Surplus Lines Insurance

Surplus lines insurance (also called excess and surplus or E&S) covers risks that standard, state‑admitted insurers are unwilling or unable to insure. It’s most common for unusual, high‑limit, or newly emerging risks that lack historical data for conventional pricing.

How it works

• Surplus lines policies are typically property and casualty products for risks outside the admitted market.
• Surplus lines insurers are non‑admitted in the buyer’s state (they’re licensed in their home state); brokers placing surplus lines business must be licensed where the buyer is located.
• Because these insurers are non‑admitted, policyholders usually do not have access to state guaranty funds if the insurer becomes insolvent. Historically, surplus lines insolvency rates have been low, but the absence of guaranty protection is a key difference from admitted coverage.
• Surplus lines carriers have more flexibility on pricing, coverage terms, and the risks they will accept.

Typical providers

The surplus lines market includes both specialist markets and major insurance groups. Firms tied to Lloyd’s of London hold a significant share of surplus lines capacity; other prominent players include:
* Berkshire Hathaway Insurance Group
* American International Group (AIG)
* Markel Corporation
* W. R. Berkley
* Nationwide
* Fairfax Financial
* Chubb
* Liberty Mutual

What surplus lines covers

Surplus lines insurers handle a wide range of nonstandard exposures, including:
* Special event liability and unusual operations
* Coverage for hazardous materials or demolition work
* High‑value collections (art, classic cars) or properties rejected by admitted carriers
* Higher limits than available through admitted markets
* Industry‑specific or emerging risks (some cyber, entertainment, or novel technology risks)

States publish “export lists” that identify coverages typically unavailable through admitted carriers; examples include kidnap & ransom, amusement parks, fireworks displays, sawmills, and hot air balloons. In some states and circumstances, surplus lines insurers may also offer flood coverage when federal or admitted options aren’t available or sufficient.

Surplus lines vs. standard (admitted) insurance

• Admitted carriers: must comply with state rules on rates, policy language, and solvency; covered by state guaranty funds that may pay claims if the insurer fails.
• Surplus lines (non‑admitted) carriers: not bound by the same rate and form regulations, allowing them to insure higher or unusual risks; policyholders lack state guaranty fund protection.

Licensing and regulation

• Insurance is primarily regulated at the state level; states license insurers, brokers, and agents.
• The federal McCarran‑Ferguson framework generally leaves insurance regulation to the states.
• Surplus lines insurers must be authorized in their domicile; brokers placing surplus lines business must follow state rules for exports and documentation.

Risks and considerations for buyers

• No state guaranty fund protection — evaluate insurer financial strength and claims-paying history.
• Premiums and policy terms can be less standardized; review exclusions, limits, and conditions closely.
• Work with a licensed surplus lines broker who can document that the risk was placed in the surplus market appropriately (many states require proof that admitted market options were exhausted or unavailable).

When surplus lines is appropriate

• The risk is new, unusual, or high‑severity and admitted carriers won’t provide coverage.
• You need higher limits or specialized wording not available through standard markets.
• Admitted markets have declined to insure the exposure after a documented placement effort.

Key takeaways

Surplus lines insurance fills gaps left by admitted markets, offering flexible solutions for uncommon or high‑risk exposures. It enables coverage for needs that standard insurers won’t accept, but it carries added considerations — most importantly, the lack of state guaranty fund protection and varying policy terms. Buy surplus lines only after assessing insurer strength and working with a licensed surplus lines broker.