Electronic Filing

Related Information

Surplus Lines Frequently Asked Questions

  1. What is an eligible surplus lines insurer?
  2. What is a surplus lines licensee?
  3. Does Pennsylvania allow for the licensing of non-residents?
  4. Why does the diligent search process have to be accomplished for each surplus lines placement?
  5. Are there any surplus lines placements for which the diligent search process is not required?
  6. What is the Export List used for?
  7. How do I determine if a filing must be made in Pennsylvania?
  8. How do I determine that a given risk may be excluded from the Pennsylvania Surplus Lines Law?
  9. How do I determine if a given risk qualifies for surplus lines premium tax exemption?
  10. I have a surplus lines insurance placement that involves several different states. What must I do with regard to Pennsylvania?
  11. If I have a multiple state account with locations in a large number of different states, do I have to make filings in each state?
  12. I have a surplus lines placement in which a number of different carriers are participating on the total risk and I need to know if there is any special handling involved.
  13. What happens if our agency takes over an account in the surplus lines market with a Broker of Record letter?
  14. What is independently procured insurance?
  15. I have a producer who serves as a captive agent for only one carrier. Why must this producer comply with the diligent search process?

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1. What is an eligible surplus lines insurer?

  • An Eligible Surplus Lines Insurer is a non-admitted insurer that has notified the Pennsylvania Insurance Commissioner of the intent to do business in Pennsylvania and has satisfied the requirements to be placed on the Pennsylvania Insurance Department's list of Eligible Surplus Lines Insurers. An eligible surplus lines insurer is domiciled and licensed in at least one state or country but not in Pennsylvania. Eligible surplus lines insurers that are domiciled and licensed in a state or states other than Pennsylvania are referred to as foreign eligible surplus lines insurers. Eligible surplus lines insurers that are domiciled and licensed in a country outside of the United States are referred to as alien eligible surplus lines insurers.
  • Eligible surplus lines insurers are also referred to as non-admitted, unauthorized or unlicensed carriers and the surplus lines market is often referred to as the non-standard or sub-standard market.
  • The surplus lines market is intended to provide coverage for nonstandard or unique risks that do not fit the underwriting guidelines of insurers licensed to transact business in the market for standard or traditional insurance coverages. It is for this reason that most jurisdictions view the surplus lines market as a second level market.
  • The non-admitted status of the eligible surplus lines insurer allows for freedom of rate and with the exception of personal lines, freedom of policy form. This contributes to the ability of the surplus lines licensee to make risk placement possible. It should, however, be noted that Pennsylvania Surplus Lines Laws generally allow for activity in the surplus lines insurance market but never encourage this activity.

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2. What is a surplus lines licensee?

  • A surplus lines licensee is a duly licensed insurance producer who also has a separate surplus lines license that allows for the solicitation, negotiation and placement of appropriate insurance coverage with eligible surplus lines insurers. Some surplus lines licensees elect to accept business from duly licensed producers and some surplus lines licensees serve as both a duly licensed producer and surplus lines licensee in client representation. Either way, all surplus lines transactions require a duly licensed producer to represent the insured and a surplus lines licensee who is licensed to access the surplus lines market to make the placement.

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3. Does Pennsylvania allow for the licensing of non-residents?

  • Yes. On September 7, 2002 the Pennsylvania Surplus Lines Law was amended to accommodate non-resident surplus lines licensees. The amendment to the Pennsylvania Surplus Lines Law was followed by the enactment of Act 147, the Producer Licensing Modernization Act (PLMA) effective June 4, 2003 Therefore, a duly licensed producer from another state can first obtain a non-resident Pennsylvania producer license and subsequently, if duly licensed for surplus lines in his/her home state, may also apply for a non-resident Pennsylvania surplus lines license. The Pennsylvania Surplus Lines Law and its supporting Regulations apply to all aspects of the non-resident surplus lines licensee as well as for the resident surplus lines licensee. This includes all filing responsibilities as well as surplus lines tax collection and remittance requirements.

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4. Why does the diligent search process have to be accomplished for each surplus lines placement?

