Surplus Line Broker Frequently Asked Questions
Frequently Asked Questions
Below are Frequently Asked Questions (FAQ's) regarding the Surplus Line Broker requirements and fees. The FAQ's are organized by topic and provide licensees and applicants with step-by-step instructions regarding compliance with the licensing rule requirements.
- Property Broker-Agents and Casualty Broker-Agents that transact Surplus Line business on behalf of Surplus Line Broker Business Entities
- Clarification for Endorsees to Business Entity Surplus Line Broker Licenses
- Surplus Line Brokers
- New Applicants for a Surplus Line Broker license
- Surplus Line Broker Bond Requirements
- Surplus Line Broker Business Entity
- Non-Resident Surplus Line Brokers
- Surplus Line Broker Training Requirements
- Special Lines Surplus Line Brokers
Property Broker-Agents and Casualty Broker-Agents that transact Surplus Line Business on Behalf of Surplus Line Broker Business Entity.
1. May an individual holding only a Property Broker-Agent and Casualty Broker-Agent transact surplus lines business on behalf of a surplus lines broker business entity?
No. an individual licensed only as a Property Broker-Agent and Casualty Broker-Agent may not transact surplus lines business on behalf of a surplus line business entity licensee without also holding an individual Surplus Line Broker license.
2. For a Property Broker-Agent and Casualty Broker-Agent that transacts on behalf of a surplus line broker business entity, what does the Property Broker-Agent and Casualty Broker-Agent have to do to apply for a Surplus Line Broker license?
The Property Broker-Agent and Casualty Broker-Agent will need to complete the following steps to receive a Surplus Line Broker license:
Step 1: Apply for an insurance license online and mark the Surplus Lines box - Go to the Fast Licensing Application Service is Here FLASH) for both resident and non-resident applicants to apply for an insurance license online. This link takes the applicant to the procedures of how to file an application online. If you already know how to use the online application service, use the following link to go directly to the FLASH online application;
Step 2: Include the $486 (effective 3/17/2014 this fee will be $534) license fee for an individual transacting only on behalf of a surplus line broker business entity or $972 (effective 3/17/2014 this fee will be $1,070) for individuals that will hold a surplus line broker $50,000 bond with the application;
Step 3: Complete the Surplus Line and/or Special Lines' Surplus Line Certification, Form LIC-050. Form LIC-050 has been revised and is to be used to declare that the broker will be providing a $50,000 bond or that the broker will be transacting on behalf of the business entity.
Step 4: Any Surplus Line Broker business entity for which the broker will be transacting on their behalf will need to submit a broker endorsement, Form LIC 411-8A. When terminating a Surplus Line Broker, the Surplus Line Broker agencies will need to submit a broker termination, Form LIC 411-8T. The fee for submitting either of these forms is $24 (effective 3/17/2014 this fee will be $26).
3. Would a Surplus Line Broker, who transacts only on behalf of a Surplus Line Broker business entity (and therefore is not individually bonded) have his or her license canceled if the broker's endorsement is terminated?
No, the Surplus Line Broker would hold an active license but would have no authority to transact as a Surplus Line Broker.
4. Would the Surplus Line Broker have his or her license canceled if their Property Broker-Agent and Casualty Broker-Agent license is inactivated due to a late renewal or other circumstances?
Yes, the Surplus Line licensee would become immediately inactive until the property broker-agent and casualty broker-agent license is renewed.
5. What impact will the law have on a Property broker-agent and Casualty broker-agent who handles a surplus lines transaction for a client through a licensed Surplus Line Broker?
The Property Broker-Agent and Casualty Broker-Agent (aka retailer) that goes through a licensed Surplus Lines Broker (aka wholesaler) to place the insurance with a non-admitted insurer does not need to be licensed as a surplus line broker.
Section 1765.2 (a) of the CIC clarifies the criteria for surplus line broker business entities to use when determining the minimum number of individuals to license as Surplus Line Brokers. Specifically, this Section states that, "a licensee under this chapter may be issued to an individual or any legal business entity. If issued to a business entity or individual that maintains more than one surplus line office from which it transacts that business with California residents, it shall name the natural person or persons located at each such surplus line office maintained by the licensee who is or are to be responsible for the proper discharge at each office of all duties placed upon the licensee acting as a surplus line broker. Each natural person shall meet all of the requirements for the license."
1. The surplus line licensee must pass the Property Broker-Agent and Casualty Broker-Agent examinations to receive the Surplus Line Broker license. Section 1765.4 of the CIC states that the surplus line broker must also hold active Property Broker-Agent and Casualty Broker-Agent licenses. What are the surplus line broker's additional requirements to retain active Property Broker-Agent and Casualty Broker-Agent licenses?
The Property Broker-Agent and Casualty Broker-Agent is required to complete continuing education each license term.
The following is the continuing education requirements:
- Continuing education requirement is 24 hours for each two-year license term.
- California resident property broker-agents and casualty broker-agents must also complete four hours of ethics continuing education as a part of, and not in addition to, their continuing education requirement during each two-year license term.
- Any licensee who markets flood insurance must complete a three-hour flood training course that is approved by the Federal Emergency Management Agency. The training is required to be completed one time during the life of the license.
