Surplus Lines Insurance Agent Exam Study Guide
Exam format at a glance
The Texas Surplus Lines Insurance Agent Exam is a focused, time-pressured test. It contains 60 scoreable questions that you must complete within a 60-minute time limit.
- Questions: 60 scoreable
- Time limit: 60 minutes
- Exam fee: $29
Because the number of scoreable questions equals the number of minutes allotted, you have on average one minute per question. That leaves little room to dwell — plan to move quickly, flag uncertain items, and return to them if time permits rather than stalling on any single question.
Why the timing matters
A one-question-per-minute pace means reading comprehension and recall speed are as important as raw knowledge. Practicing under a strict 60-minute clock before test day will help you internalize this rhythm so the timer does not surprise you.
The exam fee
The exam fee is $29. Budget for this cost when you plan your path to licensure.
Keep in mind that the $29 fee is charged per exam sitting. If you do not pass on your first attempt and need to retake the exam, you should expect to pay the fee again for each additional attempt. This is a strong practical reason to prepare thoroughly and sit only when you feel ready — every attempt carries the same $29 cost.
Plan to pass the first time
Because retakes repeat the fee, the most cost-effective strategy is disciplined preparation before your first sitting: study the tested material, take timed practice runs, and confirm your readiness rather than treating the first attempt as a trial run.
Pacing with a 60-minute clock
You will answer 60 scoreable questions in 60 minutes. Translate that into a concrete pacing plan:
- Target ~1 minute per question. If a question takes noticeably longer, mark it and move on.
- Checkpoint at the halfway mark. At 30 minutes you should be near question 30. If you are behind, pick up the pace on the questions you find easy.
- Reserve the last few minutes to revisit flagged questions and confirm you have not left any blank — an unanswered question can never earn credit.
Handle difficult questions efficiently
Since every question is worth the same and time is tight, do not let a single hard question consume the time of several easier ones. Answer what you know first, then return to the tough items with whatever time remains.
Frequently asked questions
What is a diligent search, and how many declinations does it typically require?
<h3>Diligent search requirement</h3><p>A diligent search (also called diligent effort) is the process a producer must complete before placing business in the surplus lines market: soliciting and being declined by a specified minimum number of admitted insurers — commonly three — that would ordinarily write that class of business. This requirement exists to keep surplus lines a market of last resort rather than a shortcut around admitted-market regulation for convenience or lower price.</p><p>Declinations must be documented, typically on an affidavit or a state diligent search/declination form, and retained in the file for regulatory examination. One exception: risks on a state's export list are known to be unavailable in the admitted market and may be exported to surplus lines without performing a diligent search.</p>
What happens to policyholders if a non-admitted (surplus lines) insurer becomes insolvent?
<h3>No guaranty fund protection</h3><p>This is one of the most tested concepts on the exam. Admitted carriers contribute to the state guaranty fund, which pays covered claims if the insurer becomes insolvent. Non-admitted (surplus lines) insurers do not participate in that fund, so policyholders of a non-admitted insurer are NOT protected — if the insurer fails, there is no state backstop for unpaid claims.</p><p>Because of this gap, surplus lines transactions require a disclosure notice to the insured stating that the insurer is not licensed in the state and that the policy is not protected by the guaranty association. To offset the risk, most surplus lines insurers must appear on a state-approved 'white list' of eligible insurers and meet minimum capital and surplus standards.</p>
Who pays the surplus lines premium tax, and which state's rate applies?
<h3>Broker collects; home state governs</h3><p>Because non-admitted insurers do not pay the premium taxes that admitted carriers pay, states levy a surplus lines premium tax on these transactions to recapture that revenue — typically ranging from about 3% to 6% of gross premium depending on the state. Responsibility for collecting and remitting the tax falls on the licensed surplus lines broker, who files periodic tax reports and pays the tax to the state.</p><p>Under the federal Nonadmitted and Reinsurance Reform Act (NRRA) of 2010, only the insured's 'home state' may require premium tax and regulate the placement of a nonadmitted policy — generally the state of the insured's principal place of business (for a business) or principal residence (for an individual). This eliminates the old multi-state tax-allocation headache for multi-state risks.</p>
Why does the E&S market grow in a hard market, and how does business actually reach it?
<h3>How risk flows into E&S</h3><p>The excess and surplus (E&S) lines market is the segment of the industry that writes coverage the standard admitted market declines — often called the 'safety valve' of the insurance industry because it absorbs risks that would otherwise be uninsurable, such as environmental liability, coastal/catastrophe property, product recall, and cyber.</p><p>Business typically reaches E&S through wholesale distribution: a retail agent who cannot place a risk in the admitted market brings it to a wholesale broker or a managing general agent (MGA), who accesses surplus lines markets. Many MGAs hold binding authority delegated by the insurer, letting them quote, bind, and sometimes issue policies and adjust claims directly. When the admitted market tightens in a hard market — raising prices and shedding risks — more business flows to E&S and its premium volume grows, since E&S carriers' freedom of rate and form lets them respond quickly with manuscript forms tailored to each account.</p>