Placing Insurance with a Surplus Line Company
Wondering what a surplus line insurance company is and how it operates?
Although the term loosely refers to specialty insurance coverages, in the typical state insurance code it means insurance placed with a non-admitted insurer. A non-admitted insurer is an insurance company that has not obtained a Certificate of Authority from the state's Insurance Commissioner to sell insurance on an admitted basis within the state.
Admitted insurance companies submit to strict financial and examination requirements specified for admittance into the state, and participate in the state's insolvency guarantee funds and residual market mechanisms. Admitted insurers must also follow the state's form and rate filing requirements, meaning they can sell only what the state has approved, and charge only according to authorized rate plans.
Non-admitted insurers may be subject to some of these requirements but generally are not subject to (their policyholders are not protected by) guarantee funds, or form and rate filing requirements.
Non-admitted insurance is placed through a specially licensed and bonded surplus line broker, who in all but a few states must be a state resident. Some states, such as California and Alaska, are especially strict in enforcing their non-admitted insurance laws and regulations.
In California, only approved non-admitted companies may be used. Evidence of approval is shown by their placement on the List of Eligible Surplus Line Insurers.
Non-admitted insurers serve the essential needs of the insurance-buying public, especially for sophisticated commercial insurance buyers. They also spell danger for those unfamiliar with their ways.
Call our firm at (626) 839-6061 for more information on placing coverage with a surplus line insurance company.
We are pleased to provide this "Bulletin" as a service to you. While this information was obtained from sources believed to be reliable, its accuracy is not guaranteed. It does not change or alter insurance contracts or coverages.
License # 0655631
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