The excess and surplus lines insurance market provides specialized coverage for risks that have been declined, nonrenewed or that possess unique underwriting characteristics. Also known as surplus lines or the nonadmitted market, this sector caters to risks that traditional insurance carriers (the standard or admitted market) are unable or unwilling to cover.
The E&S market is not constrained by rate and forms filing, which allows the carriers to create custom policies tailored to the unique characteristics of individual risks. This allows flexibility in coverage and pricing to ensure that difficult risks are covered adequately. In recent years, the hardening of the insurance market means more risks are being declined by standard carriers, necessitating placement in the E&S market, or leaving clients uninsured.
How the E&S market benefits clients
The E&S market plays a crucial role to ensure clients have access to insurance coverage—particularly for high-risk or unique situations that standard carriers deem uninsurable. Without the E&S market, clients might face gaps in coverage, be forced to go uninsured, or bear the financial burden of self-insurance in case of incidents, claims or lawsuits. By offering coverage when traditional insurers cannot, the E&S market provides essential protection and peace of mind.
A powerful example of the E&S market’s value is its response to weather-related events like wildfires, hurricanes, floods and earthquakes. The E&S market is specifically affected by weather-related events in many ways, including increased demand for coverage, higher risks, higher premiums, claims and market adaptation.
These natural disasters can have devastating effects on communities—causing significant property damage and monetary loss. Traditional insurance markets often struggle to provide coverage for these high-risk events due to the unpredictability and severity of the losses involved. As a result, many properties and risks are declined by standard carriers, leaving clients vulnerable.
The E&S market steps in to fill this gap by offering specialized insurance solutions tailored to the unique challenges posed by weather-related events. For instance, during wildfire seasons, the E&S market can provide coverage for homes and businesses located in high-risk areas that traditional insurers might avoid. Similarly, in regions prone to hurricanes and floods, E&S carriers can offer policies that address the specific risks associated with these events, such as wind and flood damage.
As the frequency and intensity of weather-related events continue to increase, the demand for specialized insurance solutions grows. The E&S market continually adapts to these changes, to develop innovative products and coverage options to meet the evolving needs of clients. This adaptability ensures that individuals and businesses have access to the protection they need—even in the face of escalating risks.
Additionally, the E&S market’s flexibility in underwriting and pricing allows it to respond quickly to emerging threats. Unlike traditional markets—which may be constrained by regulatory requirements and standardized policies—E&S carriers can create custom policies that address the specific characteristics of each risk. This ability to tailor coverage ensures that even the most challenging risks are adequately insured, providing a necessary safety net for consumers.
Looking forward, the E&S market is expected to continue to evolve in response to the increasing frequency and severity of weather-related events. Insurers are likely to develop more innovative and specialized products to address the unique risks posed by these events. The market may see further growth as more properties and risks are declined by traditional carriers—necessitating placement in the E&S market.
How the E&S market benefits agents
According to the Bureau of Labor Statistics, there were 462,810 independent sales agents in the United States as of May 2023.[1] This considerable number of agents competes for the same piece of the insurance pie. However, the E&S market allows agents and brokers to expand their capabilities and provide coverage for clients in unconventional or high-risk situations.
In 2023, there was a net underwriting loss of $21.6 billion for the U.S. property/casualty industry, with personal lines responsible for most of the losses.[2] Marketplace changes have affected the ability to write business, with limitations, exclusions and gaps becoming more stringent. Companies are canceling policies, closing markets, and mergers and acquisitions have tainted risk appetite, pricing and availability. The E&S market helps insurance agents provide capacity for risks other carriers refuse to cover.
The future looks bright for insurance agents willing to learn about the E&S market, and how it can help differentiate their agency by providing solutions for difficult risks and increasing their book of business.
E&S continues to deliver for producers
Instead of kicking hard-to-place risks to the curb, the E&S market provides specialty markets the ability to manage risks that have been declined, nonrenewed or have unique underwriting characteristics. An E&S lines insurance carrier says yes when standard, admitted carriers cannot or will not provide coverage, which enables agents and brokers to expand their capabilities and books of business.
Typical types of risks written include:
- High-risk activities such as commercial auto, explosive manufacturing, firearms, logging, security guards with firearms, towing & repo, amusement & recreation, and outdoor recreation.
- Risks that do not fit standard market underwriting, such as bars and taverns, restaurants, vacant properties, homes in high-risk weather areas, and contractors.
- Risks requiring higher limits than offered by standard markets, such as $10 million or more in liability umbrellas, or $5 million or more in property limits.
