Excess and surplus lines

Excess and surplus lines, or E&S, is the market for risks that admitted (licensed) insurers will not or cannot cover on their standard forms and rates: unusual or high-hazard operations, a poor loss record, a new venture, or coverage the standard market does not offer. The "excess" in the name means excess to what the admitted market will provide. It has nothing to do with excess liability layers.

E&S insurers are non-admitted in the state, so they generally do not file rates and forms for approval and can write manuscript terms. That freedom lets them price and design for difficult risks. The costs to the buyer are several. A licensed surplus lines broker must place the policy, often working through a wholesale broker. A surplus lines tax and, in some states, a stamping fee are added to the premium. And the policy is not backed by a state guaranty fund if the insurer fails.

Before the placement, the broker must usually complete a diligent search of the admitted market unless an exemption applies. Ask your broker why the risk is in E&S, whether it can return to the admitted market at the next renewal, and how the insurer's financial strength compares.

excess and surplus lines insurance explained explains the market in depth, and admitted vs non-admitted insurers: what the difference means compares the two sides.