is PRETTY BORING, so save it for bedtime if you're having trouble
sleeping . . .
designation "Surplus Lines" (Also called "Non-admitted")
does not equate to fly-by-night in describing an insurance company.
The basic characteristics of these insurers have to do with
their operating style, types of insurance accepted and regulatory
use of non-admitted insurance companies has been widespread for
years, having developed as insurance consumers sought types of coverage
which conventional companies refused to supply. In addition,
there are needs for insurance on exceptionally high-risk or unique
exposures, as well as needs for very large amounts of insurance
which are better suited to highly specialized and/or layered types
of policies and underwriters.
principal interest is that these carriers are not supported by state
guarantee funds. (Meaning that if they fail, your premium and your
insurance is probably lost.) Surplus lines insurers are generally
not subject to regulation by your individual state insurance department,
although some states maintain a list of so-called "Approved"
insurers who are permitted to operate. This means that you generally
cannot obtain assistance from your state insurance department if
you're treated unfairly. Clearly, the financial ratings &
industry reputation for a non-admitted insurer are of great importance
before you buy. One of the foremost references for ratings
is normally required that your business be first offered to admitted
carriers before it is placed in the surplus lines market.
insurers contract with specialized brokers in individual states
to underwrite & service their business, paying them on a commission
basis per policy, similar to what is received by retailing agents.
(These brokers are required to hold a special license & are
themselves regulated by state agencies or associations.) Some or
all of servicing fees, inspection fees or other costs may be passed
on to you as a separate item in your premium invoice. Record-keeping
entities may also charge fees, and state taxes are collected on
policies individually, for subsequent payment to the state.
scary insurance companies ("Alien"
carriers) typically operate from a base somewhere outside the U.S.
Many have impressive sounding names, and few if any real trust funds
in the US If you wish to utilize such a carrier, keep in mind
that enforcement of remedies against them is unlikely at best.