Which statement is true regarding excess and surplus lines insurance?

In the context of excess and surplus lines insurance, the statement that it requires a diligent search to identify declined risks is accurate. Excess and surplus lines insurance is typically sought when coverage is needed for risks that have been rejected by the standard or admitted insurance market. This means that an insured must demonstrate that they have actively searched for alternatives in the admitted market and that their risk was declined, often because it is considered too high or unique for traditional insurers.

This diligent search is not just a formality; it underscores the nature of surplus lines, which often cater to more unusual or higher-risk scenarios where standard coverage isn't available. Insurers in the surplus lines market may be more flexible and willing to underwrite these specialized risks, but the acknowledgment of prior declines is essential for regulatory compliance as well as to reinforce that the coverage sought is truly necessary.

In contrast, the other options present misunderstandings about the nature of excess and surplus lines insurance. While some policies may offer competitive pricing, it is not guaranteed that they will always provide better prices than admitted insurers. Negotiations do not necessarily have to be conducted with unlicensed brokers, as surplus lines brokers can be licensed for the specific purpose of placing such coverage. Additionally, while surplus lines can offer specialized coverage, guaranteeing