This information is provided by the National Association of Professional Surplus Lines Offices, Ltd. NAPSLO is the premier national trade association representing the surplus lines industry. Founded in 1975, NAPSLO has become the authoritative voice of surplus lines, acting as a source of information about the vital roles surplus lines plays in the insurance industry.

THE ROLE OF THE SURPLUS LINES MARKET

The surplus lines industry is important because it provides a market for insurance covering risks that are not freely written by standard markets. There are three basic categories of surplus lines risks:

• Specialty risks that have unusual underwriting characteristics;
• Unique risks for which standard carriers do not offer a filed policy form or rate; and
• Capacity risks where a higher limit of coverage than is being offered by standard market is sought.

MEETING THE NEEDS OF CONSUMERS

With the ability to accommodate a wide variety of risks, the surplus lines market acts as a complement to the standard market. Often called the “safety valve” of the insurance industry, surplus lines accept risks that standard markets have rejected for a variety of underwriting and market reasons.

Surplus lines companies are able to offer coverage in large part because they are free of rate and form restrictions that are imposed on other insurance carriers.

In order to protect the consumers state insurance departments oversee and regulate surplus lines placements through licensed surplus lines brokers. In addition, each domestic company must be licensed in one of the 50 states and must continually meet the solvency requirements and financial standards of that state. Financial requirements for surplus line carriers vary from state to state, but are usually more stringent than for those imposed on standard carriers.

THE BENEFITS OF USING A NAPSLO MEMBER

The NAPSLO logo is inscribed with the latin phrase uberrima fides, which means “in the utmost good faith.” This logo serves as a symbol of the professionalism and statement of purpose of NAPSLO members and the association itself. All NAPSLO members must meet specific financial and ethical standards in order to join the association.

Dealing with a NAPSLO member ensures that you are being assisted by a knowledgeable surplus lines professional who can respond to your needs in an ever changing insurance environment.

This information is provided by the National Association of Professional Surplus Lines Offices, Ltd., the premier trade association representing the surplus lines industry.

What is Surplus Lines?

Surplus lines is a mechanism that was created by state law which provides for the purchase of insurance from non-admitted insurers when insurance is unavailable from an admitted insurer.

Is surplus lines regulated by my state insurance department?

Yes. However surplus lines is regulated in a different manner than standard carriers. Each domestic surplus lines insurer is regulated by the state in which it is domiciled. In addition each state regulates surplus lines transactions through specially licensed surplus lines brokers. Requirements vary, but surplus lines brokers are restricted to using surplus lines insurers whose minimum capitalization and other financial requirements are generally more stringent than similar requirements imposed on admitted carriers.

Why is my quote with a non-admitted insurer?

Admitted carriers reject risks that do not fit their underwriting criteria. When they do, the non-admitted market can often fill the void created by the admitted insurers. There are three types of non-admitted risks: Specialty risks which have unusual underwriting characteristics; Unique risks for which admitted carriers do not offer a filed policy form or rate; and Capacity risks where a client seeks a higher level of coverage. Surplus lines companies are able to offer insurance in large part because they are free of rate and form restrictions imposed on other insurance carriers.

Why does this quote include a charge for taxes?

States impose a tax on all insurance policies. Standard carriers include the tax in the premium they charge. However, regulations require surplus lines carriers to identify and collect these taxes separately.

If I have a claim, can I rely on the financial stability of my surplus lines carrier?

Recent studies by insurance financial rating specialists, A.M. Best and Standard & Poor’s, show that the underwriting performance of the surplus lines market has continually outperformed the admitted property & casualty market. These studies also show that the solvency record of the surplus lines market has been equal to that of the standard market over the past two decades.