TX Surplus Lines flashcards
TX Surplus Lines · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Insurable interest
- A lawful economic relationship to the insured subject such that the insured would suffer financial loss from its damage or loss; required for valid coverage.
- Principle of indemnity
- Insurance restores the insured to approximately the pre-loss financial position, not to a profit; valued policies are a recognized exception.
- Adverse selection
- The tendency of higher-risk individuals or businesses to seek insurance more than lower risks, which underwriting and rating must control.
- Moral hazard
- Increased loss potential caused by insured behavior because insurance exists, such as carelessness or intentional loss.
- Reinsurance
- A transaction in which an insurer transfers part of its risk to another insurer; the original insured's policy remains with the ceding insurer.
- Risk transfer
- A risk management technique that shifts financial consequences of loss to another party, commonly an insurer, for a premium.
- Admitted insurer
- An insurer authorized by Texas to transact insurance; subject to Texas rate, form, guaranty fund, and solvency regulation.
- Texas Department of Insurance
- State agency that regulates insurance in Texas, licenses agents and insurers, reviews forms and rates, and enforces the Insurance Code.
- Unfair discrimination
- Charging different premiums or terms to insureds of the same class and risk without actuarial justification; a prohibited unfair trade practice.
- Rebating
- Giving or offering something of value not stated in the policy to induce purchase; generally prohibited in Texas unless a lawful exception applies.
- Fiduciary premium duty
- An agent or broker holding premiums for others must act in trust, keep funds separate, and not commingle with personal or business funds.
- Continuing education
- Licensed Texas insurance professionals must complete required continuing education hours, including ethics, to maintain an active license.
- Certificate of insurance
- A document summarizing existing coverage; it does not amend, extend, or create coverage under the policy.
- Surplus lines insurance
- Coverage procured from an eligible unauthorized insurer when admitted insurers are not available to write the risk.
- Eligible surplus lines insurer
- An unauthorized insurer that meets Texas financial and reporting requirements and appears on the TDI eligibility list.
- Surplus lines broker license
- A Texas license authorizing a qualified agent to place surplus lines coverage with eligible unauthorized insurers.
- Diligent effort
- The documented attempt to place coverage with admitted insurers that write the class before using a surplus lines insurer.
- Guaranty fund exclusion
- Surplus lines policies are not protected by the Texas guaranty fund; the insured bears the insurer insolvency risk.
- Written disclosure
- Required notice to the insured that the surplus lines insurer is unauthorized, not Texas-regulated, and not guaranty-fund protected.
- Chapter 981
- The Texas Insurance Code chapter governing surplus lines insurance, eligible insurers, broker licensing, and placement duties.
- Placement sequence
- The surplus lines process: check admitted market, document declinations, select eligible insurer, disclose, bind, issue, report, and retain records.
- Declination documentation
- Records showing each admitted insurer contacted, date, coverage requested, and reason for refusal to write the risk.
- Binding authority
- The broker's power to obligate an insurer to cover a risk; it must come from the insurer and be within its terms.
- Surplus lines placement file
- The broker's file containing application, declinations, disclosure, policy, endorsements, premium records, and correspondence.
- Unauthorized insurer
- An insurer not licensed in Texas; surplus lines use is allowed only if the insurer is eligible and the broker complies with Chapter 981.
- Endorsement reporting
- Changes to a surplus lines policy must be reported to the stamping office and reflected in premium tax and fee calculations.
- Surplus lines premium tax
- Texas tax on surplus lines gross premiums at 4.85%, collected by the broker and remitted as required.
- Stamping office
- The Surplus Lines Stamping Office of Texas receives policy data, reviews compliance, and supports surplus lines regulation.
- Stamping fee
- A separate charge set by rule for stamping office services; it is not the same as the surplus lines premium tax.
- Gross premium
- The total premium charged for surplus lines coverage before deductions, used as the base for premium tax and fees.
- Premium tax reporting
- Surplus lines brokers must report and remit tax on covered premiums on the timetable and forms required by Texas rules.
- Record retention
- Surplus lines brokers must keep placement, premium, tax, and reporting records available for audit for the required period.