Which of the following statements is not correct regarding surplus lines insurance?

Surplus lines insurance caters to risks that are not typically covered by standard insurers, often because they are unique or considered too high risk. In this context, the statement that it must be procured at a rate lower than the prevailing rate for the same type of coverage is incorrect. In fact, surplus lines insurance is usually associated with higher premiums due to the elevated risk level and lack of availability in the standard market.

This higher cost correlates with the specialized nature of the coverage being sought. Therefore, it is acceptable and often expected that surplus lines insurance would carry a rate that exceeds that of standard market insurance options, thus aligning with the first statement that it can only be procured at a rate higher than the prevailing rate.

Additionally, the importance of the role of a licensed surplus lines broker in facilitating this process reinforces the regulated nature of surplus lines, as brokers must adhere to specific standards and laws in securing coverage for unique risks. This regulation ensures that the insured's interests are protected while they navigate obtaining necessary coverage not otherwise available in the conventional insurance marketplace.