What is a Surplus Lines Broker Bond?

A surplus lines broker bond is often required by states for a company to be able to sell surplus lines insurance. It is a guarantee to the state and the consumer that the company will adhere to all state laws and regulations. This offers some financial protection to consumers if for some reason the company defaults.

A surplus lines broker bond is like other surety bonds. There are three key players:

• The obligee
• The principal
• The surety

The obligee is the agency that requires a company to obtain a surplus lines broker bond. In many states, the company will not be issued a license without first purchasing this bond.

The principal is the business or the individual that is required to obtain the surplus lines broker bond. They will be responsible for maintaining the bond coverage each year.

The surety is the agency that provides the financial backing for the surety bond. They will make a payment if a claim is made against the bond.

If your company fails to meet the terms of the bond, a claim can be made, and they will be compensated if the surety company finds that they have suffered a loss due to misconduct or default of the company. The company will have to repay the surety company for any amount that is paid out of the bond to the complainant.