- South Dakota does not maintain a list of eligible surplus lines insurers.
- South Dakota does not have a Surplus Lines Association.
- South Dakota does not have an Export List.
- South Dakota does not have an industrial insured exemption but does recognize a commercial purchaser exemption. South Dakota has not yet updated its exempt commercial purchaser exemption to match that of the NRRA (see Appendix C).
- Surplus lines tax: 2.5% (3% for fire insurance), payable by broker, or individual (if self-procured).
- South Dakota adopted NIMA (HB 1030); however, the Board of Directors of NIMA voted on April 28, 2016 to discontinue operations and dissolve the NIMA, Inc. organization. The SLAS Clearinghouse will continue to accept surplus lines filings and payments for South Dakota policies effective October 1, 2016 and after. Beginning October 1, 2016, all new and renewal multistate policies for South Dakota will be reported as single state policies through the SLAS Clearinghouse single state reporting platform in SLIP, with 100% of the premium being reported to and taxed by the respective home state.
- South Dakota does not allow domestic surplus lines insurers in the state.
Eligibility and Filing Requirements (All Insurers):
SD requirements for a surplus lines insurer remain the same as before aside from the requirements under NRRA. Surplus lines insurers will be required to file the Surplus Lines Insurer Business Written & Premium Tax Report along with the Schedule T & State Page for Foreign companies. Alien surplus lines companies will be required to file the Surplus Lines Insurer Business Written & Premium Tax Report.
Eligibility and Filing Requirements (Alien Insurers Only):
- Premium report (see above).
- NAIC Listing.
Types of Insurance Exempted from Surplus Lines Regulation:
- Ocean marine and foreign trade insurance.
- Insurance on subjects located, resident, or to be performed wholly outside of South Dakota or on vehicles or aircraft owned and principally garaged outside of South Dakota.
- Insurance on operations of railroads engaged in transportation in interstate commerce and their property used in such operations.
- Insurance of aircraft owned or operated by manufacturers of aircraft, or aircraft operated in scheduled interstate flight, or cargo of the aircraft, or against liability, other than workers’ compensation and employer’s liability, arising out of the ownership, maintenance, or use of the aircraft.
Other Comments or Requirements:
- Burden is on broker to satisfy himself that company is financially solvent and has requisite trust fund. If alien insurer does not have trust fund then application for eligibility must be made to Director of Insurance.
- South Dakota insurance business written by a non-admitted company must be placed through a:
• Resident or non-resident producer, licensed as a Surplus Lines Broker, or
• Surplus Lines Broker for risk retention groups or risk purchasing group – Restricted License.
- A Surplus Lines Broker license may be issued to a Non-Resident agent, in good standing in his state, doing business pursuant to the Federal Risk Retention Act of 1986. The surplus lines broker authority in this instance is limited to the solicitation of commercial liability to only purchasing group or risk retention group members located in South Dakota.
- A 2.5% tax on self-procured insurance is payable by the insured. The responsibility to inform such insured of his duty to remit the premium tax is placed upon the underwriting insurer, due to his status as the sophisticated party in the insurance transaction.
- South Dakota permits a uniform report to be filed in lieu of an annual statement or affidavit as to exported insurance. The uniform report must contain information sufficient to determine the amount and type of surplus lines insurance written in the state and sufficient to determine the appropriate amount of tax to be paid.
- The South Dakota DOI issued a Bulletin in 2013 requiring all single-state surplus lines policies issued or renewed after January 1, 2013 and any subsequent endorsements to those policies, to be filed through the SLAS Clearinghouse. Policies with effective dates or endorsements before that date will continue to be filed with the South Dakota Insurance Department until renewal.
- Life and health insurance, workers compensation, annuities and reinsurance cannot be written in the surplus lines market, except this prohibition does not apply to the procurement of disability insurance that has a benefit limit in excess of any benefit available from an admitted insurer. (SDCL 58-32-4)
- Every insurance contract procured and delivered as a surplus lines coverage must be initialed by or bear the name of the surplus lines broker who procured it and have stamped upon it, in ten point or larger, boldface type, the following:“THIS INSURANCE CONTRACT IS ISSUED BY A NON-ADMITTED INSURER WHICH IS NOT LICENSED BY NOR UNDER THE JURISDICTION OF THE SOUTH DAKOTA INSURANCE DIRECTOR.”
- The South Dakota DOI issued Bulletin 13-04 in 2014, which provides guidance on rebating, fees and commissions. Rebating, negotiating commissions with consumers, charging fees not specified in the insurance product and collecting consulting fees and commissions on the same product are specifically prohibited, including for surplus lines brokers.