What are surplus lines insurance?

Surplus lines insurance refers to coverage that is provided by non-admitted insurers. These insurers are not licensed in the state where the policyholder is located but are allowed to operate under certain conditions for specific risks that cannot be adequately covered by licensed, or admitted, insurers. The key reason for using surplus lines insurance is primarily due to the unique or high-risk nature of the coverage that standard insurers may not want to underwrite or may not have the capacity to handle.

Surplus lines can often provide tailored solutions for complex risks, including specialty coverages, which are not typically available in the standard insurance market. This flexibility is essential for businesses or individuals who require specific types of insurance that do not fit within the standard underwriting guidelines.

Additionally, while the other options mention concepts related to insurance coverage, they do not accurately define surplus lines. For instance, admitted insurers are those licensed in the state and are subject to specific regulations, while surplus lines specifically come from unlicensed carriers. Understanding the distinction between admitted and non-admitted is crucial in comprehending the surplus lines market.