In the excess and surplus lines market, the DRLP compliance picture is more complicated — and the enforcement stakes higher — than many brokers realize. A November 2025 analysis published in Insurance Journal and InsureReinsure identifies DRLP-related licensing as one of the most common compliance gaps in the E&S space.
Two issues stand out: the role of the DRLP as the operative license-holder in many surplus lines states, and the enforcement exposure that comes from transacting business under a DRLP's authorization without holding individual licenses.
The DRLP as Operative License-Holder in Surplus Lines
In the admitted market, insurance firms are generally licensed as entities, with the DRLP serving as the designated compliance individual. In the excess and surplus lines market, the picture is different.
Not all states separately license surplus lines brokerage firms as entities. In those states, the firm doesn't hold a standalone entity license — it operates by and through its Designated Responsible Licensed Producer. The DRLP is not just a compliance position; they are the operative license under which the entire brokerage conducts business.
This has significant practical implications:
- If the DRLP's individual license lapses, the firm may have no valid license to operate in that state
- If the DRLP departs, the firm loses its operational license immediately — not just after a 30-day window
- Any gap in DRLP designation can interrupt the firm's ability to place surplus lines business
In surplus lines states where entities are not separately licensed, the DRLP isn't just a compliance formality — they are the license.
The Enforcement Risk: Operating Under a DRLP's Authorization Alone
One of the most common compliance shortcuts in the surplus lines market — and one of the most costly — is transacting business solely under a colleague's or employer's DRLP authorization without holding an individual surplus lines broker license.
The reasoning often sounds intuitive: if the firm's DRLP is licensed, shouldn't that cover the firm's producers? The answer, in most states, is no — and regulators have made this point with significant enforcement actions.
According to analysis published in Insurance Journal, there have been six-figure fines in North Carolina against individuals who sold surplus lines insurance under the DRLP's authorization only, without holding individual surplus lines broker licenses. A seven-figure fine in New York was assessed for similar conduct in the admitted market. These are not hypothetical risks — they are documented outcomes.
State Variations: Where Leniency Exists and Where It Doesn't
The picture is not uniformly strict. Some states have carved out exceptions that allow for limited reliance on an agency's surplus lines broker license.
For example, Virginia's State Corporation Commission has indicated that individuals holding a P&C license who transact surplus lines business exclusively through an agency surplus lines broker are not required to hold an individual surplus lines broker license. This is a meaningful exception — but it is not universal, and the analysis cautions that this position lacks express statutory support in most jurisdictions.
The practical approach: assume the default rule applies (individual licenses are required) unless you have confirmed, state-specific guidance that an exception covers your situation. The cost of a wrong assumption has been documented in eight-figure enforcement actions.
Multi-State Surplus Lines Licensing
A further complication for growing surplus lines organizations: a surplus lines broker may need to hold licenses in every state where their insureds reside — not just in the broker's home state or employer's headquartered state.
Under the Nonadmitted and Reinsurance Reform Act of 2010 (NRRA) and the NAIC's Nonadmitted Insurance Model Act (NIMA), any person or entity that solicits, negotiates, procures, or effectuates a surplus lines insurance contract must hold a surplus lines broker license in the "home state" of the insured — which is defined as the insured's principal place of business or residence.
For a national surplus lines broker, this can mean maintaining individual producer and surplus lines licenses in dozens of states — a significant administrative burden that compounds the DRLP management challenge.
What This Means for Your Organization
If you're operating in the surplus lines market, three questions deserve an honest answer:
- Is your DRLP properly designated in every state where your firm places surplus lines business — and is their individual license current?
- Are your individual producers holding their own surplus lines broker licenses in every state where their insureds are located, or are they relying on the firm's DRLP authorization?
- If your DRLP departs, do you have a continuity plan that prevents an operational gap?
DRL Advisory's team includes licensed surplus lines producers in all 50 states. For surplus lines firms where the DRLP is the operative license-holder, we provide the continuity and compliance coverage that keeps your business running — regardless of personnel changes.
This article draws in part on analysis from Practical Licensing Challenges & Solutions for Producers, Brokers, Adjusters & Other Intermediaries, originally published in Insurance Journal and republished on InsureReinsure. DRL Advisory commentary is original.