Surplus Lines????

[cgott42]

What are surplus lines insurers? How is it different than the residual market?

[MyKenk]

The surplus lines market provides insurance coverage for nonstandard or unique risks that do not fit the underwriting guidelines of insurers licensed to transact business in the market for standard or traditional insurance coverages.

I think surplus lines cover things that aren't traditionally covered by any "regular" product.

http://www.google.com/search?hl=en&client=firefox-a&rls=org.mozilla:en-US:official&hs=WK7&defl=en&q=define:surplus+lines&ei=u_TOScXYH5PglQeJu6TVCQ&sa=X&oi=glossary_definition&ct=title

[cgott42]

thanks, can you (someone) give a few specific examples of exposures which could not be written under traditional products and needs a surplus lines writer.
Also - why does this mean that the insurer is not admitted by the state? What does one have to do with the other? Can't an admitted insurer write insurance to cover special and unique risks?

[Colymbosathon ecplecticos]

There are lots of examples, things like amusement park rides for one.

A licensed carrier needs approval for forms in most states, so a manuscripted policy isn't practical.

A surplus lines agent makes an effort to find the coverage in the regulated market --- in most states being turned down by three carriers is adequate --- then he can approach unlicensed carriers. The surplus lines agent makes sure that the premium tax is paid (see self-procurement).

[cgott42]

Thanks, tell me if this is a correct distinction between surplus lines writers and the residutal market:
Surplus lines are unique risks for which there aren't any currently approved state forms - thus they get denied (3x) and must seek insurance from non-admitted co's
Residual Market also consists of business which was denied coverage in the voluntary market - though for a different - they are unprofitable- for this there are no insurers who will write this business (i.e. not even nonadmitted companies) instead they fall to a fund, which all insurers must contribute to.

[tommie frazier]

residual markets usually exist only for things where the buyer is more or less required to buy it, or the general public will suffer if the insurance doesn't exist: personal auto, work comp, and personal property. no one cares if amusement parks can't get liability coverage. but if docs in a state can't get a quote for any insurance or you can't get a quote bc you have 11 DUIs, but you are licensed still and the state requires insurance...

[mxpx=1/2]

Residual markets are created by states and heavily regulated to ensure that undesirable risks can procure insurance coverage. Largely a personal auto thing.

Excess & surplus lines are (mostly) unregulated. They are the lines of insurance that regulators are so unconcerned about that they let insurers do (mostly) what they want. It's stuff that falls through the cracks. Think esoteric risks like sports venues insuring against somebody hitting a halftime, halfcourt shot for a prize, or large commercial risks whose insurance needs and rates can't be fit into any kind of standardized box.

(E&S writers are still subject to some regulations, including non-insurance regulation, premium taxes, and solvency.)