The Premium Tax Section is responsible for the regulation of Surplus Lines brokers, including reporting and compliance, along with the collection of surplus lines premium tax revenue. Refer to Title 18, Delaware Insurance Code Chapter 19 for details of Surplus and Excess Lines regulation.
General Information
Surplus Lines Broker Procedures Manual – Coming Soon – All parties involved in the surplus lines insurance business are expected to access and use this tool. This manual is being updated by the Department to assist and acquaint resident and non-resident Delaware Surplus Lines licensees and their staff with proper procedures.
Registered Surplus Lines Companies Listing – According to the Nonadmitted and Reinsurance Reform Act of 2010 (NRRA), an insurer domiciled in a U. S. jurisdiction (foreign surplus lines insurer) is considered eligible to transact surplus lines business in any state if that nonadmitted insurer maintains capital and surplus of at least $15 million or the minimum capital and surplus requirements under the law of the insureds home state, whichever is greater. For years, the Delaware Department of Insurance has published Surplus Lines Bulletin No. 5, the Listing of Eligible Surplus Lines Insurers. The publication and use of this listing is no longer mandatory, however, the Department intends to continue to publish a listing of surplus lines insurers who have presented the Commissioner with evidence of their qualifications as an eligible nonadmitted insurer under the NRRA requirements and voluntarily registered with the Department. This list shall be updated annually.
Alien (non-U.S.) Surplus Lines Insurers – Under the NRRA, if a nonadmitted insurer domiciled outside the United States is listed on the Quarterly Listing of Alien Insurers maintained by the International Insurers Department of the NAIC, that insurer is considered eligible to transact surplus lines business in any state.
Instructions
INFORMATION REGARDING THE NRRA AND PREMIUM TAXES
The federal Nonadmitted and Reinsurance Reform Act of 2010 (“NRRA”) became effective on July 21, 2011, and placed surplus lines taxation, regulation, and licensing authority under the exclusive oversight of the home state of the insured (see 18 Del. C. §1904(a)(9) for definition of home state).
The NRRA, among other changes, stipulates that:
- The placement of nonadmitted (surplus lines) insurance shall be subject to the statutory and regulatory requirements solely of the insured’s home state, as defined in the NRRA.
- No state other than the home state of an insured may require any premium tax payment for nonadmitted insurance.
- No State other than an insured’s home state may require a surplus lines broker to be licensed in order to sell, solicit, or negotiate nonadmitted insurance with respect to such insured.
IMPORTANT: In accordance with 18 Del. C. §§ 1925 and 1926, if Delaware is the home state of the insured, the amount of tax paid to Delaware is calculated on the entire premium for the policy, not just the portion that applies to risks located within Delaware.
The Department collects 2% tax on 100% of the policy premium when the policy is procured for a Delaware home state insured. All surplus lines licensees should take whatever measures are necessary to ensure that the proper amount of premium tax is paid to this state when Delaware is the home state of the insured.
In the past, reports were made to the state in which the covered risk was located, but the NRRA stipulates that all reporting and tax payment shall now be made to the state that is by definition the home state of the insured.
THE FOLLOWING INFORMATION MAY BE HELPFUL IN DETERMINING IF DELAWARE IS THE HOME STATE OF THE INSURED.
Delaware is considered the “home state” of the insured if any of the following conditions apply:
- Delaware is the principal place of business or principal state of residence of the insured and all of the risk is located in Delaware. (single-state policy)
- Delaware is the principal place of business of the insured or the principal state of residence of the insured and any part of the risk is located in Delaware. (multi-state policy)
- Another state is the principal place of business or principal state of residence of the insured but all of the risk is located in Delaware. (multi-state policy)
- Another state is the principal place of business or principal residence of the insured but none of the risk is located in that state and the majority of the risk is located in Delaware. (multi-state policy)
- More than 1 insured from an affiliated group are named insureds on a single nonadmitted insurance contract, and the insured is the member of that affiliated group that has the largest percentage of premium attributed to it under the insurance contract and that premium is for risks located in Delaware.
If none of these conditions apply to the policy, then Delaware is not the home state of the insured, and no report or tax should be sent to the Delaware Department of Insurance.
Use these tips to help determine which state is the home state of the insured and make your filing according to that state’s requirements.
