Information to policyholder.
The insurer and any agent or broker are obligated promptly to furnish the policyholder a statement in a form prescribed or approved by the commissioner, informing the policyholder that the insurer has not obtained a certificate of authority to do business in this state and is not regulated in this state except as provided in this section.
With respect to contracts made under this section, nondomestic insurers and domestic surplus lines insurers are subject to s. 628.34
and rules promulgated thereunder.
Prohibited and restricted surplus lines business. 618.41(6)(a)
(a) Prohibited classes.
The commissioner may by rule prohibit the making of contracts under sub. (1)
in a specified class of insurance if authorized insurers provide an established market for the class in this state which is adequate and reasonably competitive with reputable unauthorized insurers.
The commissioner may by rule place restrictions and limitations on and create special procedures for the making of contracts under sub. (1)
for a specified class of insurance if there have been abuses of placements in the class or if the policyholders in the class, because of limited financial resources, business experience or knowledge, cannot be expected to protect their own interests adequately.
Exclusion of individual insurers.
The commissioner may prohibit an individual insurer or group policyholder, including but not limited to a risk purchasing group, from making any contracts under sub. (1)
or issuing evidence of coverage and may prohibit all insurance agents and brokers from dealing with the insurer or group policyholder, if:
The commissioner has reason to believe that the insurer, or the insurer which issued the policy to a group policyholder, is in an unsound condition or the insurer or group policyholder is operated in a fraudulent, dishonest or incompetent manner or in violation of the law of its domicile.
The commissioner may issue lists of unauthorized nondomestic insurers whose solidity he or she believes to be doubtful or whose practices he or she believes to be objectionable. The commissioner may issue lists of unauthorized nondomestic insurers he or she believes to be reliable and solid. The commissioner may also issue other relevant evaluations of unauthorized insurers. No action may lie against the commissioner or any employee of the office for anything said in the issuance of such lists and evaluations.
Rustproofing warranties insurance.
An insurer issuing a policy of insurance under this section to cover a warranty, as defined in s. 100.205 (1) (g)
, shall comply with s. 632.18
and the policy shall be on a form approved by the commissioner under s. 631.20
The commissioner may, pursuant to s. 628.04 (2)
, issue to any licensed agent or broker a surplus lines license granting authority to procure insurance under this section.
Risk purchasing groups; licensed agents.
A natural person may not solicit, negotiate or obtain liability insurance for a risk purchasing group from an unauthorized insurer unless the natural person is licensed as a surplus lines agent under sub. (7)
Surplus lines agents, brokers and group policyholders. 618.41(8)(a)(a)
An agent or broker may not place insurance under this section with, and a person who offers liability insurance coverage under a group policy may not solicit the purchase of coverage under a group policy issued by, an unauthorized insurer if all of the following exist:
The insurer is financially unsound, engaging in unfair practices or otherwise substandard.
The agent, broker or other person fails to give the applicant written notice of the insurer's deficiencies.
The agent, broker or other person either knows of, or fails to adequately investigate, the insurer's financial condition and general reputation.
Retention of notice.
An agent, broker or group policyholder shall keep in its office for at least 5 years any notice provided under par. (a) 2.
To be financially sound for purposes of par. (a) 1.
, an insurer must be able to satisfy standards comparable to those applied under the laws of this state to authorized insurers, unless this state is the insured's home state, in which case s. 618.416
Requirements for surplus lines policies. 618.41(9)(a)
Every new or renewal insurance policy procured and delivered under this section shall bear the name and address of the insurance agent or broker who procured it and shall have stamped or affixed upon it the following: “This insurance contract is with an insurer which has not obtained a certificate of authority to transact a regular insurance business in the state of Wisconsin, and is issued and delivered as a surplus line coverage pursuant to s. 618.41
of the Wisconsin Statutes. Section 618.43 (1)
, Wisconsin Statutes, requires payment by the policyholder of 3 percent tax on gross premium."
Additional required information.
The policy shall include a description of the subject of the insurance, and indicate the coverage, conditions and term of the insurance, the premium charged and premium taxes to be collected from the policyholder, and the name and address of the policyholder and insurer. If the direct risk is assumed by more than one insurer, the policy shall state the names and addresses of all insurers and the portion of the entire direct risk each has assumed.
Surplus lines policies issued by domestic surplus lines insurers.
Notwithstanding par. (a)
, every new or renewal insurance policy procured and delivered under this section by a domestic surplus lines insurer shall bear the name and address of the insurance agent or broker who procured it and shall have stamped or affixed upon it the following: “This insurance contract is issued and delivered as a surplus line coverage pursuant to s. 618.41
of the Wisconsin Statutes. Section 618.43 (1)
, Wisconsin Statutes, requires payment by the policyholder of 3 percent tax on gross premium. If the insurer that issued and delivered this policy becomes insolvent, insureds or claimants will not be eligible for Wisconsin Insurance Security Fund protection under chapter 646 of the Wisconsin Statutes."
Issuance of evidence of insurance.
Upon placing a new or renewal coverage under this section, the agent or broker shall promptly deliver to the policyholder or his or her agent evidence of the insurance consisting either of the policy as issued by the insurer or, if the policy is not then available, a certificate, cover note or other confirmation of insurance.