  • The diligent search process is used by the Pennsylvania Insurance Department to assure that a diligent effort was made to place the coverage in the admitted or licensed market. When it has been determined through the declination process that placement is not possible within the admitted market, the risk then qualifies for entrance to the surplus lines or non-admitted market. This process is referred to as the diligent search, and in most jurisdictions the requirement involves a minimum of three admitted carriers to decline the risk. The declining admitted carriers must be those admitted carriers who are writing coverage comparable to the coverage being sought.
  • The diligent search process supports the fact that the surplus lines market is not in competition with the admitted market and is to be viewed as a second level market that is allowed but never encouraged. We would refer you to the Regulations that support the Pennsylvania Surplus Lines Law and we would specifically refer to Section 124.5 that describes the diligent search process.

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5   Are there any surplus lines placements for which the diligent search process is not required?

  • The Pennsylvania Surplus Lines Law and its supporting Regulations refer to several situations where the diligent search process is not required as follows:
    • Surplus lines risks that have been placed continuously for three consecutive years in the surplus lines market. (See Affidavit 1609-B)
    • Large commercial risks that meet certain criteria as set forth in the Pennsylvania Surplus Lines Law. (See Affidavit 1610-A)
    • Pennsylvania members that belong to a registered purchasing group formed under the laws of the Risk Retention Act of 1986.(See Affidavit 1610-B)
    • Those risks that represent the kinds and classes that appear on the current Export List as determined each year by the Pennsylvania Insurance Department (See Reporting Form 1604-E).
  • An additional placement which is exempt from the diligent search process involves those rare cases where there is a need for a unique form of coverage not yet available in the licensed/admitted market. A placement of this type should be done in accordance with Section 1604(2)(iii) of the Pennsylvania Surplus Lines Law and Section 124.7 of the supporting Regulation.
  • For further information regarding this subject, we would strongly suggest a review of Sections 1604 and 1609 of the Pennsylvania Surplus Lines Law and Sections 124.5, 124.6 and 124.7 of the supporting Regulations. Current copies of both the Pennsylvania Surplus Lines Law and the supporting Regulations plus the filing instructions section of the Procedures and Electronic Filing User Manual may be viewed on our website.

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6   What is the Export List used for?

  • The Export List is a list of certain kinds of coverages and classes of business operations that have been deemed by the Pennsylvania Insurance Department to be insurance coverages or to require insurance coverages generally unavailable in a given licensed/admitted market underwriting environment and, therefore, are not subject to the diligent search requirement. These risks tend to be of a nature that, for the most part, are rejected by the admitted or licensed market. If the risk that you are dealing with falls into the Export List categories, a surplus lines filing consists of a filing copy of the policy and excludes the usually required surplus lines affidavit form(s).
  • The Pennsylvania Insurance Department reviews and solicits comments to the current list on an annual basis to determine the appropriateness of amending (either adding to or deleting from) the list based on existent market conditions. The process begins in February of each year.
  • Do keep in mind that the surplus lines tax still applies as well as the appropriate stamping fee and monthly reporting as it does with any surplus lines filing.

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7. How do I determine if a filing must be made in Pennsylvania?

  • If the policy effective date is after June 30, 2011 the determining factor is establishing the “home state” as defined in Section 1602 of the Pennsylvania Surplus Lines Law.
  • If the policy effective date is before July 1, 2011 the determining factor is the location of risk.

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8. How do I determine that a given risk may be excluded from the Pennsylvania Surplus Lines Law?

  • We would refer you to the Procedures and Electronic Filing User Manual, Section entitled Pennsylvania Surplus Lines Law (in Pennsylvania) for risks that are excluded from the Pennsylvania Surplus Lines Law. Specifically we would refer you to the definition of “surplus lines insurance” which appears on Section 1602 of the Pennsylvania Surplus Lines Law. Within this definition the exceptions to the Pennsylvania Surplus Lines Law are reinsurance, wet marine and the associated transportation connected with wet marine, independently procured insurance, life and health insurance and annuities. In addition, coverage obtained from Risk Retention Groups under the Risk Retention Amendments of 1986.

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9. How do I determine if a given risk qualifies for surplus lines premium tax exemption?

