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Excess And Surplus Lines The Exciting Insurance Market Published in The RHA Review, Vol. 3, No. 4, Third Quarter 1997
By: John T. Bogart |
The Role of the Surplus Lines Market in
Property / Casualty Insurance"Proceed carefully in that direction from which all others are fleeing." (old E&S maxim)
The surplus lines segment of insurance is important, even vital, to the health of the industry because it provides a market for hard-to-place risks that standard (i.e., licensed, admitted) carriers are unable or unwilling to cover. Sound simple? Basically, it is! I'm going to try to explain this as well as I can, given the limits of my space and your attention span.
The purpose of the surplus lines market is to supplement the standard market not to compete with it. Not being subject to filed rates or policy forms or to prior approval of underwriting criteria by state regulatory authorities, the surplus lines market fills a genuine need for coverage by insuring risks which would otherwise go unprotected. A good example is the liability insurance crisis of 1986. For various reasons, the standard carriers sharply and abruptly constricted their writings of liability insurance, especially products liability. Seemingly countess numbers of risks were begging for a home and accepting restricted coverages and lower limits of liability at vastly increased premiums or were forced, unprepared, into self-insurance. The situation became so severe that even general news magazines such as Time featured cover stories bearing such titles as "America, Your Insurance Is Canceled!"
The surplus lines market responded in its historic role of "safety valve" to the larger insurance industry and relieved the pressure on the standard markets until the situation stabilized. Admittedly, surplus lines carriers and brokers made themselves as a tidy profit performing their heroic role and now lazily dream of those halcyon days, vainly hoping for their unlikely return. But the system worked! The surplus lines market did proceed in that direction from which all others were fleeing.
John T. Bogart is an Insurance Expert witness & Consultant: High Hazard casualty & Property Insurance. CGL and Umbrellas. Liability - Unique forms & exposures. Excess & Surplus Lines. Reinsurance assumed & ceded. Duties of agents, brokers and underwriters. Bad Faith issues. Coverage interpretations. Environmental insurance. Insurance policy archeology. Professional liability.
See JOhn T. Bogart's Listing on Experts.com.
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