Surplus Lines Insurance Florida: A Guide to Compliance and Regulation

In Florida, surplus lines insurance is a type of insurance that is not offered by licensed insurers, but rather by unlicensed insurers that are authorized to write policies in the state.

The Florida Department of Financial Services (DFS) regulates surplus lines insurance, and requires agents to obtain a surplus lines license to sell these types of policies.

To sell surplus lines insurance, agents must have a surplus lines license and must also obtain a certificate of authority from the DFS.

The DFS also requires surplus lines insurers to file a surety bond with the state, which serves as a guarantee that the insurer will pay claims.

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Surplus lines insurance falls into the category of property and casualty insurance. It's used to cover relatively new risks that conventional insurers shy away from because they lack historical data to properly price their policies.

In many cases, surplus lines insurance becomes a more standard product and becomes available in the admitted market after it has generated sufficient data.

The surplus lines insurer must have a license in the state where it is based, and the brokers who sell surplus lines insurance must be licensed in their own state.

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Surplus lines insurance is a specialized type of insurance that protects against financial risks that regular insurance companies won't take on.

It's available in various types for both individuals and businesses, which is a great option for those who need extra coverage.

One of the main reasons surplus lines insurance is more expensive is because the risks are higher.

Here are some key characteristics of surplus lines insurance:

In Florida, insurance companies are licensed by the state, just like insurance brokers and agents.

To sell surplus lines policies in Florida, you'll typically need a property and casualty license, which requires passing an exam. You may also need an additional license for surplus lines, depending on the state's specific requirements.

The process for getting excess and surplus coverage in Florida involves demonstrating that the person seeking coverage was rejected or denied by admitted carriers, or that the type of coverage needed is unavailable.

Insurance producers in Florida must maintain their licenses, even if a business needs a surplus license. This ensures that everyone in the insurance sales pipeline is properly licensed and compliant with state regulations.

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Insurance companies are licensed by the states, as are insurance brokers and insurance agents. This means that each state has its own set of regulations and requirements for insurance companies to operate within its borders.

Insurance companies must meet the state's licensing requirements to offer their products and services. These requirements can vary from state to state, but they typically include things like having a certain amount of capital, meeting specific financial requirements, and having a plan in place for handling claims and other customer issues.

The state's licensing process typically involves an application, payment of fees, and a review of the company's financial situation and business plan.

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To sell insurance, you'll need a license. In most states, you'll need a property and casualty license as a starting point. This license is a must-have, even if you're selling excess and surplus lines policies.

The specifics can vary by state, but having a P&C license is a good place to start. You may also need an additional license for surplus lines, which could require its own exam or certification. This is where things get a bit more complicated.

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Keep in mind that different states handle surplus licensing differently. Some states require business entities to maintain a license, while others don't. If your business needs a surplus license, its producers will still need to maintain their licenses.

To get excess and surplus coverage, the person selling the policy usually needs to demonstrate that the person trying to procure coverage was rejected or denied by admitted carriers. This is often the case if the type of coverage they need is completely unavailable.

In many states, a firm that transacts in excess and surplus lines insurance policies will need to report a designated responsible licensed producer (DRLP) who holds an E&S license and a supporting P&C license. This is an important requirement to keep in mind.

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Return is a crucial aspect of the licensing and regulation process, especially when dealing with insurance policies. Excess flood insurance, for instance, is designed to kick in once you've tapped out the coverage limits on your primary flood insurance policy. Many surplus carriers offer this type of insurance to supplement the NFIP flood insurance policy, which has limited coverage for your home and belongings. This ensures you're not left with a significant financial burden in case of a flood.

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In Florida, you'll come across two main types of carriers when it comes to surplus lines insurance: state-allowed non-admitted carriers and surplus lines carriers. A state-allowed non-admitted carrier is a company that's allowed to do business in Florida, but isn't licensed by the state.

To get on the approved list, a carrier needs to apply with the state and undergo a basic level of solvency verification. This ensures they're in good standing in their own state and have enough funds to cover claims.

Surplus lines carriers, on the other hand, are not reviewed by state regulators. This means they can offer more flexible policy options, but also lack the oversight that comes with being an admitted carrier.

Here's a comparison of the two:

It's worth noting that while surplus lines carriers may not be backed by the state's guaranty fund, the rate of insurers going insolvent is historically low, thanks to effective solvency monitoring frameworks.

Surplus lines insurance in Florida can cover a wide range of nonstandard risks that conventional insurers might not cover.

In Florida, surplus lines insurance can be used to cover special events, hazardous materials, and costly items like art collections or classic cars.

Some examples of surplus lines insurance types that may be available in Florida include:

Flood insurance is also available through surplus lines insurers in Florida, particularly if the property isn't eligible for primary coverage by the federal flood insurance program.

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Surplus lines insurance can cover a wide range of financial hazards, including risks that conventional insurers consider nonstandard. You might need liability coverage for a special event or to move hazardous materials.

Some examples of surplus lines insurance include coverage for expensive art or classic car collections, and insurance to cover kidnap and ransom. In some cases, surplus lines insurance can provide coverage limits beyond what conventional insurers are willing to provide.

The types of surplus lines insurance vary, but here are some examples:

These types of insurance are often used to cover risks that standard insurance companies won't touch.

Builders risk insurance is a type of insurance that covers homes under construction, which most standard home insurance policies don't.

You can get builders risk insurance from a surplus lines insurer to cover the project from start to finish.

Builders risk insurance is also known as course of construction insurance.

It's a specialized type of insurance that's designed to protect homeowners and builders from financial losses during the construction process.

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Cost can be a significant factor when it comes to E&S insurance. Small businesses that buy surplus lines insurance can expect higher insurance costs due to their increased risk.

Industry risks play a big role in determining the cost of E&S insurance. Business revenue also affects the cost, with higher revenue typically resulting in higher premiums.

The value of your business property is another key factor, as well as the number of employees you have. Business location is also a consideration, with certain areas being more prone to risks than others.

Claims history is a critical factor in determining the cost of E&S insurance. A history of claims can lead to higher premiums, as the insurance company views your business as a higher risk.

Here are some of the key factors that affect the cost of E&S insurance:

Surplus lines insurance in Florida can be a bit of a wild card, and it's essential to understand the unique risks involved. Unlike regular insurance, surplus lines insurance can be sold by insurers not licensed to do business in the buyer's state.

You won't have the protection of state guaranty funds in the case of default, which is a crucial consideration for businesses and individuals looking to mitigate financial risks.

Surplus lines insurance is designed to cover risks that are too large or too rare for regular insurance companies to take on. This means you'll be relying on a specialized insurer to handle your unique risk profile.