According to Florida law (F.S. 626.932), the term “premium” means the consideration for insurance by whatever name called and includes:
- Any assessment,
- Any membership,
- Service, or
- Similar fee or charge
in consideration for an insurance contract, which items are deemed to be a part of the premium.
The per-policy fee charged by the filing surplus lines agent and authorized by F.S. 626.916(4) is also included within the meaning of the term “premium.”
However, the service fee imposed by F.S. 626.9325 is excluded from the meaning of the term “premium.”
Since its inception in 2000, the Premium Reconciliation program has been highly effective in the collection of taxes, fees, and assessments relative to unreported premium. In 2018, more than $70 million in unreported premium was identified, resulting in the collection of more than $2.5 million in taxes, fees, assessments, and penalties.
As Florida eligible surplus lines insurers submit policy data to FSLSO, the system automatically “matches” its correlating policy information submitted by Florida surplus line agents or Independently Procured Coverage (IPC) filers regarding the same policy. Information is linked based on several factors including policy number, premium amount, insurer name, and effective date.
As an example, Agent John Doe submits policy information on a Commercial Property policy written through XYZ Insurance Company. XYZ Insurance Company is also required by Florida Statute to file policy information regarding the Commercial Property policy written with Agent John Doe. Both parties submit policy information for the risk and is “matched” and reconciled through FSLSO’s database.
Yes. A No Business Report is required in lieu of quarterly or annual policy information for eligible surplus lines insurers not doing business in Florida and must be submitted through SLIP (Surplus Lines Information Portal).
Foreign insurers must submit the No Business Report quarterly within 90 days of the end of the quarter. Alien insurers need to file annually, by June 30, for the previous calendar year.
Diligent effort means seeking coverage from and having been rejected by at least three admitted insurers currently writing the type of coverage documented in the rejections.
The only exception is in the case of a residential structure that has a dwelling replacement cost of $700,000 or more. In this case, you would only need to seek coverage from and be rejected by at least one admitted insurer currently writing the type of coverage requested and documenting the rejection.Surplus lines agents must maintain, as part of each insured’s file, a copy of the producing agent’s documentation of a diligent effort search, if applicable. It is the responsibility of the surplus lines agent to verify that the producing agent has made a diligent effort to place the coverage with an admitted insurer. The surplus lines agent must be able to reasonably rely on the efforts made by the producing agent by taking into account such factors as conducting a program to verify the diligent effort process meets the requirements outlined in F.S. 626.916.
All surplus lines agents who have transacted business.
Per F.S. 626.931, all surplus lines agents that have transacted business during a calendar quarter shall on or before the 45th day following the calendar quarter file with FSLSO an affidavit, on forms prescribed and furnished by FSLSO. The affidavit must state that all surplus lines business transacted by the agent during such calendar quarter has been submitted to FSLSO as required.
The quarterly affidavit can be submitted electronically via the Reports tab in SLIP.
Agents who fail to file an affidavit when due, may be subject to a fine by DFS up to $50 per day for each day the neglect continues, beginning the day after the affidavit was due until the date it was received by FSLSO.
AFFIDAVIT FILING SCHEDULE
1st Quarter January 1 – March 31
Filing Deadline May 15
2nd Quarter April 1 – June 30
Filing Deadline August 14
3rd Quarter July 1 – September 30
Filing Deadline November 14
Filing Deadline February 14
Per F.S. 626.916, some commercial coverages are exempt from the diligent effort search but require a surplus lines disclosure instead. By statute, obtaining and maintaining an accurate and complete surplus lines disclosure form is the sole responsibility of the retail/producing agent, not the surplus lines agent. To help determine which form is required for each line of coverage, please review the Diligent Effort/Disclosure Matrix.
Surplus lines agents will only be required to obtain a surplus lines disclosure when acting in both a retail/producing agent and surplus lines agent capacity.
Visit the FSLSO Education Center to purchase the manual.
Once you are licensed, appointed, and registered through SLIP (Surplus Lines Information Portal), you may begin transacting business.
For more information on obtaining a license, visit the following web pages:
- Steps to obtain resident 1-20 surplus lines license
- Steps to obtain non-resident 91-20 surplus lines license
- 60-Hour Pre-Licensing Course
There are times when policy information submitted by the insurer does not match with a surplus lines agent or IPC filing. At this point, the Premium Reconciliation staff works to find the appropriate corresponding policy information to match up with the insurer filing.
The Premium Reconciliation staff primarily uses four components to match insurer filings with agent and IPC filings including:
- Policy number
- Premium amount
- Effective date
- Insurer name
If the matching filing cannot be located, the staff will contact the insurer to gather additional information, including the name of the agent or agency contact information, as well as a copy of the declarations page.Staff will then contact the responsible party to inquire if the matching policy filing was made and to request the confirmation number for the policy in question if it was filed. If necessary, the Premium Reconciliation staff may also request that the agent or IPC filer provide additional documentation.
If the policy submission has not been made, the Premium Reconciliation staff will request it be done at the earliest convenience to avoid any late payment penalties that could accrue. The Premium Reconciliation staff has up to 180 days to reconcile the outstanding policy before it is referred to the Department of Financial Services or the Office of Insurance Regulation.
Effective January 1, 2022, pursuant to F.S. 626.916 (1)(e), no
coverage shall be eligible for export unless the insured has signed or otherwise provided documented acknowledgment of a disclosure in the following form:
You are agreeing to place coverage in the surplus lines market. Coverage may be available in the admitted market. Persons insured by surplus lines carriers are not protected under the Florida Insurance Guaranty Act with respect to any right of recovery for the obligation of an insolvent unlicensed insurer.
The following elements will be reviewed during a Compliance Review:
- Surplus lines agent license
- Agency/agent financial ledgers
- Diligent Effort forms
2. Policy Review Data Elements
- Declarations page
- Policy number
- Name of insured
- Stamp information
- Transaction type
- Coverage code
- Policy period
- Policy fees
- Inspection fees
- Premium tax
- Service fee
- Citizens' assessment fee (if one is in place)
- EMPA surcharge
- Florida Hurricane Catastrophe Fund (if one is in place)
- Unfiled policies/transactions
Execution of a diligent effort search does not take the place of a disclosure statement signed by the named insured on exempt coverages. For coverages that are statutorily exempt from the diligent effort requirement, the retail or producing agent is required to keep a disclosure statement signed by the named insured.
Surplus lines agents are not required to keep a copy of the disclosure form; however, it would be beneficial to keep a copy if needed to resolve any dispute with the insured regarding the placement of the surplus lines coverage. Please note: the surplus lines agent is required to maintain a copy of the disclosure form if they are also acting as the retail/producing agent.
For agent filings, the agent shall pay interest on the amount of any delinquent tax due, at the rate of 9% per year, compounded annually, beginning the day the amount becomes delinquent per F.S. 626.936(2). For IPC filings, the tax imposed hereunder, if delinquent, shall bear interest at a rate of 6% per year, compounded annually per F.S. 626.938(5).