What is the Surplus Lines Market?
It is an insurance marketplace established for the purpose of insuring unique or hard-to-place risks. Rules that apply to surplus lines placements and companies differ from coverage obtained from licensed insurers in Nebraska.
As surplus lines insurers are unlicensed, the transactions are regulated by state laws which require surplus lines policies to be obtained by specially licensed agents or brokers. They are called surplus lines agents or brokers and are authorized to transact business with non-admitted carriers that meet certain financial and other criteria. These insurers are known as excess or surplus lines insurers.
What is a surplus line policy?
A policy placed with an insurer that is not admitted or licensed in Nebraska but is eligible to provide property or liability insurance to Nebraskans through specially licensed agents or brokers known as surplus lines agents or brokers.
Why am I getting coverage from a surplus lines insurer?
Your agent or broker was unable to find coverage you requested among companies licensed in Nebraska but was able to provide coverage from an eligible surplus lines company.
The reason for your agent’s or broker’s action is the risk or property for which you sought coverage may be unique or have certain risk characteristics that prevent them from placing the coverage with licensed carriers.
Large commercial policyholders do not need to meet these conditions to buy from a surplus lines insurer.
Is my surplus line policy covered by the Nebraska Insurance Guaranty Fund?
There is no guaranty protection for surplus lines policies. The guaranty fund only covers policies of licensed insurers.
How is the rate or price of a surplus lines policy determined?
The rate or premium charge for a surplus lines policy is determined by the insurer depending on coverage, policy limits, exclusions, deductibles, or other similar policy provisions.
Surplus lines insurers do not file their rates or premiums for review through the Department of Insurance.
The total cost of the policy will include:
- Insurer’s premium charge
- State surplus lines taxes
- Broker or agent fees
- Commissions incurred in selling and delivering the policy to you
Does a surplus lines policy contain standard policy language?
Policies of surplus line companies are not reviewed or approved by the Department of Insurance. A surplus lines company can modify standard policy language to decrease or increase coverage depending on the desire of the insured and the extent to which the company is willing to offer coverage.
Surplus lines policies must be identified as surplus lines insurance on the Declaration Page. Within 30 days after issuing a surplus line policy, your broker must obtain written permission from you.
Can my policy be renewed or extended?
Your policy may or may not be renewed or extended when the policy expires. An extension of coverage may depend on the availability of the coverage from insurers licensed in Nebraska and the willingness of the insurance company to continue to accept the risk.
As surplus lines policies are not subject to the same notice requirements as an admitted carrier’s policies, notice of a premium increase for a new policy term or the company’s decision to not extend the policy at the same terms and conditions may not be provided until or around the date the policy expires.
It is necessary to keep in contact with your agent or broker as the expiration of the policy term is near to learn the status of the policy and assure continuance of coverage.
