What must occur before placing an insurance risk with a non-admitted insurer?

Before placing an insurance risk with a non-admitted insurer, it is essential to demonstrate that diligent efforts have been made to obtain coverage from an authorized carrier. This requirement is rooted in the regulations governing surplus lines insurance, which is designed to protect consumers and ensure that they have access to coverage options that meet certain standards.

When insurance agents or brokers seek coverage for clients, especially for risks that standard markets may not underwrite, they must first exhaust all reasonable options with admitted insurers. This includes actively searching for coverage from companies that are licensed to operate in the state and are subject to the regulatory oversight of the state's insurance department. Only after confirming that authorized carriers cannot provide suitable coverage can agents proceed to seek coverage from non-admitted insurers.

This process helps ensure that clients have access to the best possible coverage while also complying with state laws and minimizing potential risks associated with using an unregulated market. The non-admitted market is typically used for unique or high-risk situations where traditional insurers cannot or will not provide coverage.