Surplus Lines Group Contests Montana’s Right to Stamping Fees

The surplus lines industry is taking issue with the Montana Commissioner of Securities and Insurance over its decision to take over the collection of stamping fees from the Surplus Lines Stamping Office, previously part of the Montana Surplus Lines Agents Association (MSLAA).

Effective July 1, 2009, the Montana Commissioner of Securities and Insurance announced it would begin reviewing and processing surplus lines insurance submissions, determine applicable stamping fees owed, and send surplus lines agents tax and fee statements. Previously, the MSLAA was responsible for the operation of the Surplus Lines Stamping Office, but it turned over the operations to the DOI on July 1.

Normally a stamping fee is collected to fund the duties of a state’s stamping office. Fourteen states have stamping offices, which function separately from the states’ regulators. Regulators are funded with tax money, said Steve Stephan, National Association of Professional Surplus Lines Offices’ (NAPSLO) director of government relations. Stamping offices are funded by the collection of a stamping fee, which is a surcharge on top of the policy premium, he added.

NAPSLO is questioning the basis for the state to take over the MSLAA’s duties in collecting the stamping fee. Under Montana state law “if a surplus lines advisory organization is not operating as set forth in this section, the stamping fee may be collected by the commissioner and placed in a state special revenue account for the expenses of regulating surplus lines” however the MSLAA was in operation at the time of the take over.

“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.”

In addition, Mr. Stephan noted in the letter to the department that it can only take over the stamping fee collection duties from an existing organization if there is a finding that the organization is not operating pursuant to Montana law. To date Stephan said there has been no examination by the commissioner finding a violation of law and no hearing has been provided to the MSLAA and as a result there is no basis to conclude that the advisory organization was not operating as required.

Bob Biskupiak, executive director of the MSLAA, said the reason the insurance department decided to take over the duties of the stamping office was because the department believed they could do a better job regulating the surplus lines industry if they had more control over it. It wasn’t that the MSLAA was performing poorly, he said. The MSLAA has served as the designated Surplus Lines Advisory Authority for the past 19 years, Biskupiak said. “The change came as a surprise to us but they had the authority to do so,” he added.

The department’s decision to take over the stamping office duties of the MSLAA and in turn the money generated from stamping fees has had a big impact on the MSLAA. Prior to the change, the MSLAA, which also includes staff for the Independent Insurance Agents of Montana, the Montana Education Foundation and a for profit company, Public Risk Insurance Management, consisted of 10 people. “As a result (of the change) we had to lay off five people,” Biskupiak said.

NAPSLO submitted a letter and will take part a public hearing in Montana today to contest the decision by the state to take over the collection of stamping fees from the MSLAA. The office of Montana’s Insurance Commissioner Monica Lindeen declined to comment on this story because of today’s hearing.

According to statistics from the Surplus Lines Stamping Office of Texas, $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