Montana Surplus Lines Group Protests Stamping Office Takeover

The surplus lines industry is taking issue with the Montana insurance department’s takeover of the surplus lines industry’s stamping and fee collection functions.

The stamping office had been run by the Montana Surplus Lines Agents Association (MSLAA) for the past 19 years until the Montana insurance department decided it wanted to do it as part of its oversight of the industry.

On July 1, the state agency began processing surplus lines insurance submissions, determining applicable stamping fees, and sending surplus lines agents tax and fee statements. Previously, the MSLAA was responsible for the operation of the stamping office.

Fourteen states have stamping offices that function separately from the state regulators. Regulators are typically funded with tax money, while stamping offices are run on the collection of a fee on top of the policy premium, according to Steve Stephan, National Association of Professional Surplus Lines Offices’ (NAPSLO) director of government relations.

NAPSLO says the state had no reason to usurp MSLAA from its stamping office role and doing so may be a violation of state law.

Stephan said that Montana law provides for the insurance commissioner to take over the duties if there is no association to handle them or if the state determines the job is being done poorly or in violation of state law.

However the MSLAA was in operation at the time of the takeover and performing the duties in accordance with state law, according to NAPSLO. Stephan said there has been no finding of a violation of law.

NAPSLO took part a public hearing on Aug. 21 on the takeover.

The office of Insurance Commissioner Monica Lindeen declined to comment because of the hearing.

“NAPSLO’s view is that the state can step in only if there isn’t a surplus lines advisory organization collecting the fees, and there was an organization in place collecting the fees,” said Stephan. “We believe under state law Montana must allow the MSLAA to resume its role in collecting the stamping fees and processing submissions.”

Bob Biskupiak, executive director of the MSLAA, said the insurance department believed it could do a better job regulating the surplus lines industry if it had more control over the stamping office. It wasn’t that the MSLAA was performing poorly, he said.

“The change came as a surprise to us but they had the authority to do so,” he added.

The change has forced MSLAA to cut its staff from 10 to five people, according to Biskupiak.

In 2008, $54.2 million in surplus lines premiums were written in Montana in 2008, and approximately $1.5 million would have been collected in surplus lines taxes and $542,000 in stamping fees.

Topics Excess Surplus