Forms
OPTins – ONLINE PREMIUM TAX FOR INSURANCE
OPTins INTRODUCES A NEW PAYMENT METHOD ACH Credit
OPTins, the National Association of Insurance Commissioners’ (NAIC) solution for electronic filing and payment of premium tax, surplus lines tax and various other state-specific filings, recently introduced a second electronic payment method, ACH credit.
Since 2008, OPTins has facilitated insurance related tax collection using ACH debit processing. While the filing process using ACH debit is faster, some taxpayers expressed interest in an additional payment option, prompting the research into, and the implementation of, ACH credit. As a result, tax-related filings and payments can now be submitted to any of the 21 OPTins participating states using either ACH debit or ACH credit.
OPTins is the preferred method of submission of the SL-1925-A and SL-1925-Q, including attached SL-1903-MS forms. OPTins provides immediate, secure transmission and receipt of premium tax reports and payments online. All surplus lines brokers are encouraged to use OPTins to submit their Delaware annual and quarterly premium tax forms and payments to the Department electronically.
However, use of OPTins is NOT MANDATORY at this time.
ATTENTION ALL INDIVIDUAL SURPLUS LINES LICENSEES, FILING PERSONNEL AND INSUREDS WHO DIRECTLY PROCURE INSURANCE FROM NONADMITTED INSURERS
IMPORTANT: BUSINESS ENTITIES SHOULD NOT SUBMIT TAX REPORTS.
Only individual surplus lines brokers can transact business, therefore, tax reports should only be submitted by (or on behalf of) individual surplus lines brokers. It is imperative that the individual broker’s Delaware license number must be properly entered on each form in order for the tax filing to be credited to the broker.
Form SL-1925-A (formerly SL-1916) – CY 2012 Brokers Annual Premium Tax and Fees Report due on or before March 1, 2013.
THIS REPORT MUST BE FILED BY ALL INDIVIDUAL SURPLUS LINES BROKERS. ANNUAL REPORTS ARE ALWAYS REQUIRED FROM EACH INDIVIDUAL, EVEN IF NO BUSINESS WAS WRITTEN.
The Department’s preferred method for submission of this report is through OPTins. This report must be submitted by each individual surplus lines broker regardless of business volume or tax liability. Submit a zero report if no business was written.
Form SL-1925-Q (formerly SL-1917) – CY 2013 Quarterly Premium Tax Reports due during CY 2013.
The Department’s preferred method for submission of this report is through OPTins. This report must be submitted by each individual surplus lines broker. Important: Zero quarterly reports are not required.
Form SL-1903-MS (Multi-State) – Use this form to report multi-state policies ONLY.
Attach one copy of this form for each multi-state policy written in a calendar quarter to the appropriate quarterly report. Use the electronic SL-1905 form to report single-state policies.
Form SL-1905 – Notice of Insurance Transaction (to be used on an occurrence basis)
IMPORTANT: Read these instructions carefully before using form SL-1905.
This updated version contains the following changes:
- The yes/no check box about retaining the SL-1923 (formerly SL-1908) form has been removed. It was not needed as a data field.
- The drop-down list of insurers was removed. Under the new rules since the enactment of the NRRA, use the List of Eligible Insurers is no longer mandatory. Brokers should enter the Name and NAIC of the company they use.
- The drop-down under description of risk was removed. Most brokers did not use the list, but rather entered the description. All brokers should enter a brief description of the exposure being covered.
This form is designed to enable users to enter multiple policies on one spreadsheet by using the UPDATE and RESET buttons at the bottom of the form. It then should be saved as an Excel file and attached to an email for submission electronically. DO NOT submit this form in print or PDF format unless you are reporting a tax-exempt policy.
Form SL-1923 (formerly SL-1904) – Statement of Diligent Effort.
Retain this completed form in the surplus lines broker’s office with other policy materials.
Form SL-1916 (formerly SL-1908) – Binder ⁄ Policy Number Replacement.
Submit this form only when there is a change in the number that uniquely identifies a policy.
Prior Year Surplus Lines Broker Tax Filing Forms
Forms can be obtained by contacting Ann.Fletcher@delaware.gov.
If you are not able to use OPTins and are filing a paper form, send these tax reports and payments to:
Delaware Insurance Department
Attn: SURPLUS LINES SECTION
841 Silver Lake Blvd.
Dover, DE 19904-2465
Questions from Surplus Lines Brokers can be directed to Ann Fletcher.
