What is the main purpose of surplus lines insurance?

The main purpose of surplus lines insurance is to provide coverage through nonadmitted insurers, which are not licensed in the state where the insurance is being sold. This type of insurance is necessary when the risk being insured is too high for admitted insurers or when the coverage needed is not available in the standard market.

Surplus lines policies are designed to address unique or hard-to-place risks that do not fit the criteria of traditional insurance companies. By allowing placement with eligible surplus lines insurers, this mechanism ensures that businesses and individuals can obtain coverage for unconventional risks that might otherwise go uninsured.

This approach fosters competition in the insurance market and ensures policyholders have access to necessary coverage options, even when those options come from insurers that operate outside the standard regulatory framework found with admitted insurers.