What is
surplus lines insurance?
Insurance companies licensed by the Texas Department of Insurance write most
of the insurance in Texas. The state regulates these companies in a variety
of ways, including requiring their participation in the state guaranty
association (which pays claims in the event of insurer insolvency) and
controlling the premiums they charge and policy forms they use. However,
these licensed companies will not or can not provide all the insurance
needed by Texas citizens.When insurance cannot be
purchased from licensed insurers, it can be obtained in the surplus lines
market, but only from the unlicensed companies appearing on the state's
Surplus Lines Insurers List. Unlike licensed companies, the rates and forms
used by surplus lines insurers are not directly regulated by the Texas
Department of Insurance. This freedom provides the flexibility required when
insuring the hard-to-place risks found in the surplus lines market. Another
distinguishing fact is that surplus lines policies are not backed by the
protection of the state guaranty association.
More than 95% of all surplus lines insurance is written
for Texas businesses. Risks most commonly found in the surplus lines market
are:
- Distressed (e.g., fire coverage for a business with
a high incidence of prior fire losses)
- Complex (e.g., property and liability coverage for
an oil refinery)
- Unique (e.g., insurance for a special event, such as
an auto race)
- Capacity (requiring very high limits of insurance)
Only specially
licensed surplus lines agents can write insurance with surplus lines
insurers. An agent must pass an examination and meet other legal
requirements to be issued a surplus lines license by the Texas Department of
Insurance. Texas is the second largest surplus lines insurance market in the
US, with premiums exceeding $1 billion each year since 1992.
What is the Surplus Lines Stamping
Office ?
The Surplus Lines Stamping Office of Texas
is a non-profit unincorporated organization created by the Legislature in
1987. Our mission is to assist the TDI in the oversight of the surplus lines
insurance market and to encourage compliance by agents and insurers with the
surplus lines laws and regulations of the state.
The Stamping Office is not a state agency; we do not obtain our funding from
the general revenues of the State of Texas. Rather, we are funded by a
processing fee, called a "stamping fee," charged on each Texas surplus lines
insurance policy issued through licensed surplus lines agents. The first
stamping office began operation in California in 1939. There are currently
15 stamping offices across the U.S. operating in states which collectively
account for more than 55% of all surplus lines insurance written nationally.
The stamping offices in the four largest surplus lines markets - California,
Texas, Florida, and New York - process and review nearly 45% of the total
U.S. surplus lines premium volume.
In a study of the surplus lines industry, A.M. Best Company concluded that
stamping offices have proven effective in promoting "a strong working
relationship between the surplus lines market and state regulators." The
National Association of Professional Surplus Lines Offices (NAPSLO) and the
American Association of Managing General Agents (AAMGA) also support the
operation of stamping offices as beneficial to the insurance industry,
regulators, and the public.
What does the Stamping Office do?
The responsibilities of the Surplus Lines Stamping
Office of Texas can be grouped into three general categories. First, we
receive, record, and review surplus lines policies. Texas surplus lines
agents must provide our office with a copy of every surplus lines policy
they write. Agents now have the option of sending policy data via the
Stamping Office's Electronic Filing System (EFS). We review these policies
for compliance with various legal requirements, then record certain
information from them in our computer database. As a result, the Stamping
Office identifies violations and then encourages agents to correct them.
Also, we provide important statistical information about the Texas surplus
lines market, such as types of coverage and volume of premium written.
Second, each year the Stamping Office evaluates the financial condition of
insurance companies desiring to write surplus lines insurance in the state.
We send the results of our evaluations to the TDI, which in turn decides
whether an insurer will be included on the Surplus Lines Insurers List. Only
insurers on this list are allowed to write surplus lines insurance in Texas.
Third, the Stamping Office is involved in education. Each year, we present
seminars on current market and regulatory issues at no charge for surplus
lines agents and insurers. Our staff makes a variety of other presentations
to groups each year as well. We provide technical assistance to callers from
across the country having questions on Texas surplus lines insurance. The
Stamping Office web site (www.slsot.org) is a popular source for an enormous
amount of information, including insurance statutes, frequently asked
questions, insurer and market data, current legislation, and links to other
relevant sites. Also, we distribute a Procedures Manual with monthly updates
and a quarterly newsletter, Lone Star Lines.
The SLSOT Electronic Filing System
The SLSOT Electronic Filing System brings you sophisticated, secure,
web-based filing of policy information to help facilitate effective and
efficient data reporting to the Stamping Office. Developed with the input of
various agents throughout the state, the system offers a comprehensive and
user-friendly, approach to gathering and submitting necessary data for
surplus lines policies.
The EFS Help Desk is available for assistance during regular business hours.
Please call (800) 681-5848 for assistance.
For additional information on surplus lines insurance and the Surplus Lines
Stamping Office of Texas visit our website at
www.slsot.org. |
|
