What is the obligation of brokers when placing a policy with a surplus lines carrier?

When placing a policy with a surplus lines carrier, brokers have a specific obligation to conduct a diligent search for available coverage from admitted insurers before resorting to surplus lines. This requirement ensures that the client is receiving the best possible options for their insurance needs and that all avenues have been explored before turning to surplus lines, which are typically utilized when traditional and admitted carriers cannot provide the necessary coverage.

The process of diligently searching for coverage involves assessing various providers, understanding the client’s specific risks, and ensuring that potential solutions are thoroughly vetted for quality and availability. By mandating this search, the regulatory environment aims to protect consumers by ensuring that they are not exposed to unnecessary risk and that they are made aware of all available coverage options within the standard insurance market.

This approach underscores the importance of the broker's role in advocating for their clients and emphasizes the need to prioritize finding robust and compliant coverage options. Exploring alternative avenues rather than immediately defaulting to the surplus lines market helps to maintain standards within the insurance industry and promotes responsible risk management practices.