So what is E&S and how does it differ from “admitted”?
An “admitted” insurance company— often referred to as a “standard market” insurance company—is one that has been licensed and approved by the insurance department of your state. Admitted carriers are subject to all state insurance regulations and must file their specific rates, rules, and forms that can be used. “Non-admitted” carriers—often referred to as “excess and surplus lines” or “E&S” carriers— are free to draft their own insurance contracts and do not submit their forms and rates to state regulators for approval and acceptance. The enhanced flexibility allows for coverages and terms that are more customized to a specific account. While E&S carriers are not licensed by the state, they are authorized to do business in that state. Also while E&S insurers are not regulated by each state in which they do business, they do have to adhere to the regulations and guidelines of their domicile state.
Many states require that E&S insurers only write a policy if it has been rejected by admitted insurers, though some states have a list of eligible classes that are exempt from such a “diligent efforts” process. In all cases, the agent or broker placing coverage on an E&S policy must have a valid surplus lines license. Surplus lines carriers do not generally participate in state guaranty funds—funds administered by the state to pay claims in the event an insurer becomes insolvent. However, in most states they still must be approved by the state department of insurance to offer medical professional liability insurance and are subject to the same financial strength ratings as standard markets. Carriers must meet certain financial and regulatory criteria mandated by each state. These requirements usually include the establishment of substantial surplus and/or demonstration of adequate reinsurance.
States require E&S carriers to include a disclosure on the policy that lets the insured know the company is not covered by the state’s guaranty fund and the rates, rules, and forms have not been reviewed by the insurance department. When might you need an E&S carrier? The E&S insurance markets originated when those who needed insurance coverage were unable to secure it from the standard admitted companies. E&S carriers play a critical role in insuring higher risk healthcare groups such as hospitals, telemedicine groups, and physicians whose practice profile does not fit well with admitted carriers.
The typical types of risks written in E&S lines include those that:
- Are considered high risk by the admitted market
- Require higher limits than offered by standard markets
- Require specialized or unique coverage
- Have excessive or otherwise unacceptable loss history
E&S insurance policies can only be sold through licensed surplus lines brokers. If you need assistance finding a broker partner, visit our Find an Agent page.
The Difference
The Difference is an ongoing educational series from ProAssurance, designed to compare and contrast common items in medical professional liability insurance. The side-by-side comparisons make it easy to compare so you can easily pick up the highlights of each.