Texas General Lines — Property and CasualtyTexas Laws and RegulationsHard
A Texas-licensed surplus lines agent places coverage for a unique risk with an unauthorized insurer. What specific requirement must the surplus lines agent adhere to regarding the premium taxes for this transaction?
- ANo premium tax is due on surplus lines policies placed with unauthorized insurers.
- BThe agent must report the transaction, but the insured is responsible for filing and paying the tax.
- CThe agent must collect the tax from the insured and remit it directly to the TDI.
- DThe unauthorized insurer is responsible for paying the premium tax directly to the state.
Show answer & explanationAnswer & explanation
Correct answer: C. The agent must collect the tax from the insured and remit it directly to the TDI.
In Texas, a surplus lines agent is responsible for collecting the premium tax from the insured on surplus lines policies and remitting it to the Texas Department of Insurance (TDI). This ensures that the state collects revenue on these placements, even though the insurer is unauthorized.
Why the other options are wrong
- A. Premium taxes are indeed due on surplus lines policies to generate revenue for the state and to level the playing field with authorized insurers.
- B. While the agent reports, the primary responsibility for collecting and remitting the tax rests with the agent, not solely on the insured to file and pay.
- D. Unauthorized insurers do not typically directly remit taxes to the state; the responsibility falls on the resident surplus lines agent.
Texas Surplus Lines Premium Tax
A tax levied on premiums for insurance policies placed with unauthorized (surplus lines) insurers, which the surplus lines agent is responsible for collecting and remitting to the state.
- Ensures revenue collection for the state from these transactions.
- Helps regulate the surplus lines market.
- Agent acts as a fiduciary for the tax funds.
Memory trick: Surplus lines agent: special risks, special tax duties.