In Florida, a standard insurance company, also called an admitted carrier, is one licensed by the state, bound by rate and form regulations, and strictly regulated to prevent policyholders from abuse and fraud. Admitted carriers contribute to the Florida State Guaranty Association, which is used to pay losses if an insurance carrier becomes insolvent.
In contrast, an Excess and Surplus Lines (E&S) insurance company is not required to be licensed by the State of Florida. It can, however, conduct business in the state. E&S carriers are also referred to as non-admitted or unlicensed carriers. While they are not regulated by the Florida Department of Insurance, they are regulated in other ways.
E&S carriers cannot write business that can be written by standard, admitted carriers. They do not come under the auspices of the Florida State Guaranty Association (FIGA) and may only write a policy if it has been rejected by three admitted carriers. The State keeps a list of registered E&S companies, and policies can only be written by carriers on this list.
Because Excess and Surplus Lines carriers are not regulated in the same way as the standard carriers, they have much more flexibility to tailor coverage, charge the appropriate rate regardless of the State filing, and change coverage to accommodate that ever-changing marketplace. This is good for the consumer as well as for the company. It allows the carrier to accept risks that standard insurers refuse.
If you are with an E&S carrier, it is probably because you could not be written through the standard marketplace. The reasons include:
- Your risk does not meet underwriting guidelines, due to age, losses, locations, or cancellation;
- Your risk is unusual and the standard market is not comfortable with it;
- Your risk is extremely large and the standard carriers do not have the capacity to insure it; or
- Your limits of liability exceed the underwriting guidelines for the admitted market.
If you are insured with and E&S carrier, you will have to sign a disclosure form. This means that you understand that, if your carrier becomes insolvent, you are not protected by FIGA. The reality is that this possibility is extremely remote, although it can happen. You should pay more attention to the company’s financial strength and ability to pay a claim, not whether it is an E&S carrier.