How are premium rates for surplus lines coverage primarily determined?

Premium rates for surplus lines coverage are primarily determined according to the underwriting guidelines of the non-admitted insurer. Surplus lines insurance is specifically designed to provide coverage for risks that are not typically addressed by licensed admitted insurers. These non-admitted insurers have the flexibility to establish their own underwriting criteria and premium rates, which often reflect the specific risk profile of the insured.

Since surplus lines insurers are not bound by state rate regulation, they can adjust their pricing based on their own assessment of the risks involved, the market conditions, and the underwriting practices they choose to implement. This allows them to tailor coverage and rates to better fit the unique needs of businesses and individuals who may face higher risks.

In contrast, other factors such as state regulations or industry averages may play a role in certain contexts but do not primarily dictate the rates for surplus lines, as the market for these types of insurance is much more dynamic and less regulated than that of admitted carriers.