What type of insurance is Surplus Lines insurance classified as?

Surplus Lines insurance is classified as unauthorized insurance because it is provided by insurers that are not licensed to operate in a specific state. In situations where coverage is not available from authorized or licensed insurers, surplus lines can step in to offer necessary coverage, typically for unique or high-risk situations that standard insurance markets do not adequately cover.

States generally require that surplus lines insurers meet certain financial standards and that brokers place coverage selectively, ensuring they have attempted to obtain coverage from authorized carriers first. This classification serves to ensure regulation and consumer protection, while still providing options in the marketplace for hard-to-place risks. Therefore, labeling surplus lines as unauthorized is accurate, reflecting its reliance on insurers not holding traditional licenses in the state.

The context surrounding the options reflects the distinction between authorized and unauthorized insurers, emphasizing the nature of surplus lines as a solution for unique insurance needs.