New Jersey Surplus Lines cheat sheet

The New Jersey Insurance Producer Licensing Act (N.J.S.A. 17:22A-26 et seq.) requires a resident producer license for anyone selling, soliciting, or negotiating insurance in the state; a license is issued by the Commissioner of Banking and Insurance.

Producer licenses expire biennially and renewal requires completion of continuing education: generally 24 credit hours per two-year term, including at least 3 hours of ethics, with separate rules for newly licensed producers.

A producer must notify the Department of Banking and Insurance of a change of name, address, or email within 30 days of the change, and must report administrative actions or criminal prosecutions within 30 days.

Commissions may not be paid to an unlicensed person, and a producer may not share commissions with a non-producer except as permitted by statute (e.g., bona fide referral arrangements where the referral fee is not based on the sale of insurance).

Insurers must file policy forms and rates with the Department; under New Jersey's competitive rating framework, most property-casualty rates are file-and-use, while certain lines require prior approval.

The Commissioner may examine insurers and producers, issue cease-and-desist orders, impose civil penalties, and suspend or revoke licenses for violations of the Insurance Code or unfair trade practices under N.J.S.A. 17:29B.

New Jersey's unfair claim settlement practices rules (N.J.A.C. 11:2-17) set timeframes for acknowledging claims, investigating, and communicating coverage decisions; violations can lead to penalties.

A producer owes fiduciary duties to insureds and insurers, including timely remittance of premium, accurate recordkeeping, and disclosure of compensation; trust or premium accounts must be maintained where premiums are held.

Surplus lines insurance may be placed only when the full amount of coverage cannot be procured from authorized insurers; the producer must first attempt to obtain coverage from authorized insurers.

New Jersey requires that the surplus lines producer be licensed as a resident or nonresident surplus lines producer; a diligent effort to place coverage with authorized insurers must be documented.

The surplus lines producer must file a report of each surplus lines placement with the Department of Banking and Insurance (or its designee) within the timeframe prescribed by regulation, and remit the applicable surplus lines premium tax.

Surplus lines policies must include a notice to the insured stating that the insurer is not authorized in New Jersey, is not subject to the state's guaranty fund, and is not protected by the state's insurance insolvency protections.

The surplus lines premium tax rate in New Jersey is set by statute and is generally 5% of gross premiums, subject to statutory changes; the tax is collected by the surplus lines producer and remitted to the state.

Eligibility to write surplus lines in New Jersey requires the insurer to appear on the NAIC International Insurers Department (IID) list or otherwise satisfy the Commissioner's eligibility standards for nonadmitted insurers.

Surplus lines producers may not place coverage with an unauthorized insurer that is not an eligible surplus lines insurer, except where a specific statutory exemption applies (e.g., certain industrial insureds).

Records of surplus lines placements, including the diligent search documentation and policy information, must be retained for the period required by regulation, generally at least five years.

Surplus lines insurance is coverage placed with a nonadmitted insurer when authorized insurers will not provide the coverage; it fills gaps in the admitted market but does not benefit from state guaranty fund protection.

The surplus lines producer must conduct a diligent search of the admitted market, documenting refusals or insufficient capacity from authorized insurers before placing with a nonadmitted insurer.

Nonadmitted insurers are not subject to state rate and form filing requirements, allowing flexibility in pricing and policy language, but the insured bears greater credit and insolvency risk.

Surplus lines policies are typically written on nonstandard forms, and the producer must ensure the insured understands coverage differences, exclusions, and the absence of guaranty fund protection.

The surplus lines producer is responsible for premium tax collection and remittance, policy issuance, and maintaining documentation of the placement; the producer acts as the intermediary between the insured and the nonadmitted insurer.

Eligible surplus lines insurers must meet financial strength and solvency standards, often demonstrated by inclusion on the NAIC IID list or a minimum surplus and rating requirement.

Surplus lines placements must be reported to the state, and the surplus lines producer must maintain records of the diligent search, the policy, and the premium tax payment for regulatory review.

Surplus lines coverage cannot be used to circumvent admitted market regulation; placing coverage with a nonadmitted insurer when admitted coverage is available may violate state law.

The surplus lines producer must exercise due diligence to place coverage with authorized insurers before placing with a nonadmitted insurer, and must document each declination or insufficient quote.

The producer must disclose to the insured, in writing, that the insurer is not authorized in New Jersey and that the coverage is not protected by the state guaranty fund.

The producer must collect and remit surplus lines premium tax to the state within the prescribed timeframe and maintain records of the tax remittance.

The producer must file the required surplus lines report with the Department (or its designee) for each placement, including policy details, premium, and insurer information.

The producer must verify that the nonadmitted insurer is an eligible surplus lines insurer before placing coverage, and must not place coverage with an ineligible insurer absent a statutory exemption.

The producer must maintain accurate records of the diligent search, the placement, and the policy for the retention period required by regulation, and make them available to the Commissioner upon request.

The producer must ensure that policy documents and endorsements are delivered to the insured promptly and that the insured understands the terms, conditions, and limitations of the nonadmitted coverage.

The producer must comply with continuing education and licensing requirements, including any surplus lines-specific education mandated by the state.

An eligible surplus lines insurer is a nonadmitted insurer that meets the Commissioner's standards for financial solvency, management, and market conduct, and is authorized to write surplus lines in New Jersey.

New Jersey generally recognizes insurers listed on the NAIC International Insurers Department (IID) list as eligible, subject to any additional state-specific requirements.

An unauthorized insurer is one not licensed to transact insurance in New Jersey; placing coverage with an unauthorized insurer is generally prohibited unless the insurer is an eligible surplus lines insurer or a statutory exemption applies.

The unauthorized insurance market includes nonadmitted insurers that may offer coverage for risks the admitted market will not write, but such insurers are not subject to state rate and form regulation.

Insureds placing coverage with nonadmitted insurers are not protected by the New Jersey Property-Liability Insurance Guaranty Association (PLIGA) or similar guaranty funds.

The Commissioner may add or remove insurers from the eligible surplus lines list and may take action against insurers that fail to meet eligibility standards.

Surplus lines producers must verify eligibility at the time of placement and monitor the insurer's status during the policy period; placing coverage with an ineligible insurer can result in regulatory action.

The unauthorized insurance market is subject to state enforcement actions, including cease-and-desist orders and penalties, for unlicensed insurance activity.