What is imposed by state governments on surplus lines insurance policies?

State governments impose a tax on surplus lines premiums as a means of generating revenue and ensuring compliance within the insurance marketplace. This tax is typically applied to the premiums collected by surplus lines insurers, which are not licensed in the state where the risk is being insured. The purpose of the tax is to level the playing field between licensed insurers and surplus lines carriers, as well as to provide some oversight of the surplus lines market. By taxing these premiums, states can monitor the transactions and potentially enforce regulations related to the business being conducted.

In contrast, premium discounts, regulatory audits, and endorsement fees do not represent standard practices imposed by state governments specifically on surplus lines insurance. Premium discounts may be offered by insurers for various reasons but are not a requirement of state regulation. Regulatory audits may apply in broader contexts but are not uniquely focused on surplus lines. Endorsement fees, while they may exist in transactions, are not a state-imposed requirement related to surplus lines. Thus, the tax on surplus lines premiums is the clear and direct answer reflecting state involvement in managing these insurance products.