Connecticut’s surplus lines tax filing requirements are straightforward once you know which hat you wear: licensed brokers file Form SL-9 and policyholders who bought directly from a non-admitted insurer file Form SL-9L, both quarterly with the Department of Revenue Services, both paying 4% of gross premium, both due on the 15th of the second month after the quarter closes. Miss a deadline and you owe a 10% penalty plus 1% interest per month until paid.1Justia. Connecticut Code 38a-743 – Payments by Licensees on Gross Premiums Charged for Insurance and for Nonadmitted Insurance
Who Files and on Which Form
If you hold a Connecticut surplus lines broker license and you placed coverage with a non-admitted insurer for a Connecticut-domiciled insured, the reporting and payment obligation is yours. You file Form SL-9 each quarter, consolidating every policy placed during the reporting period.2Connecticut Insurance Department. FAQs – Surplus Lines Brokers
If an insured bought coverage directly from a non-admitted insurer without going through a Connecticut-licensed broker, Connecticut calls that “independently procured insurance” and shifts the obligation to the policyholder. The insured files Form SL-9L on the same quarterly schedule and pays the same 4% rate.3Justia. Connecticut Code 38a-277 – Insureds Involved With Unauthorized Insurers The point is to prevent anyone from skipping the state tax by cutting out the broker.
Each return should list the insured’s name, policy number, the non-admitted insurer’s name, the gross premium, and the coverage period dates. Mid-term endorsements that change the premium belong in the quarter the endorsement invoice falls in, not the quarter the original policy took effect.2Connecticut Insurance Department. FAQs – Surplus Lines Brokers
One practical exception for brokers: if you had no surplus lines activity during a quarter, Connecticut does not require a zero return. Skip it. But if cancellations and return premiums produced a net credit for the quarter, you still have to file so the credit is on the record and available against the next three quarters’ tax.2Connecticut Insurance Department. FAQs – Surplus Lines Brokers
What the 4% Applies To
The tax is 4% of gross premium charged to the insured.2Connecticut Insurance Department. FAQs – Surplus Lines Brokers A $5,000 premium produces $200 in tax. Connecticut adds no fire marshal assessments and no municipal surcharges on top of the 4%.4National Association of Insurance Commissioners. Surplus Lines Insurance Premium Taxes Chart
Only premium is taxable. Separate broker fees, service fees, and policy fees charged outside the premium are not part of the taxable base.2Connecticut Insurance Department. FAQs – Surplus Lines Brokers This catches people who moved here from states that fold those fees in.
Cancellations and reductions reduce the taxable base. Returned premium is deductible in the quarter it occurs. When a policy is canceled and rewritten, only the premium exceeding the unearned portion of the canceled contract is taxable, which keeps the same coverage period from being taxed twice.1Justia. Connecticut Code 38a-743 – Payments by Licensees on Gross Premiums Charged for Insurance and for Nonadmitted Insurance
Policies where the named insured is the State of Connecticut, a state agency, a town or town agency, or a special taxing district are exempt from the 4% tax, provided the government entity is both the named insured and the party responsible for paying the premium. The broker still has to place the coverage properly and keep records; only the tax is waived.1Justia. Connecticut Code 38a-743 – Payments by Licensees on Gross Premiums Charged for Insurance and for Nonadmitted Insurance
When Connecticut Is the Taxing State
Under the federal Nonadmitted and Reinsurance Reform Act, only the insured’s home state can impose premium tax on a non-admitted policy, no matter where the covered risks sit.5Office of the Law Revision Counsel. 15 USC 8201 – Reporting, Payment, and Allocation of Premium Taxes The home state is where the insured has its principal place of business, or for individuals, principal residence. For affiliated groups, it is the state tied to the member with the largest share of premium under the group contract.
When Connecticut is the home state, the full 4% applies to the entire gross premium even if the policy covers properties or operations in other states. The statute explicitly says the tax applies “irrespective of the fact that the insurance policy may cover properties, risks or exposures located or to be performed both within and without this state.”1Justia. Connecticut Code 38a-743 – Payments by Licensees on Gross Premiums Charged for Insurance and for Nonadmitted Insurance There is no premium allocation across states.
If a Connecticut-licensed broker places surplus lines coverage for a policyholder whose home state is somewhere else, that other state’s rules and rate control, and nothing is owed to Connecticut on that transaction.
Quarterly Deadlines
Deadlines run off the coverage period, not the date the policy was written. Both brokers and independently procured insureds follow the same schedule:
- January 1 through March 31 is due May 15
- April 1 through June 30 is due August 15
- July 1 through September 30 is due November 15
- October 1 through December 31 is due February 15 of the following year
Those dates are the Insurance Department’s current guidance,2Connecticut Insurance Department. FAQs – Surplus Lines Brokers and the independently procured statute confirms the same quarterly cadence with the 15th as the due date.3Justia. Connecticut Code 38a-277 – Insureds Involved With Unauthorized Insurers
What a Late Filing Costs
Connecticut adds a flat 10% penalty on the unpaid tax plus 1% interest per month, or any fraction of a month, running from the due date until the day you pay.1Justia. Connecticut Code 38a-743 – Payments by Licensees on Gross Premiums Charged for Insurance and for Nonadmitted Insurance The same structure applies to independently procured filings.3Justia. Connecticut Code 38a-277 – Insureds Involved With Unauthorized Insurers
On $10,000 of unpaid tax filed three months late, that works out to the original $10,000, a $1,000 penalty, and $300 in interest. The penalty is a single hit, but interest keeps compounding, so the cost of delay grows every month you wait.
Records You Need to Keep
Two separate retention clocks run on two different document sets for two different agencies.
Keep completed tax returns and payment confirmations for at least three years in case the Department of Revenue Services audits.2Connecticut Insurance Department. FAQs – Surplus Lines Brokers
Separately, the diligent search documentation that supported placing coverage in the surplus lines market in the first place has to be kept for the policy term plus one year and produced to the Insurance Commissioner on request.6Connecticut General Assembly. Connecticut Code Chapter 701d – Surplus Lines Brokers Under Conn. Gen. Stat. § 38a-741, both the broker and the insured must make a diligent effort to obtain coverage from authorized insurers first, which usually means three declinations from carriers that customarily write the line. If the coverage sits on the Commissioner’s Exportable List, the diligent search is presumed satisfied; flood insurance is exempt from the requirement entirely. The retail documentation set includes declination letters, Exportable List verification, or an exempt commercial purchaser’s written request for non-admitted placement.
Keep the two sets filed separately from the start. The tax records go to DRS. The placement records go to the Insurance Department. If either agency asks, you want to pull the right file without reconstructing anything.