A Firm Foundation: How Insurance Supports the Economy

The surplus lines market, a group of highly specialized insurers that includes Lloyd’s of London, exists to assume risks that licensed companies decline to insure or will only insure at a very high price, with many exclusions or with a very high deductible. To be eligible to seek coverage in the surplus lines market, a diligent effort must have been made to place insurance with an admitted company, usually defined by a certain number of declinations, or rejections, by licensed insurers, typically three to five. Many states provide an export list of risks that can be insured in the surplus lines market. This obviates the diligent search requirement.

The terms applied to the surplus lines market—nonadmitted, unlicensed and unauthorized—do not mean that surplus lines companies are barred from selling insurance in a state or are unregulated. They are just less regulated. Each state has surplus lines regulations and each surplus lines company is overseen for solvency by its home state. The role of surplus lines in the commercial market has increased over the years. In 2014, surplus lines accounted for about 13.9 percent of the U.S. commercial lines market, up from 6.1 percent in 1994, according to an August 2015 A.M. Best report. Lloyd’s of London is a significant writer of surplus lines insurance, both for corporations and individuals. Lloyd’s members conduct their insurance business in syndicates, each of which is run by a managing agent. According to A.M. Best and Lloyd’s own figures, in 2015 the Lloyd’s market represented 21 percent of the total surplus lines market share and wrote $8.6 billion in E&S premiums.


Nonadmitted Direct Premiums Written For The Top 10 U.S. Surplus Lines Writers, 2011-2015 (1)

($ billions)

(1) Excludes premiums of Lloyd’s of London syndicates.

Source: Business Insurance (www.businessinsurance.com), October 2016.

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  • Nonadmitted direct premiums written for the top 10 U.S. surplus lines writers rose 9.6 percent to $13.10 billion in 2015 from $11.95 billion in 2014.


Top 10 U.S-Based Surplus Lines Insurance Companies By Nonadmitted Direct Premiums Written, 2015 (1)


Rank Company Parent Nonadmitted direct written premiums
1 Lexington Insurance Co. American International Group lnc. $3,783,299,430
2 Nationwide Mutual Insurance Co. (2) Nationwide Mutual Insurance Co. 1,733,825,799
3 Associated Electric & Gas Ins. Services Inc. AEGIS 1,250,510,000
4 Markel Corp. Markel Corp. 1,173,396,130
5 Steadfast Insurance Co Zurich Insurance Group Ltd. 1,108,275,644
6 Ironshore Specialty Insurance Co. Ironshore Inc. 1,009,566,789 (3)
7 AIG Specialty Insurance Co. American International Group lnc. 931,710,609
8 Indian Harbor Insurance Co. XL Group P.L.C. 796,445,484
9 National Fire & Marine Insurance Co. Berkshire Hathaway Reinsurance Group. 722,736,828
10 Axis Surplus Insurance Co. Axis Capital Holdings Ltd. 603,264,518

(1) Excludes Lloyd’s of London syndicates.
(2) Formerly Scottsdale Insurance Company and Western Heritage Insurance Company.
(3) Business Insurance estimate.

Source: Business Insurance (www.businessinsurance.com), October, 2016.

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