What is the "diligent search" requirement?

The "diligent search" requirement refers to the obligation for insurance agents and brokers to seek coverage from admitted insurers before resorting to surplus lines placement. This requirement is designed to ensure that coverage options are explored in the traditional insurance market, which usually provides more consumer protections and regulatory oversight compared to surplus lines.

In practice, the diligent search mandate serves to protect policyholders by ensuring that they are not just directed to surplus lines coverage without first evaluating available options through licensed and admitted insurers. This involves demonstrating that the agent has thoroughly searched for an acceptable coverage option in the admitted market and can prove that no such option was available before making a surplus lines placement.

Understanding this requirement is crucial for compliance with regulations governing surplus lines insurance, as it reinforces the approach of exhausting available admitted market options to provide policyholders with the best possible coverage at a fair price.