What is the primary purpose of surplus lines insurance?

The primary purpose of surplus lines insurance is to provide coverage for high-risk factors that are often not accommodated by the standard insurance market. Surplus lines serve a crucial role for individuals or businesses that cannot obtain the insurance they require from traditional insurers due to unique or elevated risks.

For instance, entities in specialized industries or those that engage in activities deemed too risky may find that regular insurers either cannot offer coverage or do so at prohibitively high costs. In such cases, surplus lines are essential as they allow access to necessary coverage, helping these entities manage their risk effectively.

Lower premiums, while a potential benefit of surplus lines in specific circumstances, are not a primary purpose. Rather, surplus lines seek to meet the needs of those who fall outside the purview of standard coverage criteria, which can often lead to varying premium rates based on the risk involved. Additionally, surplus lines do not focus on regulating the insurance industry or ensuring compliance with state regulations; these are responsibilities of regulatory bodies and standard market practices. Instead, surplus lines operate within a segment of the market where the aim is to fill gaps left by standard insurers.