FREQUENTLY ASKED QUESTIONS
Is a special license required to sell surplus lines policies?
Requirements will vary from state to state, but typically an additional surplus lines license is required to broker, bind, and issue surplus lines policies.
Can retail agents and brokers go directly the non-admitted market?
State jurisdictions will typically require declination from the admitted market before allowing a risk to be considered in the non-admitted market. In some cases, there are "eport lists" of coverages that can be direclty sourced from the non-admitted market.
How does technology fit into this market?
Like most industries, automation is a source of effeciency and cost savings. Wholesalers and Insurers that provide the least amount of friction (e.g. data entry, turn-around time) typically have a competitive edge.
Do surplus lines wholesalers and insurers only sell surplus lines?
In some cases, yes, but there are a large number of entities that sell both.
Who regulates the surplus lines industry?
Regulation varies by state juristiction, but it is usually a combination of the state agency that provides insurance oversight and a stamping office or surplus lines association. The stamping offices and associations are typically created via statute or as a self-regulatory agency comprised of industry leaders.
Does it cost more for the insured to go through an intermediary like a broker or MGA?
Studies have shown that the costs are mostly the same, or less for the insured. The insurer is typically offloading the operational expense (e.g. marketing, sales, technology, policy admin) in exchange for a commision based on the premium of the policy.
Why wouldn't an insurer just sell directly to an insured?
Insurers will sometimes sell directly to insureds for coverages easily automated (e.g. simple underwriting). Insurers rely heavily on wholesalers for their underwriting expertise and retail agent relationships when it comes to more complicated coverages.
What is the primary difference, from an insured's perspective, between Admitted and Surplus Lines or Non-admitted insurance?
Admitted lines are typically backed by a state's insurance guaranty fund, which will pay claims to insureds in the case where an Insurer becomes insolvent. In E&S, no such guaranty is in place, however the market has a tremendous track-record of solvency and is a great source of risk distribution to a complex and diverse set of business concerns.