agents & brokers: Surplus Line Broker and Special Lines' Surplus Line Broker Frequently Asked Questions - Updated with AB 1699's New License Fees
On January 1, 2008, AB 1639 (Duvall, Chapter 122, Statutes of 2007) became law changing the licensing requirements and fees for both surplus line brokers and special lines' surplus line brokers. The primary change was that an individual licensed as a fire and casualty broker-agent could no longer be named on a surplus line broker business entity license as a person responsible for the proper discharge of one of its offices of all duties placed upon the business entity acting as a surplus line broker, without also holding an individual surplus line broker license.
Further, the fees for the surplus line broker licenses also changed. Specifically, the application and renewal fees for both individual and business entities were reduced to $700 per two-year license term. In addition, the fee for surplus line broker business entities to endorse or terminate an individual surplus line broker on their licenses was reduced to a one-time $23.
In addition, the surplus line broker bond requirement changed. Individual surplus line brokers who only transact on behalf of a licensed surplus line broker business entity were no longer required to file a surplus line broker bond. However, individuals who do not solely transact on behalf of a business entity still must submit a $50,000 bond to act as an individual surplus line broker.
Finally, on June 13, 2008, AB 1699 (Duvall, Chapter 29, Statutes of 2008) immediately became law as an urgency bill. This new law amends Sections 1750, 1765, and 1765.2 of the California Insurance Code (CIC) to make additional changes to the surplus line brokers and special lines' surplus line brokers licensing requirements and fees.
Below are Frequently Asked Questions (FAQ's) regarding the new 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 new licensing rule requirements, as well as the new fees.
Section 1750 of the CIC was amended to make the following changes to the surplus line brokers and special lines' surplus line broker licensing fees:
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the fee for an individual surplus line broker who only transacts on behalf of a surplus line broker business entity was further reduced from $700 to $500 (effective July 1, 2009 this fee will be $470);
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the fee for an individual surplus line broker who does not solely transact on behalf of a surplus line broker business entity license was increased from $700 to $1,000 (effective July 1, 2009 this fee will be $940); and,
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the fee for a surplus line broker business entity license was increased from $700 to $1,000 (effective July 1, 2009 this fee will be $940).
As AB 1699 is an urgency bill, the fee changes take effect immediately.
Because the CDI is required to implement these changes immediately, the online application and renewal services will temporarily not be available to surplus line broker licensees and applicants so that we make necessary changes to these services as required by AB 1699.
There will be no refunds given. Section 1765 (e) of the CIC authorizes the CDI to collect additional license fees resulting from the increase in licensee fees provided by AB 1699 and shall credit any overpayment resulting from reductions in license fees. Furthermore, there are no provisions in this bill for providing refunds to surplus line business entities who may believe that they had more of their employees licensed as surplus line brokers as a result of AB 1699 than they now believe to be necessary.
As stated above, there will be no refunds given. Section 1765 (e) of the CIC states, in part, that the CDI shall credit any overpayment resulting from reductions in license fees. If you do not renew your license, the fee credit is not refundable per Section 1751.5 of the CIC.
The credit can be a result of the reduction in license fees per Section 1750 are specific to Surplus Line Broker fees and can only be used towards the renewal of Surplus Line Broker licenses.
Individuals who previously paid $700 for a surplus line broker license, who will now be paying $500 (effective July 1, 2009 this fee will be $470) will see a one-time credit of $200 on their next renewal notice. Please note that the credit will be $100 for some individuals who only paid the one-year fee of $350 and will be $300 for individuals who paid both the one-year fee of $350 and also subsequently paid the $700 two-year fee.
You may call the Producer Licensing Bureau (PLB) at (800) 967-9331. When you call, please have the total amount that you paid for your Surplus Line Broker license on or after January 1, 2008 and the date of your Fire & Casualty Broker-Agent license renewal. The PLB staff will need to know this information to calculate the amount of credit you may receive.
The credit you received for this one-time fee adjustment will be carried forward to your next license renewal.
Your active bond on your license record is an indicator to the Department that you will be required to pay the $1,000 license fee (effective July 1, 2009 this fee will be $940). In order to receive the $500 (effective July 1, 2009 this fee will be $470) fee at the time your surplus line renewal is due, you must cancel your bond and a notice of cancellation from the surety company must be received prior to your renewal. If the bond cancellation is received prior to the expiration date of your license, you will be required to pay the $500 (effective July 1, 2009 this fee will be $470) renewal fee. In addition, you will need to submit a completed Surplus Line and/or Special Lines' Surplus Line Certification, Form LIC-050, to indicate that you will be transacting on behalf of a business entity.
