What is the safest approach for producers when working with surplus lines?

The safest approach for producers when working with surplus lines is to document communications and verify insurer ratings. This practice is essential for several reasons.

Firstly, surplus lines insurance is often sought when standard insurance carriers are unable to provide coverage for specific risks. Because surplus lines are written by non-admitted insurers, it is crucial for producers to thoroughly assess the financial stability and reliability of these insurers before placing business with them. Verifying insurer ratings from reliable sources, such as A.M. Best or Standard & Poor's, provides a clearer picture of the insurer’s ability to meet its financial obligations.

Secondly, documenting communications creates a reliable record of interactions and agreements between producers and insurers, which can be important for compliance and risk management purposes. In case of disputes or claims down the line, having a documented history can protect the producer and help ensure that all parties are held accountable.

This combination of verification and documentation helps to mitigate risks associated with surplus lines and supports the producer's duty to act in the best interests of their clients by ensuring they are dealing with capable insurers.