  • This tax exemption is controlled exclusively by the Pennsylvania Department of Revenue. We would suggest that you refer to the Filing Instructions Section of the Procedures and Electronic Filing User Manual.
  • The tax exempt status determination is made by the Pennsylvania Department of Revenue and not the Pennsylvania Insurance Department, PSLA, or you the licensee. The insured or the insured's representative should obtain the Department of Revenue's determination in writing and the surplus lines filing should indicate “TAX EXEMPT.” This surplus lines premium tax exemption does not preclude filing affidavit forms or the payment of the appropriate stamping fee.

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10. I have a surplus lines insurance placement that involves several different states. What must I do with regard to Pennsylvania?

  • If the policy effective date is after June 30, 2011 and Pennsylvania is deemed the “home state” then the filing must be made in Pennsylvania indicating the full 100% of the premium. Refer to the “home state” definition in Section 1602.
  • If the policy effective date is before July 1, 2011 and there is a location of risk in Pennsylvania then an appropriate surplus lines filing and the collection and remittance of appropriate surplus lines tax on the Pennsylvania portion of the total premium must be accomplished.

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11. If I have a multiple state account with locations in a large number of different states, do I have to make filings in each state?

  • If the policy effective date is after June 30, 2011, placements that involve two or more states are subject to the definition of “home state”. When Pennsylvania is deemed the “home state” the filing must be made only in Pennsylvania indicating 100% of the premium. Refer to the “home state” definition in Section 1602.
  • If the policy effective date is before July 1, 2011, placements that involve a location of risk in Pennsylvania require a filing to be made in Pennsylvania.

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12. I have a surplus lines placement in which a number of different carriers are participating on the total risk and I need to know if there is any special handling involved.

  • First, we would refer you to the Filing Instructions Section of our Procedures and Electronic Filing User Manual. The two types of multiple carrier placements are described as well as the appropriate handling for filing purposes. Briefly, if each carrier involved issues its own separate policy of participation, then individual separate filings must be made for each carrier involved.
  • On the other hand, if the multiple carrier placement is of a subscription form, in which the various carriers have subscribed to the same cover note or evidence of insurance, then the filing must also contain the schedule. Our record keeping requirement is to record each individual carrier's production by limit and premium.

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13. What happens if our agency takes over an account in the surplus lines market with a Broker of Record letter?

  • If the risk is taken over normally, nothing is required. The risk is simply renewed to the account of the new Broker of Record. However, we have encountered situations where the Broker of Record letter is effective during the policy period. In these cases it is necessary for the new producing surplus lines licensee to go through a mid-term Broker of Record letter process to transfer the account from the original surplus lines licensee who made the original filing into the account of the new surplus lines licensee. This entire process is described in the Filing Instructions Section of the Procedures and Electronic Filing User Manual.

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14. What is independently procured insurance?

  • Independently procured insurance is defined as insurance which a resident of this Commonwealth directly negotiates with and purchases, continues or renews from a nonadmitted insurer. This means that there can be no licensee, (no producer, surplus lines, etc.) resident or non-resident, involved in the transaction.
  • When this type of direct transaction takes place, the insured must remit a 3% premium tax to the Pennsylvania Department of Revenue within 30 days of the end of the month in which the transaction occurred. This is accomplished with a separate tax filing form (RCT-122) that the insured must obtain from the Pennsylvania Department of Revenue’s website or by contacting (717) 783-6031.

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15. I have a producer who serves as a captive agent for only one carrier. Why must this producer comply with the diligent search process?

  • With Act 147 the former broker designation and former agent designation has been repealed. All brokers and/or agents are now producers and therefore are licensed to access the entire admitted market with respect to Pennsylvania. Therefore, your producer is not limited to one carrier by way of an agency contract, but rather, has access to all admitted carriers licensed in Pennsylvania. The list of licensed admitted carriers doing business in Pennsylvania is approximately 1,700 companies. Also, keep in mind, that there are over 50 licensed carriers writing business in Pennsylvania that A.M. Best Company labels as licensed specialty carriers. These types of carriers plus the deregulation of admitted carriers make licensed security more available especially during normal market climates.
  • It should also be kept in mind that accessing licensed carriers through other duly licensed producers provides more availability in seeking admitted security for a given insured.

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