Question 87

The insurer must have a current certificate of authority or license issued by the insurance department is NOT a condition that must be met.

Surplus lines insurance can be obtained from unauthorized insurers, which means they do not necessarily need a current certificate of authority or license from the state’s insurance department.

A) The insurer must have a current certificate of authority or license issued by the insurance department

This option is incorrect in the context of surplus lines insurance. Surplus lines insurers often operate without a state-issued certificate of authority, which is a key aspect of the surplus lines market. Therefore, this statement does not represent a condition necessary for obtaining surplus lines insurance.

B) The business must be obtained through a licensed surplus lines broker

This condition is correct. Surplus lines insurance must be procured through a licensed surplus lines broker, as these brokers are authorized to place coverage with unauthorized insurers. This ensures compliance with regulatory standards and protects the interests of the insured.

C) Coverage may not be obtained solely for the purpose of obtaining a better contract or a lower premium than an authorized insurer could provide

This statement is also accurate. It is a condition that surplus lines insurance cannot be sought merely for more favorable terms or lower costs than what authorized insurers offer. This rule helps maintain the integrity of the surplus lines market.

D) The full amount of insurance cannot be obtained from authorized insurers who market the insurance in the state

This option is correct as well. A fundamental condition for obtaining surplus lines insurance is that the full coverage required cannot be available from authorized insurers. This ensures that surplus lines are utilized appropriately when traditional markets cannot meet the needs of the insured.

Conclusion

The correct answer is A, as surplus lines insurers do not require a state-issued certificate of authority, contrary to what is required for authorized insurers. Options B, C, and D represent valid conditions that must be fulfilled to ensure compliance with surplus lines regulations. Thus, while A is not a condition for surplus lines insurance, the other options are essential prerequisites for securing such coverage.