What is Surplus Lines Insurance?
Surplus lines insurance is coverage provided to an insured with a unique set of risks and requirements. It is a type of property and casualty insurance. Individuals and businesses looking for surplus lines insurance often need coverage for a unique risk that would not be accepted by a typical insurance agency in the admitted market. Surplus Lines insurance is underwritten in the non-admitted market, also known as the Excess & Surplus lines market.
Understanding Surplus Lines Insurance
Surplus lines insurance can offer flexible coverage policies for businesses and individuals that do not fit in the admitted category. By being willing to take on risks that the admitted market won’t, surplus lines insurance fosters, cultivates, and supports creative ideas and businesses. The surplus lines industry fills a gap in the admitted market by covering things that most companies can’t or won’t insure.
Surplus Lines Insurance vs. Traditional Insurance
Traditional insurance is housed in the admitted market. These lines of insurance include car, home, health, life, and the like. Everything else is housed in the non-admitted market.
Carriers that write policies in the admitted market are called admitted carriers. These companies are bound by rate and form regulations and are strictly regulated. This protects policyholders from a variety of illegal and unethical practices, including fraud. Admitted carriers are also required to financially contribute to the state guarantee fund. This fund is used to pay for losses if an insurance carrier becomes insolvent or unable to pay the losses due to their policyholders.
Carriers that write surplus lines in the non-admitted market are called non-admitted carriers. Unlike an admitted carrier, non-admitted carriers are not backed by the state. They are not required to sell policies that adhere to the same standards as admitted carriers. Surplus lines tax requirements are different from admitted market taxes. Which is why it can be helpful to use a surplus lines tax calculator.
Non-admitted carriers are often still regulated by states they do business in. Due to these less rigid standards, non-admitted carriers have more flexibility when designing coverage, selling policies, and writing risks. Companies that are struggling to find coverage in the admitted market often have more success in the non-admitted market.
Related Terms
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