What is a "diligent search" in the context of surplus lines insurance?

A "diligent search" in the context of surplus lines insurance refers specifically to the process of demonstrating that a risk cannot be placed with an admitted insurer. This concept is critical because surplus lines insurance is utilized when a risk is not insurable by any of the admitted carriers that operate within a state's regulatory framework.

To satisfy this requirement, the broker must undertake an extensive search among licensed insurers to determine that the insurance coverage needed for a particular risk is unavailable through traditional, admitted markets. By demonstrating that efforts were made to find coverage with admitted insurers, the broker legitimizes the need to turn to surplus lines insurers, which can offer more flexible underwriting options for unique or higher-risk situations.

This diligent search process is essential for compliance with state regulations surrounding surplus lines, ensuring that brokers cannot simply bypass admitted insurers without proof of their unavailability. The requirement not only protects consumers by ensuring all options are explored, but it also maintains the integrity of the insurance marketplace.