Surplus Lines Insurance

Surplus lines insurance, also called Excess and Surplus lines (E&S), is specialty insurance written by carriers that are not licensed (not admitted) in the state where the risk sits. It exists because the admitted market does not write every risk: certain classes are too new, too volatile, too high-value, or too unusual for an admitted carrier to underwrite at standard rates. Surplus lines carriers fill that gap.

It is bought through a surplus lines broker who is licensed to access the non-admitted market in the relevant state. The buyer is usually a commercial insured with a risk profile that the admitted market has declined, sub-limited, or priced out. Premium tax is paid to the state by the surplus lines broker, and policy forms are not approved in advance by the state insurance department (which is what gives the carrier the flexibility to write specialty wordings).

Surplus lines is the regulatory pipeline through which emerging-risk classes typically reach the U.S. market first. Cyber insurance, environmental liability, and many newer professional liability classes were predominantly E&S in their early years before broader admitted appetite developed. Generative AI Liability sits in the same pattern today.

Because the carrier is non-admitted, surplus lines policies do not benefit from state insurance guaranty funds in the event of carrier insolvency. Buyers and brokers therefore weigh carrier financial strength carefully when placing E&S. Lloyd's of London, with its A+ (Superior) AM Best rating, is one of the largest sources of surplus lines capacity in the United States.