The Alabama Department of Insurance has issued Bulletin No. 2024-05, announcing a new bond requirement for nonresident surplus lines brokers. Effective January 1, 2025, all nonresident surplus lines brokers will be required to file a surety bond in favor of the State of Alabama in the amount of $50,000. This bond must remain in force for the duration of their license. The bond amount may be increased if deemed necessary by the commissioner based on the amount of surplus lines tax paid in previous years.
Key Points of the New Requirement:
- Bond Amount and Duration:
- The bond amount is set at $50,000.
- The bond must remain in force for the entire duration of the broker’s license.
- Application and Renewal:
- Any application for a new license or renewal of a nonresident surplus lines broker license will require the bond for the license to become or remain effective.
- Filing and Compliance:
- The bond must be filed with the Alabama Commissioner of Insurance.
- The bond ensures that the broker will conduct business in accordance with the surplus line insurance law and will promptly remit the required taxes.
- Cancellation and Notice:
- The bond cannot be terminated without at least 30 days’ prior written notice to both the broker and the commissioner.
Additional Requirements for Surplus Line Brokers:
- Resident Insurance Producers:
- Licensed resident insurance producers in Alabama for property and casualty lines can be licensed as surplus line brokers if deemed sufficiently experienced by the commissioner.
- The application must be made on designated forms, and the required license fee must be paid.
- Business Entities:
- Business entities acting as surplus line brokers must designate each licensed individual producer acting under the license.
- Each individual producer must comply with Alabama’s insurance laws, rules, and regulations.
- Nonresident Brokers:
- Nonresident brokers must comply with the same requirements as resident brokers.
- They must appoint the commissioner to receive service of legal process issued against them in Alabama.
This new bond requirement aims to ensure that both non-resident and resident surplus lines brokers operate in compliance with Alabama’s insurance laws and regulations, providing greater protection for consumers and the state. The bond serves as a financial guarantee that brokers will adhere to the legal and regulatory framework, ensuring that they conduct their business ethically and responsibly.
For those interested in obtaining a nonresident surplus lines broker license, it is crucial to understand the implications of this new requirement. The bond not only protects the state and consumers but also reinforces the broker’s commitment to maintaining high standards of practice. Brokers should be prepared to meet these requirements and ensure that their bond remains active and in good standing throughout the duration of their license.
If you are interested in obtaining a non-resident surplus lines broker license, please contact Lexington National Insurance Corporation. We will connect you with an agent licensed in Alabama who can provide assistance in obtaining the bond for you.
For more detailed information, you can refer to the official bulletin issued by the Alabama Department of Insurance. Additionally, the bond form can be found here.
By staying informed and proactive, brokers can ensure a smooth transition to the new requirements and continue to operate successfully within the state of Alabama. This change underscores the importance of compliance and the role of surety bonds in maintaining the integrity of the insurance industry.