The one-time additional fee of $300 will be due at the time you renew your surplus line broker license.
The additional $500 (effective July 1, 2009 this fee will be $470) fee should be submitted with the bond to the CDI. If the bond is received at the CDI without the additional fee, the licensee will receive a letter that states the additional $500 (effective July 1, 2009 this fee will be $470) must be submitted before the licensee's record can be updated to show that this licensee has the authority to act as an independent surplus line broker. In addition, you will need to complete the Surplus Line and/or Special Lines' Surplus Line Certification, Form LIC-050, to indicate that you will solely transacting on behalf of a surplus line broker business entity license.
The additional $300 fee should be submitted with the bond to the CDI. If the bond is received without the additional fee, the licensee will receive a letter from the CDI that states the additional $300 must be submitted before the licensee's record can be updated with the authority to act as an independent surplus line broker. In addition, you will need to complete the Surplus Line and/or Special Lines' Surplus Line Certification, Form LIC-050, to indicate that you will be transacting solely on behalf of my own broker license.
Individuals who previously paid $700 for a surplus line broker license, who will now be paying a $1,000 (effective July 1, 2009 this fee will be $940) fee will see a one-time additional charge of $300 on their next renewal notice. You will need to continue to maintain your active bond on file.
The additional charge will be $150 for some individuals that only paid the one-year fee of $350 and will be $450 for individuals that paid both the one-year fee of $350 and also subsequently paid the $700 two-year fee.
The Business Entity that previously paid $700 for a surplus line broker license that will now be paying $1,000 (effective July 1, 2009 this fee will be $940) will see a one-time additional charge of $300 on their next renewal notice.
The additional charge will be $150 for some Business Entities that only paid the one-year fee of $350 and will be $450 for business entities that paid both the one-year fee of $350 and also subsequently paid the $700 two-year fee.
No. An Individual licensed only as a fire and casualty broker-agent may no longer transact surplus lines business on behalf of a surplus line business entity licensee without also holding an individual surplus line broker license.
Effective June 13, 2008, the original application and renewal fees for a surplus line broker license were adjusted. The fee for a surplus line broker who is an individual transacting only on behalf of a surplus line broker business entity is $500 (effective July 1, 2009 this fee will be $470) per two-year license term. The fee for an individual surplus line broker who transacts on behalf of his own license is $1,000 (effective July 1, 2009 this fee will be $940) per two-year license term. That individual is also responsible for maintaining a $50,000 bond.
The fire and casualty broker-agent will need to complete the following steps to receive a surplus line broker license:
Step 1: Submit an Individual Application for Insurance License, Form LIC 441-9, and mark the surplus line broker box;
Step 2: Include the $500 (effective July 1, 2009 this fee will be $470) license fee for an individual transacting only on behalf of a surplus line broker business entity or $1,000 (effective July 1, 2009 this fee will be $940) 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 $23.
However, during this transition, if the fire and casualty broker-agent is currently named as a transactor on a surplus line broker business entity license, a broker endorsement form is not required.
Individuals who previously paid $700 for a surplus line broker license, who will now be paying $500 (effective July 1, 2009 this fee will be $470) will see a one-time credit of $200 on their next renewal notice. Please note that the credit will be $100 for some individuals who only paid the one-year fee of $350 and will be $300 for individuals who paid both the one-year fee of $350 and also subsequently paid the $700 two-year fee.
No, the surplus line broker would hold an active license but would have no authority to transact as a surplus line broker.
Yes, the Surplus Line licensee would become immediately inactive until the fire and casualty broker-agent license is renewed.
The fire 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.
Through the end of 2007, California allows individuals to perform surplus line broker functions when endorsed to a business entity surplus line broker license.
Effective June 13, 2008, Section 1765.2 (a) of the CIC was amended to clarify 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."
Yes, to continue to act as a surplus line broker, as of January 1, 2008, the surplus line broker will need to complete the following steps to receive a fire and casualty broker-agent license:
Step 1: Either go to the CDI Website and submit an application through the Online application service (FLASH) or submit an Individual Application for Insurance License, Form LIC 441-9. For both methods, mark the fire and casualty broker-agent box.
