With the increasing demand for niche, specialty insurance products driven in part by the "InsurTech" wave permeating the insurance underwriting, distribution and claims handling components of the commercial and personal lines insurance industry, excess and surplus lines insurance has become more popular than ever. Surplus lines insurance companies are not typically "admitted" in the U.S. jurisdictions where they place insurance policies, but rather are "eligible" to write insurance pursuant to the provisions of the Nonadmitted and Reinsurance Reform Act of 2010 (NRRA) and as further regulated under applicable state insurance law.

Traditionally, there have been two methods for an insurance company to gain surplus lines ‎eligibility. One method, with respect to alien (non-U.S.) insurance companies is to obtain ‎inclusion on the Quarterly Listing of Alien Insurers maintained by the National Association of ‎Insurance Commissioners (NAIC). The second option is to become licensed as an admitted insurer in at least one U.S. jurisdiction ‎whereby such company may write surplus lines insurance business in all other ‎states as long as certain eligibility criteria are satisfied.‎

Historically, a problem that U.S. companies have faced, however, is that being licensed as an admitted insurer in a domiciliary state precludes writing surplus lines insurance business in that state. Fortunately, during the last 10-15 years, some states have begun embracing the concept of a "domestic surplus lines insurer" (DSLI) whereby an insurance company is licensed in its domiciliary state solely to transact surplus lines insurance business. To date, nearly half of all states have passed DSLI legislation. This article discusses some of the key benefits of pursuing the formation or purchase of a DSLI, as well as some of the challenges associated therewith.