Writing Your First Excess and Surplus Personal Lines Policy

The times, they are a changin' — in the personal lines market. With challenges in the admitted market, the spotlight has shifted to the Excess and Surplus (E&S) Lines market. Here's what you need to know to write your first E&S personal lines policy.

Why Are Personal Lines Shifting to the E&S Market?

With the personal lines homeowners insurance market experiencing significant changes across many parts of the country, carriers in the admitted market are opting to exit specific states or scale back on writing new business. Homeowners in Louisiana, Florida and California, for example, are finding it challenging to get coverage, particularly if they are located in catastrophe-prone areas.

Enter the E&S market.

"The E&S market, which was once thought of as the 'insurance of last resort,' is now playing a larger role in getting people coverage," says Robbin Parsons, RPS branch manager. "This specialty market is invaluable in helping to alleviate some of the issues in states where the admitted markets are leaving and for risks that are unable to find a home with standard carriers."

When Should Agents Turn to the E&S Market?

According to the Best's Market Segment Report, "Market Segment Outlook: US Excess and Surplus Lines Insurance," admitted carriers continue to constrict their underwriting criteria, leading accounts to seek coverage in the E&S market.*

Examples where the E&S market comes into play include:

• High-risk properties. Standard insurers considered homes in areas prone to natural disasters, such as flooding, windstorm damage and fires, high risk and are increasingly excluding those homes from their books of business.
• Homeowners with loss history. E&S insurers may be more willing to provide coverage for homeowners with a less-favorable claims history.
• Homes with unusual features. Standard markets may not have the appetite for specific risks, such as historic homes, homes with unique construction materials and high-value properties.

"The E&S market will insure more difficult and high-risk exposures," Parsons says. "This includes writing dwelling coverage, vacant properties, jewelry floaters and policies for manufactured homes, for instance."

In addition, the E&S market offers more coverage flexibility, with more capability to customize a policy.

"For example, a homeowner's policy with an admitted carrier is generally written on a replacement cost value basis. With an E&S policy, you choose replacement cost or actual cash value. You can also opt to offer a policy with wind coverage or x-wind when looking at an insured's risk tolerance and budget."

How to Place Coverage Through the E&S Market

Agents and brokers seeking coverage in the E&S market typically go through a managing general agent (MGA) with expertise in the space that can help find suitable coverage for their clients' unique needs.

"At RPS, we have the markets and expertise to help agents find insurance solutions for their clients when the admitted market is unavailable," explains Parsons.

"We have established relationships with carriers that offer E&S homeowners coverage. This access allows agents to tap into markets that may be more flexible in underwriting, accommodating properties and risks that might be challenging to insure through standard markets."