Glossary · Insurance agency commissions
Surplus lines broker
A surplus lines broker is a producer holding a state surplus lines license who places insurance with non-admitted carriers and is responsible for the state’s surplus lines filings and tax; retail agencies often reach that market through one, sharing the commission.
What it means
The California Department of Insurance describes its surplus line broker license this way: “A Surplus Line Broker is a person who places insurance with non-admitted insurers, covering risks other than aircraft and certain marine and transportation risks.” California requires the applicant to hold both property and casualty broker-agent licenses first. The NAIC surplus lines overview adds that “[t]he licensed surplus lines broker is responsible for ensuring the surplus lines insurer meets eligibility criteria to write policies in the state and remits payment of the surplus lines premium tax to the ‘home state.’”
How it works: a retail agency without a surplus lines license sends a hard-to-place risk to a wholesale broker that has one. The wholesaler places it with a non-admitted carrier, files and pays the tax, and bills the retail agency. Some retail agencies hold the license themselves and place directly.
Why it matters for agency commissions
When a wholesaler is involved, the retail agency’s commission is a share of the total, set in its agreement with the wholesaler, not the carrier. The invoice adds surplus lines tax, a stamping fee where the state has one, and often a broker or policy fee. Only premium is commissionable, so the check is: retail share times premium, with every tax and fee left out.
How it shows on a commission statement
Expect the wholesaler’s statement or invoice, not the carrier’s, with the retail commission already net of the wholesaler’s part. Tax, stamping fee and broker fee sit on their own lines. On agency bill placements, you remit the net to the wholesaler.
Example
- Premium
- $12,000.00
- Surplus lines tax and stamping fee (not commissionable)
- $480.00
- Broker fee (not commissionable)
- $200.00
- Retail share agreed with the wholesaler
- 10% of premium
- Expected retail commission
- $1,200.00
- Commission on wholesaler statement
- $1,268.00
Common mistakes to check
- Calculating commission on the invoice total instead of premium.
- Expecting the carrier to pay you when the wholesaler’s agreement sets your share.
- Assuming the wholesaler’s broker fee is shared with the retail agency; that depends on the agreement.
Questions
What is a surplus lines broker?
A producer with a state surplus lines license who places coverage with non-admitted carriers and handles the state filings and surplus lines tax.
Who pays the surplus lines tax?
The NAIC says the licensed surplus lines broker remits it to the insured’s home state. The insured usually pays it as a separate charge on the invoice.
How does a retail agent get paid on surplus lines business?
Usually as a share of the commission, paid by the wholesale surplus lines broker under their agreement, and calculated on premium only.
Sources
- California Department of Insurance, Surplus Line Broker license requirements. Retrieved October 14, 2026.
- National Association of Insurance Commissioners, Surplus Lines, insurance topics page. Retrieved October 14, 2026.
Lapidar is commission reconciliation software for independent insurance agencies, in its founding pilot. Related: admitted vs. non-admitted carrier.