- Specialty coverage needs, such as special events, concerts, hole-in-one contests, and unique situations.
- Risks with excessive or otherwise unacceptable claims/ loss history.
Mining for specialty risks
Reviewing your current book of business and conducting lifestyle and policy reviews with your clients and prospects can uncover previously undetected risks. Is their home in a high-risk weather area? Do they have dogs or exotic pets? Do they own firearms? Do they train, mentor or provide care for others? Rent or own recreation devices? Serve on a board of directors? Volunteer or coach? Certain types of business have a harder time finding insurance coverage. Does this business have commercial auto risks? Does it have vacant properties?
Another way to mine for new business is to find a list of risks that are considered difficult to place by searching the internet for state exportable lists (not all states have them, but you can find a list in Connecticut, New Jersey and New York).[3] Generally, these lists contain risks that the standard market doesn’t want to cover.
By evaluating clients and prospects, insurance agents may find they haven’t addressed all risks or didn’t know how to place some of the risks. With proper guidance, E&S can lead to successful placements of hard-to-place risks.
Some guidelines for placing risks: put the clean risks with the traditional market; put the difficult risks that take time and other resources with an E&S carrier that will help provide solutions for these risks.
How to access the E&S market
Now you know how to mine for risks, let’s move on to how you place these difficult risks. If agents don’t have a surplus license (most do not), then they will need to go through a surplus lines broker. Always ensure you check the credentials and reputation of any brokers with whom you do business.
Ways to find a surplus lines broker:
- Check a state’s insurance department website
- Check a state’s surplus lines association—not all states have them—in New York state it’s Excess Line Association of New York, and in New Jersey it’s the Surplus Lines Association of New Jersey.
- Check the Wholesale & Specialty Insurance Association or trade publications
- When all else fails, try an internet search
[EDITOR’S NOTE: PIA Northeast members have access to PIA’s MarketBaseTM, which has access to some 2,100 specialty risk categories from more than 100 firms.]
Use a strong E&S carrier
When seeking out an E&S carrier, it’s important to partner with a company that doesn’t compete with current markets, but instead writes the business being declined, canceled or nonrenewed, and that has a strong financial foundation. Use an E&S carrier with longevity and expertise in risk management and claims management. A strong history is necessary.
Additional factors that impact the E&S market
While weather-related events significantly impact the E&S market, other factors also affect its landscape.
One factor is the increasing cost of Nuclear Verdicts® that cause social inflation. A nuclear verdict refers to unreasonably high jury awards, while social inflation refers to the rising cost of claims and premiums (above the rate of economic inflation) attributed to nuclear verdicts. Social inflation can be driven by negative attitudes toward insurance companies and third-party litigation funding. Third-party litigation funding is when a third party finances a lawsuit in exchange for a portion of the judgment or settlement.
Another factor is the rise of cyber security risks. As businesses and individuals become more reliant on digital technologies, the threat of cyberattacks and data breaches grows. The E&S market has responded by developing specialized cyber insurance products to address these emerging risks.
In summary, the E&S market is impacted by a variety of factors beyond weather-related events. By staying attuned to the marketplace and adapting strategies accordingly, E&S insurers can continue to provide essential coverage for high-risk, unique and emerging risks for insureds with the help of insurance producers.
Conclusion
The E&S lines insurance market demonstrates sustained growth, with S&P Global reporting a continuous upward trend. In 2023, E&S premiums surged by 15%, reaching a total of $86.47 billion.[4] This substantial increase displays the market’s resilience and potential for expansion.
This growth trend presents promising opportunities for insurance agents and brokers to strengthen their capabilities, to increase revenue streams and to address the diverse needs of their clients.
Collaborating with established E&S carriers can empower industry professionals to effectively navigate intricate risks, distinguish their offerings, and provide tailored solutions for their clientele.
This article originally appeared in the May 2025 issue of PIA Magazine.
[1] U.S. Bureau of Labor Statistics, 2023
[3] PIA Northeast members can access the exportable lists in Connecticut, New Jersey and New York in the PIA QuickSource library. New Hampshire and Vermont do not have exportable lists.
Barbara Malkowski
Barbara Malkowski is the senior vice president of marketing for Prime Insurance Company. The company is an excess and surplus lines insurance carrier, specializing in property/casualty insurance for specialty risks that don’t meet the current appetite of other markets. The company writes E&S business in all 50 states and has an “A” (Excellent) rating by AM Best. Additionally, Prime is affiliated with a surplus lines broker, XINSURANCE, dba of Evolution Insurance Brokers LC.
