Which of the following statements is true regarding the surplus lines market?

The surplus lines market operates under specific regulations to ensure that insurance products provided by unauthorized insurers are still subject to oversight in order to protect consumers. The requirement that surplus lines business must be conducted in accordance with state law emphasizes the importance of compliance and regulatory oversight, even though surplus lines insurers are not licensed in the same way as admitted insurers.

This means that surplus lines transactions must adhere to rules established by state insurance regulators, which could include guidelines on how insurance policies are written, marketed, and sold. Such regulation helps ensure accountability and maintain a level of consumer protection, even when dealing with insurers that do not have the same licensing requirements as admitted carriers.

The other statements do not accurately reflect the realities of the surplus lines market. For instance, admitted insurers are not exempt from oversight; they are heavily regulated to ensure solvency and consumer protection. The assertion about stricter capital requirements for surplus lines carriers does not align with typical industry practices, as surplus lines insurers often operate under different capital adequacy requirements than licensed insurers. Lastly, while insured parties can seek remedies, they typically cannot directly sue unauthorized insurers without going through proper channels as surplus lines regulations often prescribe specific procedures to follow in these instances.