What is the primary characteristic of surplus lines insurance?

The primary characteristic of surplus lines insurance is that it is issued by nonadmitted insurers under specific regulations. This type of insurance comes into play primarily when coverage needs cannot be met by licensed or admitted insurers within the state. Surplus lines insurers are not subject to the same state regulations that govern admitted insurers, which allows them greater flexibility in providing coverage for unique or high-risk situations that the traditional market may not accommodate.

This ability to operate outside the constraints of certain state insurance regulations enables surplus lines insurers to offer solutions tailored to specific risks, including those that are difficult to insure. Additionally, in Pennsylvania, as in many other states, surplus lines insurance must still adhere to certain regulatory requirements, such as being placed through a licensed surplus lines broker and ensuring that the carrier holds a Certificate of Authority to write surplus lines in that state.

The other options misrepresent essential features of surplus lines insurance or describe characteristics that do not encompass its primary function. For instance, it is not exclusively for high-risk individuals, as any unique coverage need can qualify. Also, surplus lines insurance is not primarily provided through admitted insurers, which operate under different standards and regulations. Finally, it does not offer universal coverage for all risks; rather, it targets specific situations where traditional insurance options