The purpose of this article is to clarify how wet marine and transportation insurance and aviation insurance are regulated under the state insurance laws in the United States. The writing of such kinds of insurance is generally exempt from the licensing requirements of most state insurance laws; nonetheless some laws are fraught with traps for the unwary. These laws are often misunderstood or ignored by brokers and pose a potential problem for unauthorized alien insurers writing such covers on risks resident, located or to be performed in the U.S.

Some states treat certain types of wet marine and transportation and aviation risks as surplus lines business and require placement of such risks through resident, licensed surplus lines brokers or agents with eligible surplus lines insurers. Other states do not subject the insurance of such risks to the surplus lines laws, but nonetheless require the placement of the risks either through a resident licensed surplus lines broker or through a special broker. There are even states which either restrict such business to the admitted insurer market, or preclude corporate alien insurers without a U.S. branch from writing such covers.

Business classified as wet marine and transportation insurance, even when exempt from state licensing requirements, is usually subject to state taxation on the insurer’s net underwriting profit allocated to the particular state. Surplus lines business, on the other hand, is taxed on the basis of the gross premiums on such business in the state. Insurers of wet marine and transportation insurance and aviation risks are usually required to provide a service of suit clause in their policies naming the Commissioner of Insurance of the particular state involved as their agent for process.

Wet marine and transportation insurance is by statute usually a sub-group of marine insurance and is generally statutorily defined as follows1: