A Guide to Surplus Lines Fee and Its Regulations

The surplus lines fee is a tax levied on non-admitted insurance policies, also known as surplus lines insurance. This fee is typically paid by the insurance company and can range from 2% to 5% of the premium.

In the United States, the surplus lines fee is regulated by each state, with some states imposing a higher fee than others. For example, California charges a 4% fee, while Florida charges a 2% fee.

The surplus lines fee is used to fund the state's insurance department and other regulatory activities. This fee helps ensure that the state's insurance market is properly regulated and that consumers are protected.

Insurance companies must pay the surplus lines fee for each non-admitted policy they write, and they can pass the cost on to the policyholder.

The North Carolina surplus lines tax is five percent (5%) on all taxable transactions, which includes premiums, company fees, and endorsements.

This tax will apply to all premiums, company imposed fees, and all endorsements entered in SLIP.

For example, a policy with a premium of $1000.00 would have a tax of $50.00 (5% of $1000.00).

A policy with a premium of $1000.00 and a company fee of $200.00 would have a total taxable amount of $1200.00, resulting in a tax of $60.00.

The North Carolina surplus lines tax is applied to the total taxable amount, not just the premium.

Here's a breakdown of the taxes and fees for the examples:

The North Carolina Surplus Lines Insurance Services Office (NCSLSO) charges a stamping fee, which is a percentage of the premium or a set dollar amount per policy.

Surplus lines regulations are in place to ensure that non-admitted insurers are properly licensed and monitored.

These regulations require surplus lines insurers to be licensed by the state and to meet certain financial requirements.

Each state has its own surplus lines regulations, which can be complex and time-consuming to navigate.

In some states, surplus lines insurers must be licensed on a state-by-state basis, while in others, a single national license is sufficient.

This can make it difficult for consumers to understand their rights and obligations when dealing with surplus lines insurers.

Federal regulation of surplus lines premium taxes has simplified life for carriers and brokers on the nonadmitted market. A 2011 federal law, the Nonadmitted and Reinsurance Reform Act (NRRA), greatly simplified life for carriers and brokers.

Prior to 2011, states could require carriers and brokers to pay surplus lines premium taxes and fees in any state the business touched. This led to a complex and confusing system.

Thanks to the NRRA, we now have a clearer picture. The law states that only the home state of an insured may require any premium tax payment for nonadmitted insurance.

The NRRA has made a significant impact on the surplus lines industry. It has reduced the administrative burden on carriers and brokers.

Here's a breakdown of the surplus lines tax in North Carolina: The tax is 5% on all taxable transactions, including premiums, company fees, and endorsements entered in SLIP.

Here's an example of how the tax is calculated:

The tax will apply to all premiums, company fees, and endorsements entered in SLIP. The only exception is if the policy has qualified for an NCDOI approved tax exemption or a statutory line coverage exemption.

The North Carolina surplus lines stamping fee percentage is based on the effective date of the policy.

For new and renewal policies with an effective date on or after January 1, 2023, the stamping fee is 0.3% of the premium.

Company fees are taxable and considered part of the premium, subject to surplus lines tax and stamping fee.

Any fees charged and retained by the broker are not considered company fees and are not subject to surplus lines tax or the stamping fee.

Here's a breakdown of the stamping fee percentages based on the effective date of the policy:

Policies that fall within certain coverage codes with a non-taxable status are exempt from surplus lines premium tax.

The North Carolina surplus lines stamping fee is based on the effective date of the policy. If your policy's effective date is on or after January 1, 2023, you'll be charged 0.3% of the premium.

Here are the key dates to keep in mind:

Company fees are taxable and considered part of the premium. However, fees charged by the broker are not subject to surplus lines tax or the stamping fee.

If you're filing a tax-exempt policy, you'll need to enter it in SLIP with a nontaxable tax status. The Stamping Office will then ask for supporting documentation to present to the NCDOI for a decision on the tax status.

Payments for surplus lines policies are due by the end of the month following the month that the invoice was processed. This means if your invoice was processed in January, the payment is due by February 28th.