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Surplus lines producers
NOTICE: HB 1123 has passed the North Dakota Legislature and has been signed by Gov. Jack Dalrymple. Click here to view the bill.
Effective April 19, 2011, the placement of surplus lines coverage applies only where the insured's home state is North Dakota.
"Home state" of the insured is:
(1) The state in which an insured maintains its principal place of business or, in the case of an individual, the individual's principal residence; or
(2) If 100% of the insured risk is located out of the state referred to in #1 above, the state to which the greatest percentage of the insured's taxable premium for that insurance contract is allocated.
If more than one insured from an affiliated group are named insureds on a single nonadmitted insurance contract, the term "home state" means the home state, as determined pursuant to (1) and (2) above, of the member of the affiliated group that has the largest percentage of premium attributed to it under such insurance contract.
If the insured's home state is a state other than North Dakota, no filing is required and no tax is due to North Dakota for policies effective April 19, 2011, or later. If the insured's home state is North Dakota and the policy is effective April 19, 2011 or later, tax is due on all risks covered by the policy whether or not the risk is located in North Dakota. Payment of tax must be allocated and tax paid at the rate applicable to the state in which the risk is located.
Policies with effective dates before April 19, 2011, are governed by North Dakota law in effect at that time, and multi-state policies need to be allocated and tax paid for the portion of the risk located in North Dakota regardless of the home state of the insured.
Eligible surplus lines insurers
Surplus lines policies can only be written by eligible surplus lines insurers that have met the conditions specified under paragraph 4 of N.D.C.C. § 26.1-44-03. Eligible surplus lines insurers, including any insurer listed on the NAIC Quarterly Listing of Alien Insurers, must register with the Insurance Department. Click here for instructions to register as a surplus lines insurer.
Click here to look up a surplus lines insurer registered in North Dakota. For a complete list of registered surplus lines insurers, choose "Surplus Lines Insurer" under the company type drop-down menu and leave all other fields blank.
Coverage can only be placed in the nonadmitted market if one of the following is true:
- A diligent search has determined the inability to procure the insurance from an insurer authorized to do business in North Dakota. To secure lower premium rates or an advantage as to the terms of the insurance contract does not justify the use of a nonadmitted company.
- The coverage is listed in Appendix I of Article 45-09 of the North Dakota Administrative Code. If the coverage is listed in Appendix I, there is a presumption that the insured is unable, after diligent search, to procure the insurance, indemnity contract or surety bond desired from a company authorized to do business in this state. A licensed surplus lines producer must conduct the search, unless the licensed surplus lines producer deems a search conducted by a licensed producer or the insured was sufficient.
- The insured is an exempt commercial purchaser as defined in N.D.C.C. ch. 26.1-44 and the insured has been informed that the insurance may or may not be available from the admitted market that may provide greater protection with more regulatory oversight and the insured has subsequently requested in writing that the surplus lines producer procure or place the insurance from a nonadmitted insurer. Click here for the definition of an exempt commercial purchaser.
The surplus lines producer shall give the following consumer notice to every person applying for insurance with a nonadmitted insurer. The notice must be printed in 16 point type on a separate document affixed to the application. The applicant shall sign and date a copy of the notice to acknowledge receiving it. The surplus lines producer shall maintain the signed notice in its file for a period of five years from expiration of the policy. The surplus lines producer shall tender a copy of the signed notice to the insured at the time of delivery of each policy the producer transacts with a nonadmitted insurer. The copy must be a separate document affixed to the policy.
"Notice: 1. An insurer that is not licensed in this state is issuing the insurance policy that you have applied to purchase. These companies are called "nonadmitted" or "surplus lines" insurers. 2. The insurer is not subject to the financial solvency regulation and enforcement that applies to licensed insurers in this state. 3. These insurers generally do not participate in insurance guaranty funds created by state law. These guaranty funds will not pay your claims or protect your assets if the insurer becomes insolvent and is unable to make payments as promised. 4. Some states maintain lists of approved or eligible surplus lines insurers and surplus lines producers may use only insurers on the lists. Some states issue orders that particular surplus lines insurers cannot be used. 5. For additional information about the above matters and about the insurer, you should ask questions of your insurance producer or surplus lines producer. You may also contact your insurance department consumer help line."
Each surplus lines insurance producer shall keep a full and true record of each surplus lines insurance contract placed by or through the producer, including a copy of the policy, certificate, cover note, or other evidence of insurance as set out in N.D.C.C. § 26.1-44-06. The surplus lines producer shall keep the record of each contract open at all reasonable times to examination by the commissioner for a period of five years following the termination of the contract.
