Required Agency Notifications to TDI; Information Relating to Premium Tax; Licensing of Surplus Lines Agents
REQUIRED AGENCY NOTIFICATIONS TO TDI
Agents are required to notify the Texas Department of Insurance (TDI) of a variety of different circumstances. Many agents remain unaware of these requirements.
Notice Regarding Employees
Within 30 days of employment, each licensed surplus lines agency, both resident and nonresident, shall notify TDI of the name and Texas surplus lines agent license number of each individual agent employed by the agency. [28 TAC §15.4(a)]
Within 30 days after an individual surplus lines agent ceases to be employed by a licensed surplus lines agency for any reason, the agency, whether resident or nonresident, shall notify TDI that the individual is no longer employed by that agency. [28 TAC §15.4(b)]
You can add or delete an agent from an entity license using Form TDI-501. This form is not available on TDI’s website, but must be requested directly from the Agent’s License Division. Additions/deletions should be provided to Agent’s License, with a copy to Company Licensing and Registration.
Notice Regarding Insurer A surplus lines agent shall immediately inform TDI and the Stamping Office whenever the agent has grounds to reasonably doubt the capacity, competence, stability, claim practices, or business practices of an eligible surplus lines insurer. [28 TAC §15.9(c)]
Notice Required for Registration of Branch Offices or Change of Address
An agent must register with TDI all branch offices under a license and all assumed trade names used. [28 TAC §19.902(a)] – TDI Form LHL 203 (Note: each branch office should have at least one person holding an individual surplus lines license. See 28 TAC 15.03, Licensing of Surplus Lines Agents, shown at the end of this bulletin, to identify which “surplus lines insurance activities” require an individual to hold a surplus lines license.)
Each agency must at all times keep TDI informed of the agency’s current address. [28 TAC §19.906] – Agency address change: TDI Form LHL 389; Branch office address change: TDI Form LHL 388
Other Notice Requirements for Surplus Lines Agents
A surplus lines agency is required to notify TDI not later than the 30th day after the date of the following:
1) a felony conviction of a licensed agent of the agency or an individual associated with the agency who was required to file biographical information with TDI;
2) a disciplinary or enforcement action taken against the agency in another state; or
3) the addition or removal of an officer, director, partner, member, or manager. [Texas Insurance Code, §4001.252(c)] – TDI Form LHL 238
Most of these forms can be obtained from TDI’s website here.
Information Relating to Premium Taxes
Filing of Tax Report by Surplus Lines Licensee When No Premium Written
A surplus lines agent that writes no surplus lines business for the year must still file a “zero premium” tax report with the Comptroller’s Office for that license. This applies to individual and to corporate/LLC/partnership surplus lines licensees. [This requirement is specified on the instructions for completing the surplus lines agents annual tax report, Comptroller Form 25-104.]
28 TAC §15.3 Licensing of Surplus Lines Agents
(a) Persons performing any of the following surplus lines insurance activities are required to have a surplus lines license:
(1) supervising unlicensed staff engaged in activities described in subsection (b) of this section, except that supervision of staff may be conducted through the supervision of the staff’s unlicensed supervisors;
(2) negotiating, soliciting, effecting, procuring, or binding surplus lines insurance contracts for clients or offering advice, counsel, opinions, or explanations of surplus lines insurance products to agents or clients beyond the scope of underwriting policies or contracts, except for a general lines property and casualty agent making a referral of surplus lines business to a surplus lines agent or agency that then completes the surplus lines transaction; or
(3) receiving any direct commission or variance in compensation based on the volume of surplus lines premiums taken and received from, or as a result of, another person selling, soliciting, binding, effecting, or procuring surplus lines insurance policies, contracts, or coverages, except for a general lines property and casualty agent making a referral of surplus lines business to a surplus lines agent or agency that then completes the surplus lines transaction.
(b) The following activities in a surplus lines agency do not require a surplus lines license if the employee does not receive any direct commission from selling, soliciting, binding, effecting, or procuring insurance policies, contracts or coverages, and/or the employee’s compensation is not varied by the volume of premiums taken and received:
(1) full-time clerical and administrative services, including, but not limited to, the incidental taking of information from clients, receipt of premiums in the office of a licensed agent, or transmitting to clients, as directed by a licensed surplus lines agent, prepared marketing materials or other prepared information and materials, including without limitation, invoices and evidences of coverage;
(2) contacting clients to obtain or confirm information necessary to process an application for surplus lines insurance so long as the contact does not involve any activities for which a license would be required under subsection (a)(2) of this section;
(3) performing the task of underwriting any insurance policy, contract, or coverage, including without limitation, pricing of the policy or contract; or
(4) contacting clients, insureds, agents, other persons, or insurers to gather and transmit information regarding claims and losses under the policy to the extent that the contact does not require a licensed adjuster as set forth under Insurance Code Chapter 4101.
(c) This section shall not be construed to prohibit distribution of agency profits to unlicensed persons, including shareholders, partners, and employees.