Frequently Asked Questions About Your Surplus Lines

Your producer may place the insurance you request in the “surplus lines market” with one or more surplus lines insurers. By definition, such surplus lines insurers are not licensed in the state, but this does not mean that the transaction is not regulated. The surplus lines market is an insurance marketplace that is established for the purpose of insuring unique or hard to place risks. Some of the rules that apply to surplus lines insurance policies and surplus lines insurance companies differ from those that govern coverage obtained from insurance companies licensed in your state. In order for you to better understand the surplus lines market and the rights you have in a surplus lines transaction, the following material is provided.

Please read the following carefully, and should you have any questions after reading the material, do not hesitate to ask your producer. If you desire further information, please contact the state insurance department. Click here and you will be directed to www.naic.org. Once at the site, click on the NAIC States & Jurisdictions header located on the top left side of the web site.

What is a Surplus Lines Policy?

A surplus lines policy is a policy placed with an insurer that is not licensed (or “admitted”) in this state, but is nonetheless eligible to provide insurance on property or liability insurance protection to citizens of a state through specially licensed producers known as surplus lines producers.

Why am I Getting Coverage From A Surplus Lines Insurer?

Your producer may have been unable to obtain the coverage you requested from insurance companies licensed in the state, but was able to obtain coverage from an eligible surplus lines insurance company. The reason for your producer’s action is that the risk or property for which you sought coverage may be unique or have certain risk characteristics that caused licensed insurers to decline to write the policy. In circumstances where licensed insurers will not write the risk, your producer is authorized by state law or regulation to obtain the coverage from a "surplus lines" insurer.

Since The Surplus Lines Insurer is Unlicensed, is the Transaction Unregulated?

Surplus lines transactions are regulated by state laws that require that surplus lines policies be procured only by specially licensed producers. These are called surplus lines producers, and they are authorized to transact business with certain unlicensed insurers that meet financial and other eligibility standards set by the state. These insurers are known as surplus lines insurers. Your producer may have worked with a licensed surplus lines producer in securing your policy. Alternatively, your producer may hold a surplus lines license.