Surplus Lines Rules Clarified for Calif. Retail Agents

California retail agent-brokers not transacting insurance on behalf of surplus line broker organizations are not required to follow a new law affecting surplus lines brokers, the California Department of Insurance confirmed. CDI clarified the requirements of the new law after numerous questions arose from licensees, it said.

In its follow-up bulletin, CDI noted that Assembly Bill 1639 applies to fire and casualty broker-agents who transact on behalf of a surplus line broker organization but are not themselves licensed as a surplus line broker; individuals licensed as a surplus line broker but who are not also licensed as a fire and casualty broker-agent; and new applicants for a surplus line broker license who are not currently licensed by the CDI in any capacity. The law does not apply to fire and casualty broker-agents who do not transact on behalf of a surplus line broker organization. If a fire and casualty broker-agent is currently not transacting surplus lines business today, they will not need to obtain a surplus lines broker license
after Jan 1 because the fire and casualty broker-agent is going through a licensed surplus lines broker to place the insurance with a nonadmitted
insurer, CDI said.

The legislation was passed to help “streamline the licensing process, and to become more uniform and reciprocal with other states in regard to nonresident licensing of surplus line brokers,” CDI said. The law also reduces the application and renewal fees for the surplus line broker license from $1,200 to $700 per two-year license term, and reduces the fee for licensed surplus line broker organizations to endorse a licensed individual surplus line broker on their license from $336 per license term to a one-time $24 fee.

According to a statement by the Insurance Brokers and Agents of the West, prior to the law, California allowed surplus lines transactions without requiring a surplus line brokers license, as long as the person had a broker-agent license and was listed as a transactor under an organization’s surplus lines license.

The new law takes effect on Jan. 1, 2008. For more information, visit www.insurance.ca.gov/0200-industry/0050-renew-license/0200-requirements/upload/Revised%20Notice%20-%20Surplus%20Lines%20License.pdf.

Source: CDI, IBA West