In what circumstances might insurance be placed with a surplus lines broker?

Insurance may be placed with a surplus lines broker primarily when the standard market cannot provide appropriate coverage. Surplus lines brokers serve as intermediaries used specifically to access unique or specialized insurance needs that are not typically met by standard insurance providers. This can occur for various reasons, such as the risk being too high, the nature of the coverage being too niche, or certain regulations limiting available options within the standard market.

In situations where a client's needs do not align with the offerings of traditional insurers—perhaps due to high-risk factors or unconventional coverage requirements—surplus lines become a viable solution. These brokers have the ability to reach a broader range of non-admitted insurers, which are not licensed in the policyholder's state but can underwrite these policies. This access allows them to tailor coverage solutions that might otherwise be unavailable.

While cost factors or underwriting stringency may play roles in the decision-making process for some clients, they do not directly motivate the necessity for using a surplus lines broker like a lack of appropriate coverage does. Clients typically seek surplus lines when they face limitations in the standard market, not merely for cost savings or basic coverage options.