- Any licensee who is 70 years of age or older and who has been licensed for 30 continuous years in California as a licensee in good standing, may be exempt from the continuing education requirement.
- The exemption from the continuing education requirement for licensees 70 years of age and in good standing for 30 continuous years does not apply to those individuals licensed for the first time on or after January 1, 2010. (Section 1749.3 (e)).
New Surplus Line Broker Applicants
1. What does an unlicensed individual who is applying for a surplus line broker license have to do to receive a surplus line broker license?
The unlicensed surplus line broker applicant will need to apply for both a Property Broker-Agent and Casualty Broker-Agent license and a Surplus Line Broker license by completing the following tasks:
Step 1: Complete the prelicensing education requirements for Property Broker-Agent and Casualty Broker-Agent licenses
Step 2: Pass both the Property and Casualty Broker-Agent license examinations. The California Department of Insurance (CDI) now requires California resident applicants to first pass the qualifying license examinations prior to submitting their license application.
This change affects California residents applying for any license in which an examination is required (i.e., life, accident and health, property, casualty, personal lines, limited lines automobile, and life limited to funeral and burial expenses). CDI's online application service Fast Licensing Application Service is Here (FLASH) now requires applicants to enter a unique 12-digit identification number which is located on the upper left corner of the passed examination letter. FLASH only allows the application to be submitted if the applicant enters the correct identification number and has passed the examination, not just scheduled the examination. Consequently, for an application to be accepted, the applicant's identification number entered must be identical to the identification number that is stated on the passed examination letter.
The identification number consists of the applicant's last four digits of his or her social security number (e.g., 7777), followed by the two-digit birth month (e.g., 01), followed by the two-digit birth day (e.g., 02), and finally, the four-digit birth year (e.g., 1963). In this example, the 12-digit identification number would be 777701021963. The online application service will only allow the application to be submitted if the identification number is correct and you passed your license examination.
Step 3: Submit an application through the CDI's online application service (FLASH) and select the Property Broker-Agent and Casualty Broker-Agent boxes;
Step 4: Include the $140 (effective 3/17/2014 this fee will be $154) license fee.
Step 5: Obtain live scan fingerprint impressions either by arranging for an appointment with a California Department of Justice (DOJ) approved live scan fingerprint vendor or at a CDI Examination site. The cost for the fingerprint impressions charges to reflect the DOJ, Federal Bureau of Investigation (FBI), and rolling fee may vary.
Step 6: Once you have passed the qualifying examinations and have been issued property broker-agent and casualty broker-agent licenses by the California Department of Insurance, then follow the instructions previously explained for those individuals who are currently licensed as property broker-agent and casualty broker-agent and transact on behalf of a surplus line broker business entity.
1. Does an individual surplus line broker have to file a bond?
Surplus line brokers who are only transacting on behalf of a licensed surplus line broker business entity will not be required to file a $50,000 surplus line broker bond. All other surplus line brokers must still comply with the $50,000 bond requirement.
The Surplus Line and/or Special Lines' Surplus Line Certification, Form LIC-050, has been revised and is to be used to declare that the broker will be submitting a $50,000 or that the broker will be transacting on behalf of the business entity.
For instance, if you are a surplus line broker who transacts on behalf of a business entity but you also place surplus lines business through your individual license, you are subjected to the bond requirement. In contrast, if you are a surplus line broker transacting only on behalf of a surplus line broker business entity's license, you are not subject to the bonding requirement.
2. If a Surplus Line bond expires or is canceled, what happens to the surplus line broker's license?
The surplus line broker would hold an active license that has no authority to act as a surplus line broker. Specifically, Section 1765(c) of the California Insurance Code states, in part, "as part of the application and a condition of the issuance of the license, file a bond to the people of the State of California in the sum of fifty thousand dollars ($50,000)". The bond shall be subject to Sections 1662 and 1663. A surplus line broker bond is not required for an individual licensed as a surplus line broker who transacts only on behalf of a licensed surplus line broker organization.
1. If a business entity has a property broker-agent, casualty broker-agent and a surplus lines broker license does the business entity have to endorse an individual licensee for all three qualifications?
No, only the qualification(s) the business entity has authorized the individual licensee to act on its behalf when engaged in insurance transactions.
1. What effect does insurance law have on non-resident surplus line broker licensees who wish to be endorsed on a California resident surplus line business entity license?
If a nonresident surplus line broker licensee wishes to be endorsed onto a California resident business entity surplus line broker license, the licensee may do so. However, the nonresident licensee must hold an individual non-resident surplus line broker license in California.
1. What is the surplus line and/or special lines surplus line broker training requirement?
Section 1765 (f) of the CIC requires surplus line business entities to provide two hours of training to its employees who solicit, negotiate, or effect insurance coverage placed by a non-admitted insurer. The training is to be given to each eligible employee every five years. The Surplus Line Association of California has developed the curriculum for the training.
Special Lines' Surplus Line Broker
1. How are Special Lines Surplus Line Brokers affected?
Per Section 1760.5 (b) of the CIC, where noted, specifies that provisions of Sections 1765, 1765.2, and 1765.3 in the CIC also apply to special lines' surplus line brokers.