What does a surplus lines transaction typically involve?

A surplus lines transaction typically involves a producer who holds a surplus lines license and a surplus lines insurer. This combination is essential for ensuring that coverage can be obtained for risks that are not available through the standard admitted market.

Surplus lines insurers are non-admitted carriers that can provide insurance for unique or specialized risks that may exceed the underwriting guidelines of admitted insurers. The role of the producer with a surplus lines license is vital as they are authorized to place these types of risks with non-admitted carriers, thus ensuring that clients have access to the coverage they need when the conventional market cannot accommodate them. This relationship is regulated to protect consumers and ensure there is a proper process in place for evaluating these transactions.

In contrast, the other options do not accurately represent the nature of surplus lines transactions. Admitted insurers may not be able to handle certain high-risk situations, high-capacity risks are just one category of potential surplus lines business, and retail agents do not necessarily have the authorization needed to engage in surplus lines without a specialized surplus lines license.