Filing evidence of insurance and affidavits (within 60 days of policy effective date)
Each surplus lines insurance producer, within 60 days after the placing of any surplus lines insurance shall execute and file the Report of Placement of Surplus Lines Insurance, SFN 59883. Please download the form to ensure you are using the most current version. The report shall be kept confidential by the Commissioner. Surplus Lines Affidavit SFN 4818 (04-2011) must be attached to the report unless the insured is an exempt commercial purchaser as defined in N.D.C.C. ch. 26.1-44. The affidavit shall be open to public inspection.
The report form and affidavit should be mailed to: North Dakota Insurance Department, 600 E. Boulevard Ave., Dept 401, Bismarck, ND 58505-0320.
Independently procured coverage
An insured who meets the definition of an industrial insured as set out in N.D.C.C. § 26.1-02-05(9) can independently procure or continue or renew insurance with a nonadmitted insurer without placing through a licensed surplus lines insurance producer. The insured is then required to file the annual report and pay the tax to the Commissioner.
Annual report and payment of premium tax
On or before April 1 of each year, the producer must file with the Commissioner an annual report for the previous calendar year and must pay the premium tax.
A zero report is not required if no business was written during the calendar year.
All policies with an effective date in the calendar year must be included on the report for that year. The premiums cannot be reported on an installment basis, even if the insured is paying on an installment basis.
Along with the annual report, the surplus lines insurance producer is required to pay the tax.
For policies covering risks located only in North Dakota, the rate is 1 and 3/4 percent and is calculated on gross amount of premium and all assessments and policy fees.
Where the insurance covers properties, risks or exposures located or to be performed both in and out of this state, and the policy effective date is between Jan. 1, 2011 and April 18, 2011, the tax payable must be computed upon the portion of the premium that is properly allocable to the risks or exposures located in this state.
Where the insurance covers properties, risks or exposures located or to be performed both in and out of this state, and the policy effective date is between April 19, 2011 and Dec. 31, 2011, the tax payable must be computed based on:
Send report and check to:
- An amount equal to one and three-fourths percent on that portion of the gross premiums allocated to this state; plus
- An amount equal to the portion of the premiums allocated to other states or territories on the basis of the tax rates and fees applicable to other properties, risks, or exposures located or to be performed outside of this state; less
- The amount of gross premiums allocated to this state and returned to the insured.
North Dakota Insurance Department
600 E Boulevard Ave., Dept 401
Bismarck, ND 58505-0320
Producers can also submit tax filings electronically through OPTins (Online Premium Tax for Insurance), a product of the NAIC. Contact OPTins at firstname.lastname@example.org or 816.783.8787 to implement OPTins at your company. Visit https://eapps.naic.org/optins-static/ for more information.
Failure to make and file the required annual report or to pay the required taxes when due may result in a fine of $25 per day for each day of the delinquency.
Applying for a surplus lines license
North Dakota issues surplus lines producer licenses to both resident and non-resident individuals and business entities.
Resident applicants must first be licensed in North Dakota as an insurance producer for the appropriate lines of authority.
Non-resident applicants must hold a surplus lines license in their resident state.
Both the application for insurance producer and the application for surplus lines insurance producer can be submitted electronically through the National Insurance Producer Registry (NIPR) at www.nipr.com.
The fee for the producer license is $100 and the fee for the surplus lines license is $100.
If the applicant is a business entity, it must also designate an individual principal insurance producer who holds a North Dakota surplus lines license. This individual will be responsible for the filing of the annual report and payment of the premium tax.
The business entity should also contact the North Dakota Secretary of State (email@example.com or 701.328.4284) to ensure compliance with North Dakota corporate law.
Surplus lines insurance producer licenses expire on April 30 of every year.
The renewal application and $25 fee can be submitted electronically through the National Insurance Producer Registry (NIPR) at www.nipr.com.
All resident North Dakota surplus lines producers must maintain an active North Dakota producer license and non-resident producers must maintain an active resident Surplus Lines license in their home state.
If you are unable to submit your renewal application electronically, print the NAIC uniform application form, complete, sign and date the form and mail it with the renewal fee. If submitting a paper application, we must have an original signature on the application. Be sure to allow extra processing time. Send with the $25 renewal fee to:
North Dakota Insurance Department
600 E. Boulevard Ave. , Dept 401
Bismarck, ND 58505-0320