What Is Excess And Surplus Lines Insurance
What Is Excess And Surplus Lines Insurance. Also knows as The E&S, and the features of this type of insurance can differ significantly from standard insurance. This article is an overview of the aspects of excess and surplus lines insurance that business owners need to know.
In the most basic form, excess and surplus lines insurance is a unique type of insurance coverage that serves consumers who are unable to obtain coverage in the standard or admitted market. Standard insurance companies will usually not write insurance policies for unusual and high-risk situations. Excess and surplus lines insurance enable consumers to obtain casualty or property insurance cover via an insurance market that is regulated by the respective state.
What is excess and surplus lines insurance? Insurance companies, brokers, agents as well as policyholders can formulate unique insurance coverage and work out premiums on the basis of the risks involved. As such, the surplus lines insurance industry has a unique ability to effectively adapt to changing market conditions as well as consumer and commercial firm preferences. This segment of insurance is unlike standard insurance for the usual risks that employs pre-approved policies and pre-approved rates.
What is excess and surplus lines insurance? The E&S insurance sector offers commercial policies that cater to unique, complex or difficult risks that cannot be easily insured in the standard insurance market.
You can skip to the following answers to what is excess and surplus lines insurance using these links:
- How Is The Excess And Surplus Lines Market Regulated?
- What Benefits Does Excess & Surplus Insurance Offer?
- How Does A Standard Or Admitted Insurer Differ From Excess & Surplus Carrier?
- Where Can I Buy Excess And Surplus Insurance?
- How Much Does Excess and Surplus Insurance Cost?
How Is The Excess And Surplus Lines Market Regulated?
Every surplus lines insurer is licensed and regulated in their home state. They submit to the jurisdiction of the policyholder's home state either directly or indirectly. All states maintain a list of the approved E&S lines carriers. Insurance policies can only be formulated by the companies in the approved lists.
The surplus lines brokers are also licensed and regulated in the policyholder's home state. The brokers are task with ascertaining the solvency of the E&S lines carrier, complying with surplus lines tax regulations and providing specific statutory notices.
What is excess and surplus lines insurance? This market is a viable component of the larger insurance industry and has been for many years. It meets the insurance needs of lenders and businesses across the country and can provide a much-needed risk management solution to your business.
What Benefits Does Excess & Surplus Insurance Offer?
The E&S lines market, therefore, allows both the lender and borrower to obtain coverage not otherwise available on the standard market for various reasons. These can include:
- Risks not meeting the requirements of the standard insurance market as a result of location, age, and loss or cancellation history.
- Policy limits exceeding the guidelines for the admitted market.
- Risk being out of range of policies that standard carriers are willing to write, otherwise referred to as an unusual risk.
- The risk being too great or having high loss potential such that standard carriers are not comfortable offering cover for such a risk. These are termed as extraordinary risks.
The Difference Between Standard And Excess & Surplus Carriers
How Does A Standard Or Admitted Insurer Differ From Excess & Surplus Carrier?
A standard or admitted lines carrier refers to an insurance coverage provider that is licensed by the department of insurance from the respective state. Through licensure, they have the authority to write certain lines of insurance. Standard lines carriers adhere to strict regulations and are constrained by form and rate regulations. This serves to protect you as the consumers/policyholder from any illegal or unethical business practices, such as fraud.
Standard lines carriers are also obligated to contribute a specific amount to a state guarantee fund. A state guarantee fund is basically a government coffer that can be used to cover for losses in the event that an insurance firm becomes insolvent. This is also the case when a standard carrier is unable to accrue losses owed to the policyholders.
Excess and Surplus
What is excess and surplus lines insurance? An E&S lines carrier, on the other hand, does not require licensure from the state to conduct business in the said state. In some cases, these carrier are termed as unlicensed or non-admitted carriers. It is worth noting that E&S lines carrier are reputable and financially capable entities and are regulated in many other ways.
In most states, they are required to provide key information and details including but not limited to financial data, list of officers and articles of incorporation. Excess/Surplus lines carriers are not authorized to write insurance policies that are evident in the standard market. They are also not covered by the state guarantee fund and in some instances may be subject to higher tax rates.
E&S carriers are authorized to write an insurance policy if the said policy has been rejected by 3 separate standard carriers. The agent serving the business must also have a surplus lines license for the policy to be valid. Only firms on the approved list of E&S insurance companies can be able to write policies.
Excess and Surplus lines carriers do not have constraints related to form and rate regulations as is the case with standard lines carriers. This freedom enables the firms to be adaptable, changing the insurance coverage offered and pricing. They, therefore, have the benefit of not encountering time constraints or filing costs; a win win situation for the policyholders and the firms.
What is excess and surplus lines insurance? The disclosure on your insurance policy may state that the policy was formulated by a non-admitted or non-licensed insurance carrier. If this is the case, your business is exempted from the protection of the state guarantee fund. If the insurance provider goes through insolvency, you cannot seek recourse through that channel. The good news is that fewer E&S line carriers go through insolvency as compared to standard line carriers. As a business owner, enlist the services of insurance companies that are financially capable and can be able to pay your claims in case of a loss. This is regardless of whether they are admitted or non-admitted carriers.
Where Can I Buy Excess And Surplus Insurance?
These excess & surplus wholesalers insure the risks that would otherwise be declined by standard carriers. Your broker can help you get a policy from these companies. Some of the largest are:
- Abram Interstate Insurance Services
- All Risks
- Amwins Group
- Arc Excess & Surplus
- Arlington/Roe & Co.
- Bass Underwriters
- Brown & Riding Insurance Services
- Burns & Wilcox
- Cochrane & Company
- CRC Insurance Services / Swett & Crawford
- Gorst & Compass Insurance
- Mcclelland And Hine
- Myron F. Steves & Co.
- Partners Specialty Group
- Peachtree Special Risk Brokers
- Program Brokerage Corporation
- Risk Placement Services
- Risk Theory Insurance Services
- RT Specialty
- Scottish American Insurance General Agency
- Socius Insurance Services
- US Risk Insurance Group
- USG Insurance Services
- and Worldwide Facilities
How Much Does Excess and Surplus Insurance Cost?
Typically more than standard insurance. Because of the variance in they underlying insurance forms and coverages, you will need to speak to a broker to get an exact price for your business.
Consult with a commercial insurance agent to determine which coverage types you need and any endorsements that you must purchase to fully protect your business' potential liability at the lowest possible premium.
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Get useful tips and information about how much commercial insurance costs, small business risks and exposures, how insurance regulations effect your businesses' and detailed descriptions of coverages and exclusions and more. Most small businesses need to buy the following four types of insurance at a minimum to cover their operations from every day risks:
Property Insurance: This policy covers a business if the property used in the business is damaged or stolen as the result of common perils like fire or theft. Commercial property insurance covers the buildings, structures and also business personal property - which includes furniture, inventory, raw materials, machinery, computers and other items.
Liability Insurance: Any company can be sued. Slip-and fall lawsuits are very common and be costly. Customers can claim you injured them or damaged their property - and lawsuits are very expensive. Commercial liability insurance pays damages and can include attorney's fees and other legal expenses. It also ca pay for the medical bills of injured third parties
Commercial Auto Insurance: For vehicles owned by the business. Commercial auto insurance pays bodily injury or property damage costs for which the business is found liable - up the the policy limits for liability and property damage.
Workers Compensation Insurance: In almost every state employers must provide workers comp when there are W2 employees. Workers compensation pays for the medical care of employees and can replace a portion of lost wages - regardless of who was at fault for the injuries.