What document must a surplus lines broker obtain prior to placing coverage?

The requirement for a surplus lines broker to obtain a diligent search document prior to placing coverage stems from regulatory mandates aimed at ensuring that the broker has made a comprehensive effort to secure insurance coverage from admitted insurers before approaching non-admitted markets. This diligent search serves two primary purposes: it protects consumers by confirming that surplus lines coverage is only utilized when necessary, and it maintains the integrity of the admitted insurance market by ensuring that brokers are engaging responsibly with their clients.

In practice, this diligent search document typically outlines the efforts made to find coverage in the traditional marketplace, including details on the insurers approached and the responses received. By maintaining a record of this due diligence, brokers demonstrate compliance with state regulations and safeguard against potential abuses in the surplus lines market.

This requirement is essential to mitigate the risk that customers are directed to surplus lines insurance without adequate justification, reinforcing the accountability of brokers in their professional conduct within Colorado's regulatory framework.