Surplus lines (California)

Source ledger

5 sources. Every citation number above resolves to a record below. Nothing here sits behind an account.

1. [1]

   California Insurance Code Sections 1760.5 and 1761 (what falls outside the surplus line chapter, and who may place the rest)(opens the original record on California Legislative Counsel (leginfo.legislature.ca.gov))

   California Legislative Counsel (leginfo.legislature.ca.gov)Primary lawPrimaryJurisdiction CALast checked September 5, 2026Updates: Amended only by legislation.ID ca-ins-code-1760-5

   What this source supports (5)

   • Section 1760.5(a) provides that the chapter's provisions limiting the insurance that may be placed with nonadmitted insurers, and requiring a report of it, do not apply to reinsurance of the liability of an admitted insurer.
   • Section 1760.5(a)(2) excludes insurance against perils of navigation, transit or transportation upon hulls, freights or disbursements or other shipowner interests, upon goods and other personal property in the course of exportation, importation or coastwise transportation including war risks, and marine builder's risks, drydocks and marine railways including ship repairer's liability and protection and indemnity insurance, but excluding insurance covering bridges or tunnels.
   • Section 1760.5(a)(3) excludes aircraft or spacecraft insurance, and section 1760.5(a)(4) excludes insurance on property or operations of railroads engaged in interstate commerce.
   • Section 1760.5(b) provides that the insurance specified in paragraphs (2), (3) and (4) may be placed with a nonadmitted insurer for a home state insured only by and through a special lines' surplus line broker.
   • Section 1761(a) provides that except as provided in sections 1760 and 1760.5 and in section 1761(b)(1) and (2), a person within this state shall not transact any insurance for a home state insured with nonadmitted insurers except by and through a surplus line broker licensed under the chapter and upon the terms and conditions prescribed in the chapter.

   Read together these two sections draw the boundary of the surplus line regime: 1761 says a nonadmitted placement must go through a licensed surplus line broker, and 1760.5 lists the classes that sit outside the chapter's placement limits entirely, three of which still require a special lines' surplus line broker. Ocean marine is the commercially significant one and it is routinely described as surplus lines when the statute treats it separately.

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2. [2]

   California Insurance Code Section 1763 (diligent search before placing surplus line insurance)(opens the original record on California Legislative Counsel (leginfo.legislature.ca.gov))

   California Legislative Counsel (leginfo.legislature.ca.gov)Primary lawPrimaryJurisdiction CALast checked September 5, 2026Updates: Amended only by legislation.ID ca-ins-code-1763

   What this source supports (15)

