Surplus Line Insurance Law and Legal Definition
Surplus Line insurance is a form of insurance in which insurance buyers can deal with non-admitted or unauthorized insurance companies through specially licensed brokers. This is applicable in a situation where the state’s licensed insurers are unable to fulfill the buyer’s insurance needs. Surplus lines insurance is also known as non-admitted insurance.
The following is the example of a state statute (Nebraska) explaining surplus line insurance:
R.R.S. Neb. § 44-5510 states that if an applicant for insurance is unable to procure such insurance as s/he deems reasonably necessary to insure a risk or exposure from an admitted insurer, such insurance may be procured from a nonadmitted insurer upon the following terms and conditions:
1. The insurance shall be procured from a surplus lines licensee;
2. The insured shall provide, in writing, his/her permission for such insurance to be written in a nonadmitted insurer and his/her acknowledgment that, in the event of the insolvency of such insurer, the policy will not be covered by the Nebraska Property and Liability Insurance Guaranty Association.