Excess & surplus (E&S) lines market
US segment where risks judged too specific or too volatile for the admitted market are placed with surplus lines insurers that are non-admitted but still supervised.
On July 21, 2010, the Dodd-Frank Act carried a statute few people outside the trade ever read, the Nonadmitted and Reinsurance Reform Act. It took effect a year later and settled an old headache for the excess and surplus lines market: only the insured's home state regulates and taxes a nonadmitted policy. E&S is the US market for risks that a state's admitted carriers decline or price badly, for lack of data or because the exposure is too volatile. Those risks go to a surplus lines insurer that holds no license in the insured's state but is supervised by its domiciliary state and meets the home state's eligibility standards. A non-US carrier also needs to appear on the NAIC Quarterly Listing of Alien Insurers. The surplus lines broker has to complete a diligent search of the admitted market first, and the policy generally falls outside state guaranty funds. In return, freedom of rate and form is close to complete. The segment grows with every hard market: cat-exposed property, admitted carriers pulling back in Florida and California (State Farm stopped writing new homeowners business in California in May 2023), professional liability, and cyber in the early 2020s.
After several major admitted insurers withdrew, from 2023 onward, from the California homeowners market exposed to wildfire, affected homeowners turned to excess & surplus lines insurers, which accept the risk at higher premiums.
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