What is the primary purpose of the surplus lines tax?

The primary purpose of the surplus lines tax is to support state regulatory activities. This tax is imposed on the premium collected by surplus lines insurers and serves as a critical source of revenue for state regulatory agencies. These agencies oversee the insurance industry, ensuring compliance with state laws and regulations, which ultimately protects consumers. The funds generated help maintain the infrastructure necessary for effective regulation, licensing, and oversight of surplus lines insurance, which is essential for the industry to function properly, especially since surplus lines often cover risks that standard markets are unable or unwilling to insure.