Exam 1 Pard D Flashcards
Surplus Lines
”- Statutory provision in state insurance codes
- Allows insurance buyers access to nonaddmitted/unauthorized insurance companies
- Access via specially licensed brokers when the state’s licensed insurers are unable to fulfill the buyer’s insurance needs”
Surplus Lines: Why requirements?
”- Tax
- Providesa an orderly , regulated, legitimate and taxable method of accessing a supplemental outlet
- "”safety valve”” market
- consisting of non admitted/unauthorized carriers”
Underwriting Cycles
”- Soft Market
- Hard Market”
Soft Market
”- Write many classes - (standard market)
- Flexible with loss history
- Competitive premiums
- Optional coverage available
- Goal is to increase market share”
Hard Market
”- Write less classes
- Not flexible w/loss history
- Increased premiums
- Less optional coverages available
- Goal to reduce writings to optimal level”
Surplus Lines Broker
”- Specialty broker licensed by the state
- Place or procure insurance from eligible surplus lines insurers”
Types of Surplus Lines Brokers
”- Wholesale Insurance Broker
- Retail Broker”
Wholesale Insurance Broker
Broker/Producer providing insurance products (usally specialized insurance products) to retail producers
Retail Broker
A broker or producer who deals with the public to provide them with insurance products and solve their insurance problems
E&S Business Flow
“1) Insured - Retail Agent
2) Retail Agent - Standard Contractor Carrior
3) Standard Contract Carrior declines
4) Retail agent - Wholesale Agent
5) Wholesale Agent - Surplus Carrier”
Freedom of Rate & Form
”- Foundation of surplus lines is based on freedom of rate and form from regulation
- Varying risks and limited data = need for freed”
Varying Risks for E&S
”- New
- Unique
- Distressed
- High capacity requirements
- Less seasoned”
E&S Examples
”- Products liabilityy
- Unbrella/Excess Liability
- Professional Liability
- Environmental
- Catastrophic Property
- Special Events
- Energy and Marine coverages”
E&S Risks
”- Cycle Risks
- Catastrophic Exposure”
E&S Cycle Risks
Risks that move in and out of the admitted market as the underwriting cycles change
