How does the premium for surplus lines insurance generally compare to admitted insurance?

Surplus lines insurance typically comes with a premium that may be higher than that for admitted insurance. This is primarily due to the nature of surplus lines coverage, which is designed for risks that are too difficult to insure through the standard market. Insurers of surplus lines often deal with unique or high-risk situations that carry a greater chance of loss.

Moreover, surplus lines insurers have more flexibility in underwriting and pricing because they are not subject to the same strict regulatory constraints as admitted insurers. This flexibility allows them to adjust premiums based on the specific risks they are covering, which can lead to higher costs in comparison to admitted insurance.

Additionally, admitted insurance companies are often required to follow state mandates regarding rate approval, limiting their ability to charge higher premiums for high-risk exposures. In contrast, surplus lines insurers can operate outside these regulations, allowing for potentially higher premiums that reflect the greater risk undertaken. Thus, the correct understanding of surplus lines pricing reflects the nature of the risks insured and the regulatory environment in which these insurers operate.