What is the primary benefit of the regulatory framework for surplus lines?

The primary benefit of the regulatory framework for surplus lines is that it protects consumers and states. This framework ensures that surplus lines insurance is subject to certain regulations that help maintain market integrity and consumer confidence. By allowing surplus lines to operate within a regulated environment, state insurance departments can monitor the activities of these insurers, ensuring they remain financially stable and capable of fulfilling their obligations to policyholders.

These protections are crucial because surplus lines are often sought when standard market options are unavailable, meaning that consumers may turn to these insurers in times of need. The regulation includes requirements for disclosure, ensuring that consumers are informed about the nature of the coverage and any potential risks associated with using a non-admitted carrier. Overall, this regulatory environment enhances consumer protection and fosters a more stable and reliable insurance marketplace.