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Surplus Lines Insurance

“Surplus lines” insurance is coverage that is unavailable through admitted carriers but can legally be placed with eligible non-admitted companies. These surplus lines companies may be located in other states or countries. Your agent may work with a licensed surplus lines broker in securing your policy. Only licensed surplus lines brokers can place coverage with these insurers. A broker must pass a special examination to qualify for a surplus lines license.

By law, a broker can place a risk with a surplus lines company only after making a “diligent effort” to find an admitted carrier to issue the policy. If you are not satisfied with the results of the search, keep shopping for a licensed company, perhaps with another agent. The surplus lines broker must notify the insured in writing that:

  • The insurer with which the coverage has been placed is not licensed by this state and is not subject to its supervision; and
  • In the event of the insolvency of the surplus lines insurer, losses will not be paid by any State insurance guaranty or solvency fund.

Surplus lines insurers are unlicensed. Their policies are regulated by state laws which require surplus lines coverage to be obtained by specially licensed surplus lines agents or brokers who are authorized to transact business with unlicensed (also called “nonadmitted”) insurers that meet financial and other criteria. These insurers are known as surplus lines insurers.

Companies attempting to become eligible surplus lines insurers must have at least $15 million in combined capital and surplus to conduct business in North Carolina. (Capital and surplus are a company’s financial cushion against unexpected claims.)

In addition, an alien insurer – one based in a foreign country – must have a trust fund of at least $5.4 million in either a national bank or a member of the Federal Reserve System to protect its U.S. policyholders.