What is "surplus lines insurance"?

Surplus lines insurance refers to coverage provided by non-admitted insurers for risks that admitted insurers are unwilling or unable to underwrite. This typically occurs in situations where the risk is considered too high or unusual according to standard insurance guidelines, leading traditional insurers to decline coverage. Surplus lines insurance allows consumers to access necessary coverage that might otherwise be unavailable in the standard insurance market. Non-admitted insurers are those that do not have to meet the same state regulations as admitted insurers, which gives them more flexibility in underwriting unique or high-risk insurance products.

In contrast, other options do not accurately define surplus lines insurance. Coverage from quota-share agreements involves different terms of sharing risk among insurers, and mutual insurers specifically focus on serving policyholders rather than the broader market scope of surplus lines. Lastly, a no-claims bonus is a reward or discount for not filing claims rather than a type of insurance policy, which does not relate to the surplus lines concept.