Surplus lines exist in the insurance market to cover risks that traditional and admitted insurers won’t take on. This type of insurance covers mostly risks with adverse loss experience. There usually is a lot of research done by a surplus lines insurer on a case to case basis before they decide to insure an insured.
This market mostly exists for insurance consumers that need a non-traditional insurance product. This can be Stevie Wonder insuring his fingers for example. Or John Mayer insuring his vocal chords (feel sorry for whatever company insured that one). It opens up a whole new way for insurance to be sold, ultimately further stimulating our economy.
The reason that surplus lines exists is because this helps provide insurance for the customers who eventually need protection from the risks that are not insured in the typical market. This type of insurance covers the above than average loss that a normal company could not take on. Before selected the insureds to insure, there would need to be a lot of research done on the insured in order to see if they have the ability to pay back or not. Having surplus line benefits by allowing freedom with no rate filing and have no forms. They are more flexible to adjust to the coverage and premiums when it is needed.