What must a policyholder demonstrate to be eligible for surplus lines coverage?

To be eligible for surplus lines coverage, a policyholder must demonstrate that they have searched for coverage from admitted insurers. This requirement is in place to ensure that surplus lines insurance is used as a last resort when standard options are not available. The process of seeking coverage from admitted insurers confirms that the policyholder has made a genuine effort to find appropriate coverage within the traditional insurance market.

Admitted insurers are those that are licensed to operate in the state and are subject to state regulations. If an individual or business cannot find the necessary insurance coverage through these entities, they then have the grounds to seek surplus lines coverage, which is typically more flexible, but also less regulated. The importance of this requirement lies in maintaining the integrity of the insurance market by ensuring that surplus lines are not used as a first option, but rather as a solution for risks that are not insurable through standard channels.