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Understanding E&S coverage

As an insurance agent looking to provide comprehensive coverage for your clients, you know “Excess and Surplus” insurance coverage could be a great option for your clients, but do you know when to consider it?

Let’s start by looking at the difference between admitted and E&S/non-admitted coverage.

  • Admitted insurance coverage is a policy issued by insurance companies that must comply with state insurance laws and regulations and are required to meet certain financial and solvency requirements. Admitted policies are backed by state's guarantee funds, which provides additional protection to policyholders in case the insurance company becomes insolvent.
  • E&S/non-admitted insurance coverage, also known as surplus lines insurance, refers to a policy provided by an insurance company that is not required to comply with the state's insurance laws and regulations and does not have to meet the same financial and solvency requirements as admitted companies. Non-admitted insurance policies may offer more flexibility in terms of coverage and underwriting but may also come with higher premiums and fewer consumer protections.

In simple terms, E&S coverage is a specialized type of insurance policy that offers protection for risks that standard insurance policies won't cover. It's like having an extra layer of security for those unique and hard-to-place risks that fall outside the standard market. It's important to note that the availability of admitted and non-admitted insurance coverage may vary depending on the jurisdiction and the specific insurance market.

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Now let's dive deeper into the world of E&S coverage and discover how it can benefit you and your clients.

When to Use E&S Coverage

There are situations where standard insurance policies simply won't cut it. That's where E&S coverage comes into play. When your clients have unique risks, such as high-risk properties, unusual liability exposures, and even risks with an increased claims history or hard-to-place risks, E&S coverage is the solution. It allows you to provide tailored coverage that meets your clients' specific needs, even when traditional insurance carriers are unable to offer suitable options. Think of it as a “second chance” to place a policy for your client.

Don’t be afraid of E&S coverage

Some agencies may be hesitant to offer E&S options or will only place E&S policies through a wholesale broker because of the “fear” of E&S taxes and filings. These are the state-specific taxes and regulatory reporting requirements imposed on surplus lines insurance transactions. 

  • Taxes: When an insurance policy is placed with a non-admitted insurance company, the insured may be required to pay a surplus lines tax, typically a percentage of the premium. The surplus lines broker/agent is responsible for remitting the tax to the appropriate state regulatory authority.
  • Filings: When a non-admitted insurance policy is issued, the surplus lines broker/agent is typically required to file certain documents with the state insurance department. The purpose of these filings is to ensure compliance with state insurance laws and regulations and to monitor the surplus lines insurance market.

If you are leery about the E&S taxes and filings process, be sure to work with an insurance provider/carrier that will handle the process for you.

Hot tip: Both E&S providers available through Victor, Joyn and Pathpoint, will take care of the taxes and filings for you. From your agencies’ perspective it will operate exactly like writing a standard policy.  

Benefits of E&S Coverage

  1. Tailored Protection: E&S coverage allows you to find customized insurance solutions to fit your clients' unique risks. You can provide coverage for hard-to-place risks that standard policies won't cover, ensuring your clients are better protected.
  2. Market Access: E&S coverage gives you access to a wide range of insurance markets and carriers that specialize in high-risk or non-standard risks. This means you can find the best coverage options for your clients, even when traditional markets may turn them away. In many cases, an E&S policy is issued by the same A-rated carrier that would issue a standard policy. You may find almost all standard carriers also have an E&S offering.
  3. Increased Revenue Potential: E&S coverage opens new revenue streams for your business. By tapping into the E&S market, you can expand your client base and generate additional income by serving clients with specialized insurance needs. 
  4. Client Retention and Satisfaction: You will have additional options to offer your client in the event their risk falls out of the standard market offerings. When you can provide comprehensive coverage for your clients' unique risks, they'll appreciate the value you bring to their insurance portfolio. This leads to increased client satisfaction and loyalty, helping you build long-term relationships and retain valuable clients. 
  5. Competitive Advantage: By offering E&S coverage, you can differentiate yourself from other insurance agents and grow your book of business. You can become the go-to expert for clients with unique risks, positioning yourself as a trusted advisor who can provide tailored solutions that others cannot.  

Below are a few examples of industries or client situations where E&S coverage may be a better option due to unique risks.

  • Keep in mind this list is not exhaustive, and it's always important to assess each client's specific needs and consult with underwriters to determine the best coverage options. 
  • High-Risk Properties: Clients who own properties with high-risk features, such as vacant buildings, properties with a history of claims, or properties in areas prone to natural disasters.
  • Special Events: Clients organizing special events, such as concerts, festivals, or sporting events, often require coverage for unique risks associated with the event, such as liability for accidents, property damage, or cancellation due to unforeseen circumstances.
  • Contractors and Construction: Clients in the construction industry, including contractors, builders, and developers, often face unique risks related to construction projects, such as environmental liabilities, subcontractor default, or design errors.
  • Professional Services: Professionals in specialized fields, such as architects, engineers, consultants, or technology companies, may require E&S coverage to protect against professional liability claims that may not be covered by standard professional liability policies.
  • Non-Standard Auto Risks: Clients with unique auto risks, such as commercial trucking companies, transportation network companies (Uber, Lyft), or businesses with large fleets, may need E&S coverage to address specific risks associated with their operations.
  • Liquor Liability: Clients in the hospitality industry, including bars, restaurants, and event venues, often require liquor liability coverage to protect against claims arising from the sale or service of alcohol.
  • Excess Liability: Clients with high liability exposures, such as manufacturers, contractors, or healthcare providers, may need excess liability coverage to supplement their primary liability policies and provide additional protection against catastrophic claims.

 

Check out the full list of class codes that may be eligible for E&S coverage through our provider partners Joyn and Pathpoint.

In today's competitive insurance landscape, staying ahead requires offering innovative solutions that meet your clients' evolving needs. By leveraging the benefits of E&S coverage, you can protect your clients' interests, expand your market reach, and boost your revenue.

Explore the E&S coverage highlights available through Victor for Agents for your clients.

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