalf. Appointment requirements apply to surplus lines placements and must be kept current while the producer writes business.

The tax imposed on surplus lines premiums written in North Carolina, collected by the surplus lines producer and remitted to the state. The rate and filing schedule are set by statute and regulation.

A fee charged on surplus lines transactions by the designated stamping office or surplus lines association, used to fund regulation and market oversight. It is separate from premium tax and is disclosed to the insured.

The entity designated to facilitate surplus lines placements, maintain eligibility information, and collect stamping fees or taxes. North Carolina producers interact with it when reporting transactions.

The periodic report a surplus lines producer files showing premiums written, taxes due, and supporting policy detail. Late or inaccurate returns can trigger penalties and interest.

The declarations, coverage forms, endorsements, and notices that must accompany a surplus lines policy. Documentation must identify the nonadmitted insurer and state that the insurer is not licensed in North Carolina.

The written notice to the insured stating that the insurer is not admitted in North Carolina, is not subject to the state's guaranty fund protection, and that the producer cannot represent the insurer's solvency.

The rule that claims against insolvent nonadmitted insurers are not covered by the North Carolina Insurance Guaranty Association. Insureds must be told of this gap before placement.

A document evidencing coverage that may be issued for a surplus lines policy. It does not amend or replace the policy and must accurately reflect the nonadmitted insurer's status.

An account holding premiums, return premiums, or funds belonging to insureds or insurers that a surplus lines producer must maintain separately from business funds. Misuse can result in license discipline.

The obligation of a surplus lines producer to hold and account for client and insurer funds honestly and to remit premiums as agreed. Breach may constitute grounds for license suspension or revocation.

The minimum capital, surplus, and deposit standards an eligible surplus lines insurer must maintain to keep its approval. Failure can remove the insurer from the eligible list.

The duty to keep complete records of surplus lines transactions, including diligent search evidence, policy documents, disclosures, and tax filings, for the period required by North Carolina law.

An act in the business of insurance that is deceptive, misleading, or otherwise prohibited by statute, such as misrepresenting policy terms or failing to disclose nonadmitted status. It can lead to penalties.

The process of receiving, investigating, and paying or denying claims. Surplus lines insurers and producers must handle claims fairly and may not unreasonably delay settlement or deny coverage without a reasonable basis.

An insurer's unreasonable or dishonest refusal to honor a valid claim or policy obligation. It may expose the insurer to extra-contractual damages and is a focus of unfair claims practice regulation.

A residual market mechanism providing property insurance to owners unable to obtain coverage in the voluntary market. Producers must understand when a risk belongs there rather than in the surplus lines market.

Insurance programs created by statute to provide coverage when the voluntary admitted market will not. Examples include property underwriting associations and assigned risk plans.

The coastal property insurance program operated through the North Carolina Insurance Underwriting Association to provide wind and hail coverage in designated coastal areas.

The roster of nonadmitted insurers approved to write surplus lines in North Carolina. Producers must verify an insurer's status on the list before placing a risk.

An insurer transacting insurance in North Carolina without the required authority. Surplus lines placements with eligible nonadmitted insurers are permitted; other unauthorized transactions are prohibited.

The amount charged for an insurance policy. For surplus lines, the producer must accurately report written and returned premium to calculate tax and stamping fee obligations.

The administrative action the Commissioner may take against a producer's license for violations such as placing business with an ineligible insurer, failing to remit taxes, or mishandling trust funds.

The elected official who heads the North Carolina Department of Insurance and enforces insurance statutes, including surplus lines eligibility, producer licensing, and market conduct rules.