What is surplus Lines ? For risks that may be too big, too unusual or substandard, a specially licensed producer called a surplus line producer gets involved. Their special surplus line license allows them to procure a policy for you from an insurer that is not licensed in your state.
Since this insurer is not licensed in your state, they are not regulated by your state’s Department of Insurance in the same way licensed insurers are regulated (they are, however, regulated in the state or country where they are domiciled or located). Since they are not strictly regulated by your state, they are generally free from the form or rate regulations imposed on licensed insurers. This gives them the freedom to maintain broader internal guidelines for accepting risks. They have more flexibility to design and price their policies and can, therefore, accept risks that licensed insurers will not.
The surplus line producer is required to ascertain that the insurer meets certain financial standards before buying a policy from them. Whether done by the surplus line producer, the state Department of Insurance, or some other entity, this financial monitoring is an important function because if the insurer were to fail (go bankrupt), there is no guaranty fund protection for you.
Marchel & Associates Risk Consulting has long established relationships with several surplus lines carriers and several syndicates within Lloyds of London.