What is Excess & Surplus Lines Insurance?

Excess & Surplus (E&S) lines insurance is a specialty market for businesses that cannot find coverage in the standard, or admitted, market. This is usually due to a business’ operations being high risk, or for a new business type with unknown risks. People often think of E&S lines for very unusual or large exposures, but close to 30% of businesses will only find a solution through this market and the number continues to grow!

Candidates for E&S insurance often include roofers and builders, daycare centers, amusement parks, oil companies – and anything in between. Small business owners must also receive a certain number of declinations (the number is dependent on the state) from the standard market before they can find coverage in the E&S market. Once you’re there, small business owners can choose from a range of E&S coverage options just like standard insurance types including commercial property, general liability, commercial transportation and even custom products.

The E&S market is evolving constantly, so carriers are adept at dealing with moderate to challenging exposures and have an appetite for this level of risk. They are flexible and ready with creative solutions needed to cover a wide range of businesses. E&S is also seen as an incubator for new coverage types and is often the place where new business profiles enter the insurance market. As our economy evolves and businesses change to adapt to new consumer demands, many of these new industries will first find coverage in the E&S market. 

Why do I need it?

This specialty market insures businesses that standard carriers won’t cover because the risks are specialized, complex or even just difficult to underwrite. A small business owner would enter the E&S market when standard carriers elect not to cover your insurance needs. 

There are a variety of reasons why the standard market would choose not to write your policy including: the risk doesn’t meet existing standard guidelines for age, location, loss history and/or policy limits; or the risk is uncharted, too unusual or too large for standard carriers to cover comfortably. Your agent can help you assess your options and identify the right insurance coverage to limit your exposure and give you peace of mind.

Is the E&S market regulated?

Yes, but it is regulated a little differently than the admitted, or standard, insurance market. On the whole, the E&S market is subject to less regulation than the standard market. E&S carriers cannot write insurance that is otherwise available in the admitted market, and are subject to different state licensing requirements as well. The looser regulations and alternative licensing arrangement ultimately gives the E&S market the needed flexibility to adjust policies, rates and forms to best cover the unusual risks of this space.

What is the difference between an admitted and non-admitted carrier?

An admitted, or standard, carrier has received a license from the state department of insurance giving the company authority to write specific lines of insurance. They must conform to rate and form regulations that are strictly regulated. Admitted carriers are also required to financially contribute to the state guarantee fund, which pays for losses if an insurance carrier becomes insolvent or is otherwise unable to pay losses due to their policyholders. 

A non-admitted carrier is licensed in just one state, but is allowed to do business in other states through a wholesale broker or managing general agent. They cannot write insurance available in the standard market and are not protected by the state guarantee fund. Because of the licensing, these carriers aren’t bound by a particular state’s rates and forms regulations and have the freedom to modify them to a level that’s necessary to cover the unique risks of E&S. They may also add exclusions and conditions to make the risk acceptable for them to cover. 

Non-admitted carriers are licensed, financially stable companies that are intentionally subject to looser regulations than standard insurance companies.

Are E&S carriers licensed?

E&S carriers are licensed in just one state, but are allowed to do business in other states. Small business owners can buy E&S insurance from an insurer not licensed in your state, but you can rest assured they are still subject to some industry regulations and standards. 

Standard insurance carriers are required to have a state license in each operating state, and it is regulated more heavily.

Who are the players involved in obtaining an E&S policy?

Obtaining an E&S policy can involve a few more people than obtaining a standard insurance policy. E&S policies could include a retail agent, wholesale broker and/or managing general agent, plus the E&S carrier(s) and policyholder. Agents who work in the E&S space are required to have a surplus lines license so you know they’re qualified to deal with unique exposures to risk. Standard lines typically include just a policyholder, carrier and agent.

Do I work with my usual agent to obtain an E&S policy? 

E&S insurance agents are required to have a surplus lines license so you know they’re qualified to deal with unique exposures to risk. It should give you peace of mind knowing your E&S agent is qualified to work in this specialized market, and can offer you the expertise and advice you need on coverages, conditions and inclusions on your policy. We can connect you with the right agent to answer your E&S questions and guide you through this process. 

Get a Quote