Step 2: Include the $136 license fee with the application.
Step 3: 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 broker, surplus line broker agencies will need to submit an agent termination, Form LIC 411-8T. The fee for submitting either of these forms is $23. However, during this transition, if the surplus line broker is currently named as an endorsee on a surplus line broker business entity license, a broker endorsement form is not required.
The fire and casualty broker-agent is required to complete continuing education each license term.
The following is the required continuing education for the first four years of licensure and the continuing education requirements for subsequent years:
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During each of the first four years following the date the license was originally issued, licenses must satisfactorily complete approved courses or programs of instruction or attend seminars equivalent to a minimum of 25 hours each year.
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If the agent has been licensed for more than four years, the continuing education requirement is 24 hours for each two-year license term.
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California resident fire 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.
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Any licensee who markets long-term care insurance must complete an eight-hour California specific long-term care continuing education course. Check with your insurer regarding long-term care insurance requirements. In addition, any agent marketing a Partnership Long-Term Care Insurance Policy or Certificate must complete eight (8) hours of education on long-term care in general that meet the requirements of
Section 10234.93, Chapter 2.6 of Part 2 of the Insurance Code and eight (8) hours of training eight (8) hours of training in a live classroom setting on
California Partnership for Long-Term Care.
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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.
Exception:
Effective January 1, 1998, 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. However, licensees that are exempt from this requirement who markets individual long-term care contracts are still required to meet the specific training requirements for marketing such contracts.
The unlicensed surplus line broker applicant will need to apply for both a fire and casualty broker-agent license and a surplus line broker license by completing the following tasks:
Step 1: Complete the prelicensing education requirements for a fire and casualty broker-agent license;
Step 2: Either submit an application through the CDI's online application service (FLASH) or submit an Individual Application for Insurance License, Form LIC 441-9. For both methods, select the fire and casualty broker-agent box;
Step 3: Schedule a qualifying examination for a fire and casualty broker-agent either through the CDI's online examination scheduling service or by indicating a requested examination date on the Individual Application for Insurance License, Form LIC 441-9;
Step 4: Include both the $136 license fee and $39 examination fee with the application;
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 examination and have been issued a fire and casualty broker-agent license by the California Department of Insurance, then follow the instructions previously explained for those individuals who are currently licensed as a fire and casualty broker-agent and transact on behalf of a surplus line broker business entity.
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.
The surplus line broker would hold an active license that has no authority to act as a surplus line broker. Specifically, Section 1662 of the California Insurance Code states, in part, that a licensee is to "file and continuously maintain in force the bond required. Any authority to act as a broker shall automatically terminate immediately upon there being no bond in force."
Effective June 13, 2008, the original application and renewal fees for a surplus line broker business entity have been increased from $700 to $1,000 per two-year license term.
The business entity that previously paid $700 for a surplus line broker license that will now be paying $1,000 will see a one-time additional charge of $300 on their next renewal notice.
The additional charge will be $150 for some business entities that only paid the one-year fee of $350 and will be $450 for business entities that paid both the one-year fee of $350 and also subsequently paid the $700 two-year fee.
Furthermore, the endorsement fee will remain as a one-time fee of $23.
As explained in question 2, the fee for licensed surplus line broker business entity to endorse a licensed individual surplus line broker on their licenses has been reduced from $336 per license term to a one-time $23. In addition, there is a new requirement for surplus line broker business entity to notify the CDI when terminating a broker on their license, which is also a one-time fee of $23.
The fee for a business entity that endorses an agent that holds both a surplus line broker license and a fire and casualty broker-agent license is a one time fee of $23 per Section 1765 (d) of the California Insurance Code.
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 and non-resident fire and casualty broker-agent license in California.
As stated in Section 1656 and 1679 (c) of the California Insurance Code, a non-resident surplus line business entity cannot endorse a California resident surplus line broker. Specifically, these sections state, in part, that "Applicants for a nonresident business entity license must name at least one person from their home state who may exercise the power and perform the duties under their license. Additional persons endorsed to that license may be residents of another state, but may not be residents of California."
Effective June 13, 2008, Section 1765 (f) of the CIC was added to require 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 will develop the curriculum for the training.
Yes, Section 1760.5 (b) of the CIC specifies that the change in Sections 1765, 1765.2, and 1765.3 also apply to special lines' surplus line brokers.
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