   • Section 1763(a) permits a surplus line broker to solicit and place insurance for a home state insured with nonadmitted insurers only if that insurance cannot be procured from insurers admitted for the particular class or classes of insurance and that actually write the particular type of insurance in this state.
   • Section 1763(a) makes each surplus line broker responsible to ensure that a diligent search is made among insurers that are admitted to transact and are actually writing the particular type of insurance in this state before procuring the insurance from a nonadmitted insurer.
   • Section 1763(a) requires the surplus line broker to file with the commissioner, within 60 days of placing any insurance for a home state insured with a nonadmitted insurer, a written report that shall be kept confidential, including the name and address of the insured, verification that the insured is a home state insured, the identity of the insurer or insurers, a description of the subject and location of the risk, the amount of premium charged, and a copy of the declarations page or of the broker's certificate or binder.
   • Section 1763(a) requires the broker to file a standardized form prescribed by the commissioner setting forth the diligent efforts to place the coverage with admitted insurers and the results of those efforts, signed by a person licensed under the code who made the diligent search or who supervised an unlicensed person or persons who actually conducted it.
   • Section 1763(b) provides that it is prima facie evidence that a diligent search among admitted insurers has been made if the standardized form establishes that three admitted insurers that actually write the particular type of insurance in this state have declined the risk, or that fewer than three admitted insurers actually write the particular type of insurance.
   • Section 1763(b) permits the commissioner to review the form for the accuracy of the information on it, including whether the listed insurers actually write that type of insurance and whether the three insurers declined the risk, and to take disciplinary action against the person signing the form for any misrepresentation made through negligence or as the result of an intentional act.
   • Section 1763(a) provides that the insurance shall not be placed with a nonadmitted insurer for the purpose of procuring a rate lower than the lowest rate that will be accepted by any admitted insurer, except as provided in subdivision (c).
   • Section 1763(c) provides that it shall be conclusively presumed that insurance is placed in violation of the section if it is actually placed with a nonadmitted insurer at a lower rate or lower premium than the lowest obtainable from an admitted insurer, unless at the time the insurance attaches a statement is filed with the commissioner describing the insurance, specifying the rate and the nearest procurable rates from admitted insurers, and explaining why the insurance must be placed with a nonadmitted insurer even though it is available from an admitted insurer.
   • Section 1763(c) provides that unless the commissioner notifies the filing broker within five days that the placement appears to violate the section, the broker may maintain the insurance in effect, and that a broker who is ordered to terminate the insurance within 10 days of such a notice and fails or refuses to do so violates the section.
   • Section 1763(e) defines type of insurance, for purposes of the section, as the hazard or combination of hazards covered by a contract of insurance.
   • Section 1763(g) provides that the section does not apply to an extension of coverage by a nonadmitted insurer of or for the same risks and to the same insured under an existing surplus lines policy, that such an extension may not exceed 90 days in the aggregate during any 12-month period, that it may not include a change in coverage, terms, conditions or limits, and that any additional premium shall be determined pro rata on the same rate as the existing policy.
   • Section 1763(h)(1) provides that the diligent search requirement does not apply to a commercial insured as defined in Insurance Code section 1760.1(b) when the surplus line broker has disclosed in writing to the commercial insured that surplus insurance may or may not be available from the admitted market that may provide greater protection with more regulatory oversight, and the commercial insured has subsequently requested in writing that the broker procure or place surplus insurance from a nonadmitted insurer.
   • Section 1763(h)(2) makes the surplus line broker responsible to ensure that the applicant is a commercial insured, and provides that a broker who reasonably relies on information provided in good faith by the applicant, whether directly or through a producer, is deemed to be in compliance with that requirement.
   • Section 1763(d) provides that statements filed under the section are not subject to public inspection unless the commissioner determines that the public interest or the welfare of the filing broker requires that a statement be made public.
   • Section 1763(f) provides that the section does not apply to insurance issued or delivered in this state to a home state insured by a nonadmitted Mexican insurer through a surplus line broker affording coverage exclusively in the Republic of Mexico on property located, or operations conducted, temporarily or permanently within the Republic of Mexico.

   The three-declination test in subdivision (b) is prima facie evidence rather than a definition of diligent search, and subdivision (b) lets the commissioner go behind the form to check whether the insurers named actually write the type at all. The commercial-insured exemption in (h) is the part most often stated without its two conditions, both of which must be in writing.

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3. [3]

   California Insurance Code Section 1764.1 (surplus line insurance disclosure notice)(opens the original record on California Legislature, California Legislative Information (leginfo))

   California Legislature, California Legislative Information (leginfo)Primary lawPrimaryJurisdiction CALast checked September 5, 2026Updates: Amended by the California Legislature from time to time; verify the current text on leginfo before relying on it.ID ca-ins-code-1764-1

   What this source supports (11)

   • The required notice states that the insurance policy is being issued by an insurer that is not licensed by the State of California.
   • The required notice states that the insurer is not subject to the financial solvency regulation and enforcement that apply to California licensed insurers.
   • The required notice states that the insurer does not participate in any of the insurance guarantee funds created by California law, and that those funds will not pay claims or protect assets if the insurer becomes insolvent.
   • The disclosure must appear in boldface 16-point type on a freestanding document, and must be signed by the applicant.
   • The disclosure must also be included in boldface 16-point type on the front page of the policy.
   • Section 1764.1(a)(1) places the responsibility for obtaining the applicant's signature on both the nonadmitted insurer and the surplus line broker, and applies it at the time of accepting an application for a policy other than a renewal of that policy.
   • Section 1764.1(a)(1) requires the surplus line broker to keep a copy of the signed disclosure in the broker's records for at least five years, and to make those records available to the commissioner and to the insured on request.
   • Section 1764.1(a)(1) provides that the disclosure must be signed by the applicant and is not subject to a limited power of attorney agreement between the applicant and an agent, broker, or surplus line broker.
   • Section 1764.1(a)(2) provides that where the applicant has not received and completed the signed disclosure form the section requires, the applicant may cancel the insurance so placed, that the cancellation shall be on a pro rata basis as to premium, and that the applicant is entitled to the return of any broker's fees charged for the placement.
   • Section 1764.1(b) directs the reader of the notice to ask questions of their agent, broker or surplus line broker, or to contact the California Department of Insurance at 1-800-927-4357 or at www.insurance.ca.gov, and to ask whether the insurer is licensed as a foreign or non-United States insurer.
   • Section 1764.1(b) requires the notice to be printed in English and in the language principally used by the surplus line broker and nonadmitted insurer to advertise, solicit, or negotiate the sale and purchase of surplus line insurance.

