What must brokers prove before placing coverage with a surplus lines insurer?

Brokers must demonstrate that they have explored all alternatives before placing coverage with a surplus lines insurer. This requirement exists to ensure that brokers have conducted due diligence in attempting to secure traditional insurance options with admitted carriers before turning to surplus lines. The surplus lines market is typically utilized when standard insurance cannot meet the needs of the client, whether due to unique risks, specialized coverages, or a lack of availability in the admitted market. This exploration of all alternatives not only reinforces the responsible use of surplus lines but also protects consumers by ensuring they are being offered the most suitable coverage options available.

The other options do not accurately reflect the requirements for placing coverage with a surplus lines insurer. The length of time an insurer has been in business or its rating does not necessarily pertain to the requirement of exploring alternatives, nor does the comparison of policy costs to admitted alternatives specifically dictate the process for surplus lines placement. The focus is ultimately on demonstrating that a thorough search for conventional coverage has been undertaken.