What does the term 'unauthorized insurance' mean in surplus lines context?

The term 'unauthorized insurance' in the context of surplus lines refers specifically to coverage obtained from carriers that are not licensed in the insured's state. Surplus lines insurance is typically used when there's a need for coverage that doesn't meet the standards or availability from admitted insurers in a given state. These non-licensed insurers, or unauthorized insurers, can offer specialty or high-risk products that may not be available through traditional markets.

In surplus lines transactions, the insurance is often placed with these unauthorized insurers as a response to unique risks or coverage needs which the admitted market cannot accommodate. As a result, this option clearly encapsulates the concept of unauthorized insurance, distinguishing it from coverage that must come from licensed providers or insurance limited to domestic carriers. Other alternatives do not define unauthorized insurance accurately within the surplus lines framework.