There are two types of insurers in every State in the United States. Non-admitted insurers (surplus lines) and licensed (admitted) insurers. Non-admitted insurers will accept risks that licensed insurers will not. Therefore, the non-admitted carrier is not required by the States to get approval for the policy forms used or the premium they charge. AM Best, a rating agency performs an annual report of non-admitted and licensed insurers and have discovered that insolvencies with non-admitted carriers are rare. However, in the unlikely event that a non-admitted insurer was to become insolvent there were not be recourse through the State Guaranty Fund.
Non-admitted insurers (surplus lines) will insure risks that are outside of the appetite of licensed insurers. For example, an agency manager that offers 50% at risk management and 50% agency management or a firm that has some claims that licensed insurers would consider risky. Your agent will help to access the need for a non-admitted insurer vs. a licensed insurer.
A non-admitted insurer will sometimes have exclusions to a policy that a licensed insurer may not have. Additionally, a non-admitted insurer may terminate or non-renew a policy without notice or without providing a reason due to the riskier nature of the insured. Be sure to read your policy so you are aware what the differences are with the non-admitted insurer.
The rules and taxes by State will vary, check with your agent to find out the rules for your state. Arizona is 3% tax, Colorado is a 3% tax and Michigan is 2.5% tax. Professional Underwriters, Inc. is required by the State laws to be licensed in Surplus Lines to provide the coverage in the specific State.
Some of the Surplus Lines carriers that Professional Underwriters, Inc. works with are Lloyds of London (various syndicates), Landmark American, and Houston Casualty.