Surplus Lines Insurance: A Solution for Coastal Markets
Learn How Surplus Lines Insurance Can Help Grow Your Business
April 23, 2024 — Business insights | Insurance insights
Over the years, elevated catastrophe activity, rising claims costs, carrier insolvencies, and increasing reinsurance costs have changed the property insurance market, and surplus lines insurance has changed along with it. Today, surplus lines is a $98.5 billion market and accounts for 11.2% of total P&C premium—and it’s no longer just for hard-to-place risks.1 It is often the solution for standard or preferred risks in distressed markets where capacity continues to shrink.
Find out how you can leverage surplus lines to serve more property owners and provide more solutions.
What Is Surplus Lines Insurance?
Surplus lines insurance, also called excess and surplus lines insurance, E&S insurance, non-admitted insurance, or specialty insurance, was originally developed to provide coverage for unique, new or unfamiliar, or high risks.
Because they contend with different state requirements than admitted carriers, excess and surplus lines insurers often have more flexibility to develop products for emerging risks, new customer segments, or changing market conditions. That’s why product innovation often starts in surplus lines before expanding to traditional markets. Unlike standard or admitted carriers that are licensed to write in a given state, a surplus lines insurer does not need to be licensed in the state where its policies are available. But that doesn’t mean it’s unregulated.
Is Surplus Lines Insurance Regulated?
Surplus lines insurers must follow state-specific laws to be eligible to provide surplus lines coverage.
While admitted insurance companies adhere to state regulations regarding policy forms, rate approvals, and claims handling, there are also many legal protections in place to govern surplus lines. For example:
• Surplus lines products can’t be marketed directly to consumers.
• A surplus lines broker must be involved in every policy transaction.
• The surplus lines broker is responsible for vetting the financial stability of the surplus lines insurer, conducting a diligent effort to determine the availability of similar coverage in the admitted market, and to remit surplus lines taxes with the state surplus lines taxing authority.
The insurance laws of the state still apply to surplus lines insurance (e.g., terminations still require adequate notice). While surplus lines carriers aren’t backed by the state’s guaranty funds to pay claims in the event of insolvency, insolvency rates for surplus lines insurers have remained historically low, according to the National Association of Insurance Commissioners.
What Makes Surplus Lines a Powerful Solution for Producers?
As capacity providers retrench from catastrophe-exposed markets, the need for reliable solutions is high, especially along the coast. Surplus lines carriers can be a reliable source of high-quality capacity, enabling you to write more business and grow your client base in coastal markets.
The SageSure Expanded Markets program makes it easy for producers to offer both non-admitted and admitted products through a single portal.
A complement to SageSure Signature products, Expanded Markets enables producers to place desirable risks that fall just beyond the eligibility of our highly preferred programs when writing business in Louisiana, South Carolina, New Jersey, and Texas, with more states being added to the program in the future.
However, producers can benefit from surplus lines offerings in many other ways too, including the following:
Ease of Doing Business
Once available to you, Expanded Markets options will appear automatically in SageSure’s Agent Portal [https://agents.sagesure.com] alongside SageSure Signature carriers so you can quote, bind, and manage policies all from one place—without leaving the platform to find a surplus lines option. Additionally, SageSure’s system rates and quotes submissions in real time, providing an immediate answer about a property’s eligibility.
Broader Eligibility
We’ve partnered with highly rated insurance carriers with an appetite for risks beyond what SageSure Signature products offer. For example, some carriers may cater to homes with older roofs or a history of losses beyond what fits the eligibility criteria of SageSure Signature offerings. Because Expanded Markets allows producers to quote more risks—regardless of risk characteristics—you can write and close more business, too, helping homeowners with a diverse set of insurance needs.
Product Diversification
As a producer, adding new capacity sources and revenue streams to your portfolio can help you grow your business and protect your income during market fluctuations and economic downturns when admitted products are difficult to source or rise above market prices. Providing this solution can give you a competitive edge and set you apart from competitors.
Prospect Retention
By offering a broader range of insurance products, you can prevent prospects from turning to competitors for the insurance coverage they need. The simplicity of using the centralized portal saves you the hassle of searching multiple platforms for dependable options in challenging areas. Quick, simple transactions can help provide timely solutions and facilitate trust and satisfaction with policyholders, encouraging customers to return for their future insurance needs.
Are you ready to incorporate surplus lines offerings into your portfolio? Reach out to your SageSure account manager to learn more.
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