   Rechecked 2026-09-05 against the section's own page and extended. The earlier entry recorded only the notice text and deliberately set aside the recordkeeping and cancellation provisions; those are now read and recorded, because subdivision (a)(2) is the operative consequence of the requirement and is the part a reader is least likely to be told. A placement made without the signed disclosure is cancellable by the insured, pro rata, with the broker fee returned.

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4. [4]

   California Insurance Code Section 1765.1 (when a nonadmitted insurer is eligible for a surplus line placement)(opens the original record on California Legislative Counsel (leginfo.legislature.ca.gov))

   California Legislative Counsel (leginfo.legislature.ca.gov)Primary lawPrimaryJurisdiction CALast checked September 5, 2026Updates: Amended only by legislation.ID ca-ins-code-1765-1

   What this source supports (6)

   • Section 1765.1 prohibits a surplus line broker from placing any coverage with a nonadmitted insurer for a home state insured unless, at the time of placement, the insurer meets the requirements of either subdivision (a) or subdivision (b), with a narrow exception for a Mexican-domiciled insurer covering only liability arising out of the ownership, maintenance or use of a motor vehicle, aircraft or boat in the Republic of Mexico.
   • Section 1765.1(a)(1) requires an insurer domiciled in a state or territory of the United States to be licensed to write the type of insurance in its domiciliary jurisdiction.
   • Section 1765.1(a)(2)(A) requires such an insurer to have capital and surplus that together total forty-five million dollars.
   • Section 1765.1(a)(2)(B) permits an insurer with less than forty-five million dollars to satisfy the requirement upon an affirmative finding of acceptability by the commissioner, based on factors such as quality of management, capital and surplus of any parent company, underwriting profit and investment income trends, market availability, and company record and reputation within the industry, and prohibits the commissioner from making that finding where the foreign insurer's capital and surplus is less than four million five hundred thousand dollars.
   • Section 1765.1(b) provides that an insurer not domiciled in a state or territory of the United States is eligible if it is listed on the Quarterly Listing of Alien Insurers maintained by the NAIC International Insurers Department and is licensed as an insurer in its domiciliary jurisdiction.
   • Section 1765.1(c) permits the commissioner to issue an order without prior notice and hearing if at any time the commissioner determines that an insurer is no longer eligible under subdivision (a) or (b).

   Eligibility is a floor on the insurer's balance sheet and licensing, not an endorsement of it. Nothing in this section subjects a nonadmitted insurer to California solvency regulation or to the guarantee funds, which is what section 1764.1 requires the insured to be told.

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5. [5]

   California Insurance Code Section 1775.5 (the surplus line premium tax)(opens the original record on California Legislative Counsel (leginfo.legislature.ca.gov))

   California Legislative Counsel (leginfo.legislature.ca.gov)Primary lawPrimaryJurisdiction CALast checked September 5, 2026Updates: Amended only by legislation.ID ca-ins-code-1775-5

   What this source supports (5)

   • Section 1775.5(a) requires every surplus line broker, annually on or before the first day of March, to pay the Insurance Commissioner for the use of the State of California a tax of 3 percent of the gross premiums charged less return premiums upon business done under the authority of the broker's licence during the preceding calendar year.
   • Section 1775.5(a) excludes from that tax any portions of premiums upon business done involving the risk finance portion of a blended finite risk product used in the financing element of state or federal Superfund environmental settlements involving remediation of soil or groundwater contamination, and business excluded by Insurance Code section 1760.5.
   • Section 1775.5(a) provides that where 3 percent of return premiums exceeds 3 percent of gross premiums in a calendar year, the broker may either carry the excess forward as a credit against the following year or elect to receive a refund equal to the taxes previously paid on that excess.
   • Section 1775.5(b) provides that for the purpose of determining the tax, the total premium charged for all nonadmitted insurance placed in a single transaction with one underwriter or group of underwriters, whether in one or more policies, is the entire premium charged on all nonadmitted insurance for the California home state insured.
   • Section 1775.5(c)(1) levies a penalty of 10 percent of the amount due upon a surplus line broker who fails to make the payment within the time required, plus interest at the rate of 1 percent per calendar month or fraction of a month from the March 1 due date until payment.

   The tax is levied on the broker rather than on the insured, and is stated here in the statute's own terms. What a particular placement costs a particular buyer is a separate question this record does not answer, and the stamping fee charged by the Surplus Line Association of California is a separate charge under a different authority.

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