Surplus Lines Insurance: Non-Admitted Market Explained
How the surplus lines market provides coverage for risks that admitted insurers cannot or will not write.
What Is Surplus Lines Insurance?
Surplus lines (also called excess and surplus, or E&S) insurance covers risks that are declined by the admitted (standard) market due to their unusual nature, high hazard, or unique coverage requirements. Surplus lines insurers are not licensed in the state where the risk is located but are approved as "eligible" surplus lines carriers. This non-admitted status means their policy forms and rates are not subject to state approval, providing greater flexibility in coverage design and pricing. However, surplus lines policies are not protected by state guarantee funds.
Market Role and Growth
The surplus lines market has grown significantly, now accounting for over 20% of U.S. commercial lines premium. This growth reflects increasing complexity of risks, capacity constraints in the admitted market, and the need for customized coverage. Common surplus lines products include hard-to-place property, professional liability, environmental liability, and emerging risks like cannabis and cyber. Surplus lines brokers must be specially licensed and document that coverage was declined in the admitted market before placing business with a surplus lines carrier.