Excess and Surplus (E & S) lines insurance is a segment of the insurance marketplace that allows consumers to buy property and casualty insurance with a greater degree of flexibility in regards to specific insurance coverage’s and negotiated pricing. Also referred to as non-admitted carriers, the E & S markets have the ability to adapt quickly to changing market conditions.
In contrast, an admitted carrier has received a license from the State Department of Insurance for the authority to write specific lines of insurance. Admitted carriers are bound by rate and form regulations and are strictly regulated. Admitted carriers are also required to financially contribute to the State guarantee fund, which is used to pay for losses of an insurance carrier that has become insolvent and unable to pay losses due their policyholders.
An E & S carrier is not required to be licensed by the State, but is allowed to do business in that State. Most States require that E & S carriers submit financial information, articles of incorporation, list of officers and other general details. Historically E & S carriers did not compete against admitted carriers, although that has changed. What hasn’t changed is that E & S carriers are not protected by the State guarantee funds.
E & S carriers are not bound by most of the rate and form regulations imposed on standard market companies, allowing them increased flexibility to change the coverage offered and the rate charged, eliminating time constraints and financial costs associated with the filling process. Because E & S markets are given additional latitude on pricing, it is important for the consumer to be aware of all charges, including not only the premium charge, but also inspection fees, surplus lines tax and stamping fees.
It is essential to work with E & S markets that follow the requirements of the MN Common Interest Ownership Act (MCIOA) to assure proper coverage.