Excess And Surplus Lines Insurance

What Does Excess And Surplus Lines Insurance Mean?

Excess and surplus line insurance protects insurers against financial risks that are too high for standard insurance companies to underwrite. Unlike regular insurance policies, which can be purchased from unlicensed insurers, excess and surplus line insurance must be obtained through a licensed insurance agent. The agent must hold a surplus lines license to sell this type of policy. This form of insurance enables coverage for entities with unique risks that other insurers are unwilling to cover. Businesses that need it often have hazards or exposures that fall outside the scope of standard types of business insurance, such as environmental cleanup contractors or event venues with high liability exposure.

Insuranceopedia Explains Excess And Surplus Lines Insurance

This type of insurance poses a risk for policyholders, as it does not include a guarantee fund for claims payment, particularly if the insurer goes bankrupt. In such cases, claims may be paid out through a state guarantee fund.

An excess and surplus lines insurer is known as a non-admitted or unlicensed carrier, but this designation does not imply that their policies are invalid. Rather, they are subject to different regulations compared to standard carriers authorized by the government. Consequently, this type of insurance often costs more than regular insurance, as it provides coverage for risks that are typically higher than what other insurers are willing to underwrite. A business that has been turned down for general liability insurance through standard carriers, for example, may find that an E&S policy is its only option. Because E&S insurers set their own rates without state-mandated pricing rules, it helps to understand how business insurance premiums are calculated before comparing quotes.