When can a producer transact insurance through an unauthorized insurer?

A producer is allowed to transact insurance through an unauthorized insurer specifically when it involves surplus lines insurance. Surplus lines insurance typically covers risks that standard insurers are unwilling or unable to insure, due to the nature of the risk being too high or unusual. In Colorado, as in many other states, producers can place coverage with unauthorized insurers if they have been unable to find coverage from authorized, licensed insurers.

This provision underlines the importance of surplus lines, allowing producers to offer necessary coverage solutions that would otherwise be unavailable in the standard market. The regulatory framework establishes that producers must comply with specific requirements when arranging surplus lines coverage, including ensuring the risk is eligible for surplus lines and that they have conducted due diligence to seek coverage from authorized insurers first.

The other options do not adequately capture the specific permissions granted for surplus lines transactions. Being licensed in another state or having written permission from the commissioner may be relevant under different circumstances, but they do not pertain directly to the surplus lines context. Furthermore, the risk classification of a policy, such as being low risk, does not inherently grant permission to transact with unauthorized insurers. Thus, transacting business through an unauthorized insurer is explicitly linked to surplus lines insurance.