Are claims made against the surplus lines insurers subject to state guarantee funds?

Surplus lines insurers operate beyond the traditional state-regulated insurance market, typically writing policies for high-risk or unusual coverage that standard insurers may not. One of the key features of surplus lines insurance is that these insurers are not protected by state guarantee funds. This means that if a surplus lines insurer becomes insolvent, policyholders do not have access to state funds that would ordinarily provide coverage in such circumstances for other types of insurance companies.

The nature of surplus lines coverage is aimed at unique risks, and because these insurers are often not licensed in the state where the policyholder resides, they do not participate in the state’s guarantee fund program. Thus, policyholders bear the risk of potential insolvency without the safety net that state-regulated insurers provide.

In contrast, other options may suggest limited coverage or conditions under which some level of support is available, which does not align with the clear understanding of how surplus lines insurers function in relation to state guarantee provisions.