Credit Where Credit Is Due

The ability to transfer risk is one of the cornerstones of our economy and helps create our extremely high standard of living. Without that ability, lenders won’t lend; builders won’t build. The current hard market threatens that risk transfer mechanism. The standard markets have withdrawn from the market for all but the plainest of vanilla risks. Into that breach, steps the Surplus Lines market.

The Surplus Lines market deserves some credit for that step. Surplus Lines brokers, Managing General Agents and Excess and Surplus Lines carriers will say they are just performing the way they are supposed to perform. They are the industry’s safety valve. In the teeth of the hardest of hard markets, they’re writing business.

They have performed financially better than the standard markets. Every year, NAPSLO (the National Association of Professional Surplus Lines Offices), commissions A.M. Best & Co. to prepare a report on the financial results of E&S carriers. Those reports show the E&S carriers have out performed the standard carriers over the past 10 years. That says a lot about the stability of the Surplus Lines market. The Surplus Lines market is crucial in maintaining a stable market and they’re playing an invaluable role for retail agents and their insureds

Yes, I’ve heard the complaints from retail agents and brokers that the Surplus Lines market doesn’t pay the same commissions the standard markets do and ‘I don’t want to use a non-admitted market’. But accounts that belong in the Surplus Lines market require underwriting and innovation. It isn’t easy and it isn’t cheap. Innovation is one of the major benefits of the Surplus Lines market. They were the pioneers of EPLI and Directors and Officers covers, just to mention a few. The Excess & Surplus carriers need freedom of rate and form, too. So does the standard market, incidentally. The E&S carriers need to be able to respond to changes in the market, the exposures and the reinsurance market.

Right now, wholesale brokers are swamped with submissions and requests for quotes. They will take care of their best customers first, as any prudent business would. So when the market turns soft, and it will, keep as much premium in the Surplus Lines market as you can. They won’t desert you, they don’t ask for volume requirements, they will come up with innovations that will make you look good to your clients and they will keep you in business. Get to know the people and products of the Surplus Lines market. It could save your economic life and the economic life of your clients.

Topics Agencies Excess Surplus