Surplus Line Broker 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 Sircon's Apply for a License service for both resident and non-resident applicants to apply for an insurance license online.
Step 2: Include the $646 license fee for an individual transacting only on behalf of a surplus line broker business entity or $1,296 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 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 $32.
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 does current insurance 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.
California Insurance Code (Cal. Ins. Code) Section 1765.3(a) 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. Cal. Ins. Code Section 1765.4 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:
- The California resident continuing education requirement is 24 hours for each two-year license term.
- California resident property broker-agents and casualty broker-agents must also complete three 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)).
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) requires California resident applicants to first pass the qualifying license examinations prior to submitting their license application.
Step 3: Submit an application through Sircon's Apply for a License and select the Property Broker-Agent and Casualty Broker-Agent boxes;
Step 4: Include the $188 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 reflect the DOJ, Federal Bureau of Investigation (FBI), and rolling fee, and 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, 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?
Cal. Ins. Code Section 1765(f) 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.
1. How are Special Lines Surplus Line Brokers affected?
Per Cal. Ins. Code Section 1760.5(b), where noted, specifies that provisions of Cal. Ins. Code Sections 1765, 1765.2, and 1765.3 also apply to special lines' surplus line brokers.