Surplus Lines

Surplus lines reporting, including the submission of placement forms and scanned affidavits, can be done online through the North Dakota Insurance Department Surplus Lines application. Please follow instructions in the North Dakota Surplus Lines System User Guide for assistance with your submission.

Notice to Surplus Lines Producers of New Filing Law

House Bill 1075 has been signed by the Governor and the law became effective on March 8, 2019. The law changes the surplus lines producer filing requirements to a quarterly basis, and the law provides that after any surplus lines insurance placement, endorsement, audit, or cancellation, the filing to the North Dakota Insurance Department must be made no later than:

  • March 1 for the quarter ending the preceding Dec. 31,
  • June 1 for the quarter ending the preceding March 31,
  • Sept. 1 for the quarter ending the preceding June 30, and
  • Dec. 1 for the quarter ending the preceding Sept. 30 of each year.

Because the law became effective on March 8, 2019, filings for business conducted in the first quarter of 2019 (Jan. 1, 2019 through March 31, 2019) are due June 1, 2019. The new law does not require producers to duplicate filings that have already been submitted to the Department prior to the effective date of the law.

The new law also modified the diligent search form. The updated form, the Surplus Lines Certified Diligent Search Statement (SFN 4818), is available for download. There is no longer a requirement to have the form notarized.

Home State

"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 percent 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.

Eligible Surplus Lines Insurers

Surplus lines policies can only be written by eligible surplus lines insurers that have met the conditions specified under N.D.C.C. § 26.1-44-03. Eligible surplus lines insurers, including any insurer listed on the National Association of Insurance Commissioners (NAIC) Quarterly Listing of Alien Insurers, must register with the North Dakota Insurance Department.

You may look up a surplus lines insurer registered in North Dakota through the NAIC State Based System (SBS) Lookup Search. 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.

Acceptable Risks

Coverage can only be placed in the nonadmitted market if one of the following is true:

  1. 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.
  2. The coverage is listed in Appendix I of Article 45-09 of N.D. Admin. 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.
  3. The insured is an exempt commercial purchaser as defined in N.D.C.C. § 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. See the definition of an exempt commercial purchaser.
Consumer Notice

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 the 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 North Dakota 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 the North Dakota Insurance Department.
Recordkeeping

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 Insurance Commissioner for a period of five years following the termination of the contract.

Quarterly Filings for Insurance Placement, Endorsement, Audit or Cancellation

Each surplus lines insurance producer, after any surplus lines insurance placement, endorsement, audit or cancellation, shall complete and make the filing to the North Dakota Insurance Department no later than:

  • March 1 for the quarter ending the preceding Dec. 31,
  • June 1 for the quarter ending the preceding March 31,
  • Sept. 1 for the quarter ending the preceding June 30, and
  • Dec. 1 for the quarter ending the preceding Sept. 30 of each year.

You may access the Surplus Lines Report of Placement (SFN 59883) form through the North Dakota Insurance Department Surplus Lines application. The report shall be kept confidential by the Insurance Commissioner. The Surplus Lines Certified Diligent Search Statement (SFN 4818) must be attached to the placement record for new and renewed policies unless the insured is an exempt commercial purchaser as defined in N.D.C.C. § 26.1-44. The affidavit shall be open to public inspection.

A penalty of $25 a day may be assessed for late filing reports of placements and affidavits.

Questions related to the forms above can be emailed to the North Dakota Insurance Department at surpluslines@nd.gov.

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 Insurance Commissioner.

Annual Report and Payment of Premium Tax

On or before March 1 of each year, the producer must file with the Insurance Commissioner a Surplus Lines Annual Tax Statement (SFN 17419) form 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. 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.

Where the insurance covers properties, risks or exposures located or to be performed both in and out of North Dakota (multistate policies) effective on or after June 1, 2015, where North Dakota is the home state, the tax rate on both North Dakota and non-North Dakota risks is 1.75 percent and is calculated on the total amount of gross premium, all assessments and policy fees.

A penalty of $25 a day may be assessed for late filing of annual statements.

The report and check should be sent to the North Dakota Insurance Department.

The Surplus Lines Annual Placement Report (SFN 4824) form must be attached to the annual tax statement and can be generated using the North Dakota Insurance Department Surplus Lines application.

Producers can also submit tax filings electronically through OPTins (Online Premium Tax for Insurance), a product of the National Association of Insurance Commissioners (NAIC), if the product is currently utilized by your company.

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).

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.

License Renewal

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).

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, you may print the National Association of Insurance Commissioners (NAIC) Uniform Application for Individual Producer License Renewal/Continuation or NAIC Uniform Application for Business Entity Insurance License Renewal/Continuation form, complete, sign and date and mail to the North Dakota Insurance Department with the renewal fee. If submitting a paper application, the Department must have an original signature on the application. Be sure to allow extra processing time.