What is an example of a risk that may necessitate surplus lines insurance?

Surplus lines insurance is designed to cover risks that are typically not insurable through standard insurance markets. A commercial property located in a high-hazard area exemplifies a situation where surplus lines insurance may be needed. This is because standard insurers often avoid insuring properties in locations prone to greater risks, such as high crime rates, severe natural disasters, or other significant hazards that could lead to high potential losses. Consequently, businesses operating in these areas may find themselves unable to procure coverage from traditional insurers, prompting them to seek surplus lines insurance that can accommodate these specialized and higher-risk needs.

In contrast, the other options illustrate scenarios that generally fall well within the parameters of traditional insurance markets. Standard residential properties and low-risk manufacturing operations are typically insurable by regular policies. Likewise, properties located in suburban areas usually pose less risk, making them suitable for conventional insurance as well.