TEXAS SURPLUS LINES INSURANCE AGENT
LICENSING EXAM
Question 1
Which of the following best describes a surplus lines insurer?
A) A company licensed and admitted in all 50 states
B) A domestic insurer restricted to personal lines only
C) An unauthorized insurer allowed to write business through a
surplus lines agent
D) A state-funded insurance provider
Answer: C) An unauthorized insurer allowed to write business
through a surplus lines agent
Rationale: A surplus lines insurer is not admitted in the state but
is permitted to provide coverage for risks that admitted insurers
will not cover. These insurers must meet eligibility requirements
but are considered non-admitted.
Question 2
What is the primary purpose of surplus lines insurance?
A) To replace all admitted market insurance
B) To provide coverage for high-risk or specialty exposures
C) To eliminate the need for insurance regulation
D) To insure only government entities
Answer: B) To provide coverage for high-risk or specialty
exposures
Rationale: Surplus lines insurance exists to fill gaps in the
admitted market by covering unique, unusual, or high-risk
exposures that standard insurers are unwilling to insure.
Question 3
Before placing business in the surplus lines market, what must
,an agent generally attempt first?
A) File the policy directly with the state
B) Conduct a diligent search of admitted carriers
C) Obtain approval from the insured’s employer
D) Submit the risk to a reinsurer
Answer: B) Conduct a diligent search of admitted carriers
Rationale: A diligent search demonstrates that the risk was
declined by the admitted market before placing coverage with a
surplus lines insurer.
Question 4
How many declinations are typically required to satisfy a
diligent search in Texas?
A) 1
B) 2
C) 3
D) 5
Answer: C) 3
Rationale: Texas generally requires evidence of at least three
declinations from admitted insurers unless an exception applies.
Question 5
Which entity maintains the list of eligible surplus lines insurers
for Texas?
A) Texas Department of Motor Vehicles
B) Texas Department of Insurance
C) Federal Insurance Office
D) National Association of Realtors
Answer: B) Texas Department of Insurance
Rationale: The Texas Department of Insurance (TDI) regulates
,insurance and maintains eligibility standards for surplus lines
insurers.
Question 6
Surplus lines insurance policies are typically placed through:
A) Licensed surplus lines agents
B) Unlicensed brokers
C) Bank loan officers
D) Policyholders directly
Answer: A) Licensed surplus lines agents
Rationale: Only licensed surplus lines agents are authorized to
place coverage with non-admitted insurers.
Question 7
What is the Texas Surplus Lines Stamping Office primarily
responsible for?
A) Selling insurance policies
B) Reviewing and recording surplus lines transactions
C) Licensing insurance adjusters
D) Setting insurance premium rates
Answer: B) Reviewing and recording surplus lines transactions
Rationale: The stamping office reviews surplus lines policies for
compliance and ensures proper documentation and tax
reporting.
Question 8
Which of the following is NOT a characteristic of surplus lines
insurance?
A) Higher flexibility in coverage
B) Regulation by admitted market rules
C) Coverage for hard-to-place risks
D) Use of non-admitted insurers
, Answer: B) Regulation by admitted market rules
Rationale: Surplus lines insurers are not subject to the same
strict rate and form regulation as admitted carriers.
Question 9
Who pays the surplus lines tax in Texas?
A) The insurer
B) The insured
C) The federal government
D) The agent personally
Answer: B) The insured
Rationale: The insured ultimately pays the surplus lines
premium tax, which is collected and remitted by the agent.
Question 10
What is the current Texas surplus lines tax rate commonly
applied?
A) 1%
B) 2%
C) 4.85%
D) 10%
Answer: C) 4.85%
Rationale: Texas applies a surplus lines premium tax rate of
4.85% on gross premiums.
Question 11
Surplus lines insurance is also commonly referred to as:
A) Standard market insurance
B) Non-admitted insurance
C) Federal insurance
D) Primary insurance
LICENSING EXAM
Question 1
Which of the following best describes a surplus lines insurer?
A) A company licensed and admitted in all 50 states
B) A domestic insurer restricted to personal lines only
C) An unauthorized insurer allowed to write business through a
surplus lines agent
D) A state-funded insurance provider
Answer: C) An unauthorized insurer allowed to write business
through a surplus lines agent
Rationale: A surplus lines insurer is not admitted in the state but
is permitted to provide coverage for risks that admitted insurers
will not cover. These insurers must meet eligibility requirements
but are considered non-admitted.
Question 2
What is the primary purpose of surplus lines insurance?
A) To replace all admitted market insurance
B) To provide coverage for high-risk or specialty exposures
C) To eliminate the need for insurance regulation
D) To insure only government entities
Answer: B) To provide coverage for high-risk or specialty
exposures
Rationale: Surplus lines insurance exists to fill gaps in the
admitted market by covering unique, unusual, or high-risk
exposures that standard insurers are unwilling to insure.
Question 3
Before placing business in the surplus lines market, what must
,an agent generally attempt first?
A) File the policy directly with the state
B) Conduct a diligent search of admitted carriers
C) Obtain approval from the insured’s employer
D) Submit the risk to a reinsurer
Answer: B) Conduct a diligent search of admitted carriers
Rationale: A diligent search demonstrates that the risk was
declined by the admitted market before placing coverage with a
surplus lines insurer.
Question 4
How many declinations are typically required to satisfy a
diligent search in Texas?
A) 1
B) 2
C) 3
D) 5
Answer: C) 3
Rationale: Texas generally requires evidence of at least three
declinations from admitted insurers unless an exception applies.
Question 5
Which entity maintains the list of eligible surplus lines insurers
for Texas?
A) Texas Department of Motor Vehicles
B) Texas Department of Insurance
C) Federal Insurance Office
D) National Association of Realtors
Answer: B) Texas Department of Insurance
Rationale: The Texas Department of Insurance (TDI) regulates
,insurance and maintains eligibility standards for surplus lines
insurers.
Question 6
Surplus lines insurance policies are typically placed through:
A) Licensed surplus lines agents
B) Unlicensed brokers
C) Bank loan officers
D) Policyholders directly
Answer: A) Licensed surplus lines agents
Rationale: Only licensed surplus lines agents are authorized to
place coverage with non-admitted insurers.
Question 7
What is the Texas Surplus Lines Stamping Office primarily
responsible for?
A) Selling insurance policies
B) Reviewing and recording surplus lines transactions
C) Licensing insurance adjusters
D) Setting insurance premium rates
Answer: B) Reviewing and recording surplus lines transactions
Rationale: The stamping office reviews surplus lines policies for
compliance and ensures proper documentation and tax
reporting.
Question 8
Which of the following is NOT a characteristic of surplus lines
insurance?
A) Higher flexibility in coverage
B) Regulation by admitted market rules
C) Coverage for hard-to-place risks
D) Use of non-admitted insurers
, Answer: B) Regulation by admitted market rules
Rationale: Surplus lines insurers are not subject to the same
strict rate and form regulation as admitted carriers.
Question 9
Who pays the surplus lines tax in Texas?
A) The insurer
B) The insured
C) The federal government
D) The agent personally
Answer: B) The insured
Rationale: The insured ultimately pays the surplus lines
premium tax, which is collected and remitted by the agent.
Question 10
What is the current Texas surplus lines tax rate commonly
applied?
A) 1%
B) 2%
C) 4.85%
D) 10%
Answer: C) 4.85%
Rationale: Texas applies a surplus lines premium tax rate of
4.85% on gross premiums.
Question 11
Surplus lines insurance is also commonly referred to as:
A) Standard market insurance
B) Non-admitted insurance
C) Federal insurance
D) Primary insurance
