What term describes nonadmitted insurers allowed to transact business in a state?

• A. Surplus lines insurers
• B. Admitted carriers
• C. Exclusive providers
• D. Rating organizations

Answer: (A)

Surplus lines insurers are the nonadmitted carriers allowed to transact business in a state. They come into play when a risk is too unusual or high for the standard admitted market, so a surplus lines market fills the gap. These insurers aren’t bound by the same pre-approved rates and forms as admitted carriers, and coverage usually comes through a licensed surplus lines broker. Premiums can be higher, and protections may differ, but the state still regulates the process and taxes the premium accordingly. The other terms don’t describe this niche: admitted carriers are the regular, licensed market; exclusive providers and rating organizations aren’t the nonadmitted insurers that transact surplus lines business.