What purpose does “policyholder notice” serve in surplus lines?

The purpose of the "policyholder notice" in surplus lines is to ensure awareness of the non-admitted status of the insurer. This means that the insurer does not hold a license to operate in the state where the policyholder is located. The notice serves as a critical disclosure to the policyholder, making them aware that their policy is with a non-admitted carrier, which often implies that they do not have the same legal protections as they would with an admitted insurer. This includes the lack of state guaranty fund protections in the event the insurer becomes insolvent.

By informing policyholders about the non-admitted status, the notice helps them understand the potential risks and implications of their coverage choices. It empowers them to make informed decisions regarding their insurance, as they should recognize that, while they may have access to unique or specialized coverage options through surplus lines, they might be assuming additional risk by choosing a non-admitted insurer.