What is meant by "rated coverage" in surplus lines?

"Rated coverage" in surplus lines refers to the concept of insurance that is priced based on specific underwriting criteria. This means that the insurer evaluates particular risks associated with the coverage being provided, and the price is determined by the risk assessment conducted through various underwriting factors. These factors may include the type of coverage, the characteristics of the insured entity or property, and any other relevant details that affect risk.

In the surplus lines market, which provides coverage for risks that standard insurers may not be willing to underwrite, rated coverage is crucial. It allows for flexibility and customization in pricing to ensure that the premiums are reflective of the actual risk. This is in contrast to other types of insurance that may have fixed premiums or standard pricing models.

The reasoning behind considering rated coverage this way highlights the nuances of risk assessment in underwriting, particularly in markets where risks are atypical or not universally insurable, reinforcing the role of the surplus lines broker in facilitating appropriate coverage for unique or complex risks.