Wholesale Insurance

Wholesale Insurance: What it is and how it works

Wholesale insurance (also called franchise insurance) provides coverage for small employer groups or risks that cannot obtain typical group or retail insurance. Policies are issued as individual contracts for each person but generally contain the same provisions across the group.

Key points

• Typically used by employer groups too small for standard group coverage (often fewer than 10 employees).
• Policies are written at individual rates, with identical policy terms for group members.
• Wholesale insurance is commonly offered by nonadmitted carriers (also called surplus line or excess line carriers), which operate under different state regulatory rules.
• Nonadmitted carriers have greater pricing flexibility but may carry additional risks related to insurer solvency.

Why wholesale insurance exists

Wholesale insurance fills gaps left by the admitted/retail market:
* Small employer groups or unusual risks that admitted carriers will not underwrite.
* Specialized or high-risk exposures (environmental hazards, certain construction or transportation liabilities, specialty pharmaceuticals, etc.).
* Situations requiring tailored pricing or broader coverage than standard policies provide.

Typical products and exposures

Wholesale insurance often covers high-risk or specialized exposures, including:
* Environmental liability
* High-risk chemical or flammable-incident coverage
* Pharmaceutical and medical product-failure protection
* Privacy and identity-theft liability
* Transportation safety–critical products
* Construction-related structural integrity

Who sells wholesale insurance

Wholesale insurance is placed through a two-tier distribution model:
* Retail agents/brokers: originate the business with the insured and bring the risk to market.
* Wholesale brokers/agents: work directly with insurers to place difficult-to-place risks. They may possess specialized technical expertise and market access.

Two common types of wholesale intermediaries:
* Managing General Agents (MGAs): often have underwriting or binding authority from insurers.
* Surplus lines brokers: place coverage with nonadmitted carriers but typically do not have binding authority.

A single broker may act as a retail or wholesale broker depending on the situation.

Nonadmitted carriers and the risks

Nonadmitted (surplus line) carriers:
* Are not licensed in the state where the policy is sold and therefore are not subject to the same state filing, licensing, and reporting rules as admitted carriers.
* Can offer more flexible terms and pricing for unusual or catastrophic risks.
* May not participate in state guaranty funds, so claim payments could be at greater risk if the insurer becomes insolvent.

Being nonadmitted does not automatically indicate financial weakness—many nonadmitted carriers are well-capitalized subsidiaries of major financial firms—but it does change the regulatory protections that apply.

When to consider wholesale insurance

Consider wholesale insurance when:
* Your group is too small for standard group plans.
* The risk is specialized, difficult to place, or unusually large.
* You need coverage terms or pricing outside what admitted carriers will offer.

How to obtain wholesale coverage

• Start with a retail agent who understands the exposure. If the risk is difficult to place, the retail agent can approach a wholesale broker.
• Wholesale brokers (MGAs or surplus lines brokers) will seek appropriate nonadmitted or specialty carriers to provide coverage.
• Review carrier financial strength, policy terms, and the implications of nonadmitted status (including insolvency protections) before committing.

Bottom line

Wholesale insurance provides access to coverage for small groups and hard-to-place or high-risk exposures that traditional admitted carriers won’t underwrite. It offers flexibility and specialized solutions but involves different regulatory and insolvency considerations. Work with experienced retail and wholesale brokers and evaluate carrier stability and policy terms carefully.