Securing a surplus Lines Brokers Authority
You must have a valid Colorado P & C License
There is no pre licensing class but you must pass a 30 question test based
upon the transaction of surplus lines insurance in Colorado.
This information is contained in Article V of the insurance code and Regulation 2-4-1.
Both documents can be viewed in the Legislative section.
To schedule an examination contact Pearson Vue
Once you have passed the examination go to: www.Sircon.com/Colorado
Click on :Apply for a License.
Please note that the Authority attaches to the P & C license and expires on the
same date irrespective of the date it is issued.
Once the authority is issued you are required to log in with the Colorado DOI tax reporting system and file monthly reports of surplus lines activity
Non Resident Producers
You must have a valid surplus lines license in another state
Go to: www.Sircon.com/Colorado
Click on: Apply for a License
Once the license is issued you are required to log in with the Colorado DOI tax reporting system and file monthly reports of surplus lines activity
Diligent Search Effort
All surplus lines procurements are subject to a diligent search of the admitted market unless the insured is a Commercial Exempt Policyholder. Each policy renewal is subject to a new diligent search.
The Colorado DOI has provided a form in order to record the diligent search.
Please note that the Division of Insurance has modified the Diligent Effort Affidavit effective 10/25/2016. This version states that it is the responsibility of the broker to retain the form.
Colorado Surplus Lines Tax.
The surplus lines tax rate for 2019 is 3% calculated on gross premiums and any fees charged by the insurer or the broker as part of the insurance transaction. There is no stamping fee.
Tax Reporting Requirements
Colorado requires that surplus lines producers submit a monthly activity report detailing premiums written for the prior month. Presently this includes a report of No Premium Written. Close attention should be paid to ensure that all reported premiums comply with Colorado Home State Rules. The report is submitted to the Colorado Division of Insurance and no report is required by the Surplus Lines Association.
Colorado Disclosure Statements
In order to protect policyholders all surplus lines policies must contain the non admitted disclosure statement. Please note that some policies may require additional disclosures if they are claims-made policies, automobile policies that do not provide statutory coverages and policies that are written with insurers that may not be eligible in Colorado.
Please note that producers may charge fees only under certain specific situations. Regulation 1-2-9 does contain an exemption for wholesale producers but requires certain disclosures to the retail producer.
Amended Regulation 1-2-9 Fees Charged By Producers
Colorado Home State Rules
In accordance with the NRRA Colorado has adopted rules concerning appropriate payment of surplus lines taxes based upon the “home state” of the insured. The risk should fit one of the following criteria:
1) If a risk has a home state of Colorado and exposures are located within the state 100% of the surplus lines premium tax is payable to colorado.
2) If a risk has a home state of Colorado but has locations that are located in other states and all locations are covered on a nonadmitted policy that includes the Colorado exposures 100% of the surplus lines premium tax is payable to Colorado.
3) In the event that a risk has a home state of Colorado but has no exposures in the state no tax shall be payable to Colorado but shall be remitted to the appropriate venue,
4) If a risk has a home state of Colorado but has a seperate location(s), covered by a separate non admitted policy, in another state(s) 100% of the surplus lines tax for that location(s) shall be paid to the state in which the location is situated. No tax is payable to Colorado.
5) If a risk is home based in another state and there are no exposures in that state AND the majority of the exposures are located in Colorado 100% of the tax for all locations and exposures shall be reported to Colorado and tax paid at the Colorado rate for all exposures.
Taxation of Broker Fees
The Colorado Division of Insurance interprets the term premium to include fees paid by an insured to a broker for the purposes of procuring insurance. Consequently broker fees that are associated with an insurance policy and appear on the policy are subject to surplus lines tax.
Fees charged by a broker for activities not associated with a policy of insurance and not appearing on the policy face are NOT subject to surplus lines tax.
Colorado is a broker responsibility state
With the implementation of changes to Article V to comply with the federal requirements of NRRA Colorado became a broker responsibility state. Since the Colorado Division of Insurance no longer conducts a substantial financial review of non admitted insurers transacting business in the state it is the responsibility of the producer to ensure the financial stability and viability of the insurer. Although Colorado publishes a list of eligible non admitted insurers that list is compiled of companies that apply, meet a minimum policyholder surplus requirement as defined in NRRA and pay a fee. No other investigation is conducted to ascertain their financial strength and the state relies upon the home state regulator. It is not clear whether or not a Colorado producer can rely upon the same source when conducting financial due diligence on behalf of an insured.
Delinquent Tax Payments
The DOI recognizes that under certain circumstances taxes may not have been reported. Consequently they have established a procedure to report such delinquent taxes. Late taxes may be subject to penalty as determined by the DOI.
If the delinquent tax arises from a policy that should have been reported prior to 2017, but not before 2006, the broker should contact the Colorado Division of Insurance and request that the appropriate year(s) be reopened so that the policy(ies) can be entered. Once entered a check should be issued for the tax amount. The DOI will determine any additional amounts due (penalties and fees) and will bill the producer. Penalties and fees on delinquent policies are not payable by the insured.
If delinquent policies are older than 2006 then the DOI should be contacted and the form below used.
Tax exempt entities
Effective 8/20/2014 Colorado exempted property and exposures of Native American tribes located on Indian reservations from surplus lines tax. Property and exposures located elsewhere are taxable.
Non profit organizations are not exempt from surplus lines tax.
Exempt Commercial Policyholder
Colorado defined certain policyholders as sophisticated insurance buyers that may be exempt from certain regulatory protections. In order to comply with this provision the state has established certain criteria that must be met. The NRRA established substantially different criteria which can be viewed under the Legislative section however Colorado has decided to retain their own criteria.
Policies placed on behalf of Exempt Commercial Policyholders are exempt from the diligent search requirement. However all other requirements related to taxation and disclosure are applicable.
Exempt Commercial Policyholder Definition 2