The commissioner may by rule subject policies written under this section to as much of the regulation provided by chs. 600
for comparable policies written by authorized insurers as the commissioner finds to be necessary to protect the interests of insureds and the public in this state.
Application when this state is not the insured's home state.
The placement of insurance under this section is not subject to subs. (4)
, or (10)
if this state is not the insured's home state and the placement complies with the laws of the insured's home state.
An insurer domiciled in this state may submit to the commissioner an application for a certificate that permits the insurer to provide surplus lines insurance as a domestic surplus lines insurer. The commissioner shall issue the certificate to the insurer if the insurer satisfies all of the following requirements:
The insurer's board of directors has adopted a resolution requesting to be certified as a domestic surplus lines insurer.
The insurer is eligible to provide surplus lines insurance in a state other than this state.
The insurer has capital and surplus of no less than $15,000,000.
If the insurer applying for a certificate under this subsection has issued insurance policies in this state as a domestic insurer, the insurer includes in its application a plan for the insurer's proposed treatment of those policies in compliance with chs. 600
A domestic surplus lines insurer is subject to all requirements of this subchapter and the requirements that apply to a domestic insurer organized under ch. 611
Notwithstanding subd. 1.
, a surplus lines insurance policy issued in this state by a domestic surplus lines insurer is only subject to the requirements of this section and the rules promulgated under this section and shall be exempt from all statutory requirements, including requirements relating to insurance rating plans, policy forms, policy cancellation and nonrenewal, and premium charged to the insured, in the same manner as a surplus lines insurance policy issued by a nondomestic insurer.
Nothing in this section shall be construed to affect the application of ch. 646
to insurance policies that were issued by a domestic insurer prior to that domestic insurer obtaining a certificate to do business as a domestic surplus lines insurer under this subsection.
A domestic surplus lines insurer shall be considered a nonadmitted insurer as defined in 15 USC 8206
with respect to surplus lines insurance the domestic surplus lines insurer issues in this state.
Insurance transacted by a domestic surplus lines insurer under this section is subject to taxation as specified under s. 618.43
A surplus lines insurance policy issued in this state by a domestic surplus lines insurer under this section is not subject to the Wisconsin insurance security fund under ch. 646
No domestic surplus lines insurer may offer insurance other than under this section.
A domestic surplus lines insurer, after obtaining a certificate to do business as a domestic surplus lines insurer under this section, may not apply to the commissioner to issue policies other than as a domestic surplus lines insurer.
Independent actual notice to a policyholder, in the absence of stamping or affixing the information required under sub. (9) (a) to the policy, was insufficient. Combined Investigative v. Scottsdale Ins., 165 Wis. 2d 262
, 477 N.W.2d 82
(Ct. App. 1991).
Surplus-lines insurance must be “placed" with an insurer through an agent or broker who holds a Wisconsin surplus-lines license. However, no provision requires a person to hold a surplus-lines license to negotiate a policy or perform the underwriting unless the policy is for a risk purchasing group under sub. (7m). In addition, a broker can perform the role under sub. (8) with respect to a given insurer and then allow others to place policies with that insurer under the broker's license. Midwest Commercial Funding, LLC v. Cincinnati Specialty Underwriters Insurance Co., 399 F. Supp. 3d 736
The proposal requirement under sub. (4) is distinct from the stamping requirement under sub. (9) (a), and each disclosure must be made at a different time. The proposal letter must be furnished to the policyholder promptly, which means before the policy has been procured, for it informs the insured that the agent or broker intends to procure the policy on a surplus-lines basis and instructs the insured to contact the agent or broker if the proposal is not satisfactory. In contrast, the information required to be stamped on the policy must be disclosed at the time the policy is procured and delivered. Midwest Commercial Funding, LLC v. Cincinnati Specialty Underwriters Insurance Co., 399 F. Supp. 3d 736
Group liability insurance issued by an unauthorized insurer. 618.415(1)(1)
Notice before taking application.
A person may not take an application for liability insurance coverage under a group liability insurance policy which is issued by an unauthorized insurer and which is for a risk that resides or is otherwise located in this state, unless before taking the application the person gives the applicant clear and prominent written notice of all of the following:
That the insurer has not obtained a certificate of authority in this state and is not regulated in this state.
That the risk is not protected by the Wisconsin insurance security fund.
Any other information required by the commissioner by rule.
Notice in the evidence of insurance.
A person may not provide liability insurance coverage under a group insurance policy which is issued by an unauthorized insurer to a member for a risk that resides or is otherwise located in this state, unless the evidence of insurance clearly and prominently includes all of the following:
That the risk is not protected by the Wisconsin insurance security fund.
Any other information required by the commissioner by rule.
History: 1987 a. 247
Qualification for placement of surplus lines insurance with an unauthorized insurer.
An intermediary may not place surplus lines insurance under s. 618.41
with an unauthorized insurer if this state is the home state of the proposed insured, unless at the time of placement all of the following apply to the unauthorized insurer:
If the unauthorized insurer is domiciled in a United States jurisdiction, the insurer satisfies all of the following:
In its domiciliary jurisdiction, the unauthorized insurer is authorized to write the type of insurance to be placed with the insurer.
