The Excess and Surplus line is about to boom!

The Excess and Surplus line is about to boom!

We need agents that like referrals.

Before we get into the details let me just say this. linqrs pro mobile app is looking to onboard excess and surplus lines agents. The market is stronger than ever, and we feel confident that we can help agents take advantage of this booming market.


The demand for surplus lines insurance rose dramatically in 2019 and is continuing to expand into this year. Now is the best time for us to work with agents that sell non-admitted products since the pandemic and the rioting has significantly increased the demand. If you are interested in receiving referrals at no risk to you (No Deposit), simply download the linqrs pro app and we will send you quality referrals in real real-time. I said real real-time because so many companies use a middle man and call that real-time. They need to be educated on what real-time means I suppose.

So, what is a surplus lines broker?

A surplus lines (SL) broker negotiates coverage on your behalf from an excess and surplus lines (E&S) insurer. The E&S insurers specialize in risks that standard insurers are too afraid to cover. They are non-admitted, meaning they operate in states in which they are not licensed. Placing business with an E&S insurer requires a broker to have a standard license for property and casualty insurance and an SL license.

A Surplus lines broker doesn't deal directly with insurance buyers. Instead, they act as an intermediary between your agent-broker, and the non-admitted insurance company.


What type of businesses needs to consider E&S insurance?

Insurers establish underwriting guidelines that underwriters and agents must follow. These describe the types of risks the insurer is willing to insure and those it will not. A standard insurer may decline to protect any business that:

  • Possesses a poor loss history

  • Engages in activities that are hazardous, unusual, or difficult to assess. Examples are daycare centers, vacant buildings, hole-in-one golf tournaments, and amusement parks

  • Needs a coverage the insurer doesn't offer.

  • Perhaps it is a new venture

  • Or needs higher limits or broader coverage than standard insurers will provide

State Regulations

States regulations require an agent or broker to try to place the client with an admitted carrier before contacting an E&S broker. In other words, they must try to obtain coverage on the buyer's behalf from a specified number of standard insurers, typically 3. The agent or broker can approach an SL broker once these insurers have declined or have been rejected.

However, a diligent search is not required if the insured wants coverages that are NOT available in the standard market. Here is a good example. Suppose you want general liability insurance for a tattoo studio you own. If no standard insurers insure a tattoo studio in your state, your agent may now look for coverage on your behalf in the E&S market. No diligent search is required.

Wholesales insurance brokers and Managing general agency

Most Surplus Lines brokers work for a wholesale insurance brokerage or a managing general agency (MGA). Wholesale brokerages serve as an interface between your regular agent and E&S insurers. But, it cannot bind coverage on your behalf. Instead, they send your completed application to an E&S insurer. The E&S insurer provides a quote, which the broker sends to your agent. If you and your agent, along with the insurer, agree on the coverage and price, the insurer issues you a binder that is eventually replaced within a short-time period of 30 days.

An MGA is an insurance agency that has permission to risk-profile and issue policies on the insurer's behalf. Contracts between the insurer and MGA outlines the MGA's underwriting authority. If your agent submits an application to an MGA, the MGA may provide a quote. If all parties agree on the price and coverage, the MGA may bind coverage and issue a policy on the insured behalf.

For the record, SL brokers and MGAs typically charge a fee for their services. They have to make their money!


Regulations

An Excess and Surplus lines insurer is licensed and regulated only in the state in which it is domiciled. E&S is not licensed or regulated by other states in which it operates.


What are the requirements for agents?

Laws vary from state to state, but most have the following standard requirements:

  • Brokers must maintain the proper licenses.

  • Brokers cannot contact an E&S Line insurer to acquire coverage that is available from a standard insurer.

  • Brokers must ensure that E&S insurers meet specific financial requirements before placing business with them. States can monitor insurers and provide agents with a list of approved carriers. At the end of the day, brokers are ultimately responsible for ensuring that they are financially sound.

  • Brokers must inform policyholders that E&S insurers are not licensed by the state, nor are they covered by the state's guaranty fund.

  • Brokers must keep records of policies, premiums, and other data and file reports to various state authorities.

  • The broker must collect the surplus lines premium tax and remit it to the state.

Why should you choose an Excess and Surplus line direction?

  • More flexibility in pricing - ( not restricted to using filed and approved rates)

  • They can evaluate a firm on its individual merit.

  • Underwriters have greater leeway

  • Also, they have coverages that admitted markets do not

  • More risk tolerance

  • More competitive and better broader coverage

Purchasing insurance from a non-admitted carrier may seem riskier, but it can also be a better direction for your business. It provides broader or more comprehensive coverage than you could ever find with an admitted carrier.


WRITTEN BY

Steve Leach

CEO and Co-Founder of linqrs mobile app, The Most Clever Way to Shop for Insurance. Former Insurance Agency Owner, College, and NFL football coach.

linqrs Pro and linqrs are downloadable in the Google Play and the App Store.