Excess Surplus Insurance

• Licensed insurance companies operate within state regulated guidelines that place limits on the prices they can charge and the types of risk they can insure. In effect, standard insurance companies all offer similar coverages and price rates within their individual market sectors. Excess and surplus insurers work in specialty areas, or niches within different market sectors. In effect, excess and surplus insurance covers businesses or activities with unusually large assets or those who engage in unusual or high-risk activities.
  
  

Customized Coverage Plans

• Excess and surplus insurance companies---also known as E & S lines--have no state licensing requirements, though they still must adhere to certain state regulations. With no licensing requirements, excess and surplus insurers can develop customized coverage plans that meet their customers' needs. Because of their ability to fill niches or gaps left by standard insurance coverage, E & S lines insurers can work within the "main street" sector of the business industry. The areas within this sector include hotels, restaurants, bars, aircraft liability and professional liability. As no licensing requirements exist, excess and surplus insurers can set price rates according to the types of risks involved.
  
  

Risk Categories

• Much like in the standard insurance market, excess and surplus insurers manage risk factors by sorting them into different categories or levels of risk. Some E & S lines insurers may specialize in customers who fall within the unique risk category, while others focus on customers who fall within the capacity risk category. The capacity risk category consists of businesses or ventures that have a large amount of assets to insure. Customers who have little to no insurance history or fail to meet eligibility requirements set by standard insurers would fall in the non-standard risk category. In each case, excess and surplus insurers pick up where standard insurers leave off in terms of coverage amounts, coverage rates and special conditions.
  
  

State Requirements

• Within the insurance industry, each state follows its own set of regulations which govern insurance practices within a region. Excess and surplus insurance companies, while unlicensed, must register with state agencies in order to practice business in a state. E & S insurers must also supply state agencies with financial information on their companies as well as their officers or administrators. Depending on the state, E & S insurers may only do business with customers who've been turned down by a certain number of standard insurance companies. E & S insurance companies may also pay higher taxes than standard insurers in certain states. Since excess and surplus insurers deal with high risk-high revenue customers, most state agencies do not provide guarantee fund coverage for E & S insurers. Guarantee funds act as a back-up revenue source in cases in which a standard insurance company goes bankrupt.