Either the unauthorized insurer has capital and surplus or its equivalent under the laws of its domiciliary jurisdiction that equals the greater of either the minimum capital and surplus requirements under the laws of this state or $15,000,000 or the commissioner affirmatively finds that the unauthorized insurer's capital and surplus are acceptable. The commissioner's finding shall be based on factors that include quality of management, capital and surplus of any parent company, company underwriting profit and investment income trends, market availability, and company record and reputation within the industry. In no event may the commissioner find that the unauthorized insurer's capital and surplus are acceptable if the unauthorized insurer's capital and surplus are less than $4,500,000.
If the unauthorized insurer is an alien insurer, the insurer is listed on the quarterly listing of alien insurers maintained by the international insurers department of the National Association of Insurance Commissioners and meets additional requirements regarding the use of the list established by rule of the commissioner.
History: 2011 a. 224
; 2019 a. 66
Direct procurement of insurance. 618.42(1)(1)
Permitted direct procurement.
Subject to the restrictions of this section, any person seeking insurance may obtain it if no agent or broker resident or doing business in this state is involved and if negotiations occur primarily outside this state. Negotiations by mail occur within this state if a letter is sent from or to an address in this state.
Reports and taxation.
Every policyholder who procures or renews insurance otherwise subject to chs. 600
from any insurer not authorized to do business in this state, other than insurance procured under s. 618.41
and the renewal of guaranteed renewable insurance lawfully issued outside this state, shall within 60 days after the insurance procured or renewed report to the commissioner in such form as he or she requires and pay the taxes specified by s. 618.43
Prohibited placement with unauthorized insurers. 618.42(3)(a)(a)
Sales of personal property.
Any insurance on personal property sold on the installment plan or under a conditional sales contract or equivalent security agreement under chs. 401
for which a charge is made to the buyer as a part of the consideration in the agreement of sale shall be placed with an insurer authorized to do business in this state.
Whenever the law of this state requires a person to purchase insurance on risks in this state, the person shall obtain it from an insurer authorized to do business in this state, or under s. 618.41
Cross-reference: See also ss. Ins. 6.17 and 6.19, Wis. adm. code.
Taxation of insurance written by unauthorized insurers. 618.43(1)(a)
Subject to par. (bc)
, insurers, agents, brokers, and policyholders are liable, as provided in sub. (2)
, for a premium tax of 3 percent of gross premiums charged for insurance, excluding annuities, if any of the following is satisfied:
The insurance is transacted by an unauthorized insurer that is a risk retention group, including a foreign risk retention group authorized to provide health care liability insurance under s. 655.23 (3) (am)
that has not been issued a certificate of authority under s. 618.12
The insurance is transacted by an unauthorized insurer for a risk purchasing group.
Notwithstanding any other provision of this section, with respect to premiums charged on policies issued or renewed on or after July 21, 2011, for insurance to which par. (a)
applies, the tax under par. (a)
is required only if the home state of the insured is this state, and it shall be levied on the entire gross premium charged, including premium attributable to those portions of the risk located outside of this state.
If the tax required under this subsection is not paid within the time prescribed under sub. (3)
, the commissioner shall impose a penalty of 25 percent, plus one percent per month from default until payment.
Any insurance business transacted in violation of the law is subject to a premium tax of 5 percent of gross premiums charged for the insurance.
Payment of tax.
The insurance agent or broker and the policyholder are jointly and severally liable for the payment of the tax required under sub. (1)
on business written under s. 618.41 (1)
, and the insurer, insurance agent or broker and policyholder are jointly and severally liable for the payment of any other tax required under sub. (1)
. The tax shall ultimately be paid by the policyholder. Absorption of the tax by either the agent or broker or the insurer is an unfair method of competition under s. 628.34 (2) (b)
Accounting and reporting.
The commissioner shall by rule prescribe accounting and reporting forms and procedures for insurers, agents or brokers and policyholders for the purpose of determining the amount of the taxes owed, and the manner and time of payment.
Applicability of tax law.
is applicable to any tax payable under this section.
The tax under this section is in lieu of all other taxes on insurance business and of fire department dues.
Allocation of tax.
With respect to gross premiums charged on policies issued or renewed before July 21, 2011, if a policy covers risks that are only partially located in this state, the premium shall be reasonably allocated among the states on the basis of risk locations in computing the tax, except that all premiums received in this state or charged on policies written or negotiated in this state shall be taxable in full under this section, with a credit for any tax actually paid in another state to the extent of a reasonable allocation on the basis of risk locations.
Taxes as trust funds.
All premium taxes collected under this section by an agent or broker or by an insurer are the property of this state, to be held in trust for the state.
Taxes as preferred claims.
If the property of any agent or broker is seized upon any process in any court in this state, or when his or her business is suspended by the action of creditors or put into the hands of any assignee, receiver or trustee, all taxes and penalties due the state from him or her under this section are preferred claims and the state is to that extent a preferred creditor.