The insurance industry has become an increasingly globalized marketplace. Overseas companies are significant participants in the U.S. insurance markets. The most well-known foreign insurer of U.S. risks is Lloyd’s of London—historically the market leader for U.S. surplus lines business. This article provides a general overview of issues involved in purchasing insurance coverage from a non-U.S. insurer. Readers with questions concerning coverage or policy should consult with a properly licensed agent or broker.
Subject to a few narrow exceptions detailed below, U.S. insurers may only issue an insurance policy in a state where it is admitted to transact business as a licensed insurer. Licensed insurers in the U.S. are strictly regulated with respect to issues involving solvency, rates and forms and market conduct. They also are required to participate in state guaranty funds that provide coverage in the event of insurer insolvencies.
Not all types of insurance, however, may be written on a surplus lines basis. Some characteristics of risks written in the U.S. surplus lines market include risks:
- With poor loss experience
- Not satisfying the underwriting criteria of licensed insurers
- That are unique or hard to evaluate
Requiring high limits not available from licensed companies