What type of insurance companies can sell surplus lines insurance?

Surplus lines insurance is designed for high-risk situations that standard insurers are reluctant to cover. The correct response indicates that unauthorized or nonadmitted insurers on an approved list are permitted to sell surplus lines insurance. This is because surplus lines provide coverage when the risk is not available in the standard market, allowing insured parties access to specialized products.

Nonadmitted insurers are those that do not hold a license to operate in a particular state but can provide coverage for unique or high-risk needs. However, they are subject to regulations and must be on an approved list maintained by the state's insurance department to ensure they meet certain financial and operational criteria. This protects consumers and ensures that these insurers are capable of fulfilling their obligations.

Meanwhile, admitted companies are fully licensed and regulated in the state, but they generally provide standard lines of insurance rather than surplus lines, which is specifically intended for unique risks. A certificate of authority is required to operate as an admitted insurer, but it does not apply to surplus lines insurance sold by nonadmitted insurers. Hence, the focus on nonadmitted insurers is key to understanding the surplus lines market.