How do surplus lines taxes generally compare to those of admitted carriers?

Surplus lines taxes are typically higher than those of admitted carriers primarily due to the unique nature and regulatory environment surrounding surplus lines insurance. Surplus lines carriers often provide coverage for risks that are considered too high or unusual for traditional admitted insurers, which leads to a greater regulatory oversight and associated costs.

The surplus lines system is designed to ensure that coverage is available for specialized needs that standard markets cannot meet, and as a result, states impose higher tax rates on this type of insurance to help maintain the integrity and oversight of the marketplace. Additionally, surplus lines taxes may include extra fees and assessments that are not present in admitted lines, contributing to their overall higher cost.

These higher tax rates reflect the risks and regulatory requirements associated with surplus lines, making them distinct from the more stable and predictable tax structures associated with admitted carriers. It's essential to understand this distinction when evaluating insurance costs and the financial implications for buyers seeking unique coverage options.