The Surplus Line Association of California board voted to drop the association’s stamping fee to 0.18%.
Effective Jan. 1, 2023, the stamping fee will adjust downward from its current 0.25% level that took effect on Jan. 1, 2020.
The stamping fee, which is applied to all surplus lines policies filed in California, is the primary source of revenue for the SLA, a nonprofit association. These revenues fund all SLA operations, including a reviews of roughly 800,000 surplus lines filings annually on behalf of the California Department of Insurance.
The SLA is responsible for reviewing every surplus lines policy filed in California to ensure compliance with all laws and regulations. It also reviews out-of-state insurers for solvency to ensure policies are placed with companies that can pay claims, helps brokers comply with all laws and regulations, provides continuing education courses, and advocates for a fair and competitive surplus lines marketplace.
“This was the right move to make at the right time,” Janet Beaver, chair of the SLA board, said in a statement. “We raised the stamping fee in 2019 during an economic boom so that the SLA could pay off significant long-term liabilities and ensure it had sufficient reserves to avoid any reduction in member services or staffing in the event of a lengthy recession or market downturn. We are now free of long-term debt and positioned to meet a three-year recession without any changes in service or revenue-related layoffs, enabling us to provide relief for our consumers.”
The rapid growth of the surplus lines industry since the board last adjusted the stamping fee, along with the fiscal decisions made by the board and SLA management, enabled the SLA to pay off obligations to pensioners and to retire a construction loan necessitated by a move from San Francisco to less-expensive office space in San Ramon five years ago.
The board raised the stamping fee during good economic times to shield consumers from potentially having to pay more fees during leaner times, according to the association.
This is the second stamping fee change by the SLA in the last 10 years. The last adjustment took place three years ago, after the SLA held its stamping fee steady at 0.2% for the previous seven years.
The 0.18% stamping fee is well the midpoint (0.3%) of the SLA’s stamping fee variance since 1977, and 25% below the mean (0.24%) during that time, according to the association. The lowest stamping fee for the SLA over the last 45 years was 0.1% over a four-year period from Jan. 1, 1987 to Dec. 31, 1990, and the highest was 0.5% over a two-year period from Jan. 1, 1994 to Dec. 31, 1995, the association reported.
The SLA, which operates as a self-governed private organization, was appointed by the insurance commissioner in 1994 to serve as the statutory surplus line advisory organization to the CDI and facilitate the state’s capacity to monitor and direct surplus line brokers’ placements of insurance with eligible non-admitted insurers.