What is a primary characteristic of surplus lines insurance?

Surplus lines insurance is distinct because it specifically caters to higher-risk insurance options that standard insurers often consider too risky to underwrite. This type of insurance provides coverage for businesses and individuals whose needs cannot be met by traditional insurance markets due to the unique nature of their risks.

For instance, businesses in emerging industries or those with complex risks may find that conventional insurers are unwilling to cover them or will charge excessively high premiums. Surplus lines allow these entities to obtain the necessary coverage by utilizing specialized carriers who are willing to take on higher risk in exchange for potentially higher premiums.

While it is true that surplus lines can be regulated by state laws, the defining characteristic relates to the type of risks covered, making the distinction between surplus lines and traditional insurance crucial for understanding their role in providing necessary coverage to higher-risk entities.