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Agents and brokers who place relatively straightforward risks with admitted carriers traditionally have not had to concern themselves with the problem of carrier insolvency. If admitted carriers become insolvent, guaranty funds typically cover losses. But hard-to-place risks, which require the broker to access the surplus lines market, can present a virtual minefield. Although some states regulate surplus lines insurers more closely than others, insurance commissioners aren’t going to hold them to the same reporting and deposit standards as admitted carriers. Thus, although rating agencies like A.M. Best will provide brokers with the financial ratings of surplus lines carriers, those ratings won’t provide the same level of security as insurance commissioner mandates.

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