Excess and Surplus Lines (E&S)

Last updated October 13, 2026

How the E&S market works

Most US insurers are "admitted," meaning licensed by the state and generally subject to its rate and form rules. Surplus lines insurers are non-admitted in that state. They can write risks that admitted insurers decline, such as new exposures with limited loss history. NAIC describes the segment as including US non-admitted insurers, Lloyd's syndicates, and other foreign insurers. It represented about 12 percent of the US property and casualty market in 2024, according to NAIC.

Coverage is placed through a licensed surplus lines broker. Under NAIC's model act, and in most states, the broker generally must first make a diligent effort to place the risk with admitted insurers, though exceptions exist. Under the federal Nonadmitted and Reinsurance Reform Act, the insured's home state regulates and taxes the placement, and sophisticated commercial buyers may qualify for exemptions from the diligent search.

Surplus lines policies are generally not subject to the same rate and form regulation as admitted policies, which gives insurers room to tailor coverage. Insurers must still meet state eligibility standards, such as minimum capital and surplus.

Admitted vs. non-admitted: the key differences

The labels describe how an insurer is regulated in the state where the policy is issued, not how good it is. In general terms:

• Licensing. An admitted carrier is licensed in the state. A non-admitted carrier is not licensed there, but it must generally meet that state's eligibility standards before it can write surplus lines business.
• Rates and forms. Admitted insurers typically file rates and policy forms with the state regulator. Surplus lines insurers are generally exempt from those filing requirements, which lets them price the risk individually and write coverage terms that fit it.
• Guaranty funds. Admitted insurers participate in state guaranty funds that can pay covered claims if an insurer becomes insolvent. Surplus lines insurers generally do not, which is why financial strength deserves more attention.
• Who places it. Admitted coverage can be bought through a retail agent or broker. Surplus lines coverage must be placed by a broker holding a surplus lines license in the relevant state.
• Taxes and fees. Surplus lines premium typically carries a state premium tax and sometimes a stamping or filing fee, usually shown as separate lines on the quote or invoice.

Why risks end up in the surplus lines market

A risk usually lands in E&S because the standard market cannot or will not write it on its standard forms and rates. Common reasons include:

• New or novel exposures. With little loss history, admitted insurers may have no filed rate or form that fits, so they decline.
• Unusual operations or hazards. Businesses with uncommon activities may fall outside an admitted insurer's appetite.
• Loss history or volatility. A recent claim pattern can move an account out of the standard market.
• Capacity needs. Large limits, or limits on volatile classes, sometimes require several insurers sharing a layer.
• Tailored wording. Some buyers need negotiated or manuscript terms that standardized admitted forms cannot offer.
• Market conditions. In a hard market, admitted insurers often narrow their appetite and more business tends to move to surplus lines. In a soft market, some of it may move back.

Surplus lines brokers and the diligent search

Only a licensed surplus lines broker can place coverage with a non-admitted insurer. Before doing so, most states generally require the broker to make a diligent effort to place the risk with admitted insurers, and to document that those insurers declined or could not offer the coverage. How many declinations are needed, and how the search is documented, varies by state.

There are common exceptions. Many states keep lists of classes of risk that are exempt from the diligent search, and the federal Nonadmitted and Reinsurance Reform Act allows sophisticated commercial buyers who meet size and risk-management criteria to qualify as exempt commercial purchasers in many circumstances. Whether a particular buyer qualifies depends on the criteria and on the state, so ask your broker how the placement was documented rather than assuming an exemption applies.

The broker also usually handles the paperwork specific to surplus lines, such as the disclosure notice that the insurer is non-admitted, tax calculation and any required filings. Ask for the tax and fee detail in writing so you can see what is premium and what is not.

Surplus lines taxes and filings in general terms

Under the federal reform act, the insured's home state generally determines which state's law governs and collects the premium tax on a multistate placement, which simplified a patchwork that once existed. Tax rates, stamping fees and filing procedures differ from state to state and change over time, so this page does not state them. Practically, expect separate line items for tax and fees, expect the broker or the insurer to remit them in most arrangements, and confirm the amounts before binding because they add to the total cost of the policy.

How E&S relates to wholesalers and MGAs

Much surplus lines business flows through a two-step chain. A retail broker works directly with the company, then often brings the submission to a wholesale broker that has access to non-admitted markets and, in many cases, holds the surplus lines license. The wholesaler presents the risk to underwriters and returns quotes through the retail broker.

A managing general agent (MGA) is a different kind of intermediary. An MGA holds delegated authority from an insurer to underwrite, quote and bind a defined program, and many MGAs place that business on non-admitted insurer paper. When you receive a quote from an MGA, it is worth confirming which insurer is actually issuing the policy, whether that insurer is admitted or non-admitted in your state, and how its financial strength is rated. Compensation can involve more than one intermediary, so asking how each party is paid is a reasonable question.

Lloyd's and other non-U.S. capacity

Lloyd's of London is a marketplace of syndicates rather than a single insurer. In the United States, Lloyd's syndicates commonly write surplus lines business and are generally treated as eligible non-admitted capacity, placed through brokers with access to the market. Other non-U.S. insurers, including those in the Bermuda market, can also participate, often on larger or more specialized layers. Programs for complex risks may combine U.S. non-admitted insurers, Lloyd's syndicates and other international capacity in one tower, with each carrier taking a share. Some of that capacity is itself supported by reinsurance.

Example

What to watch for

• No guaranty fund. If a non-admitted insurer fails, state guaranty funds generally do not pay claims. Check the insurer's financial strength and eligibility.
• Surplus lines taxes and fees. The premium usually carries state taxes and stamping fees that a broker itemizes separately.
• Wording varies. Forms are less standardized, so exclusions, definitions, and conditions need careful comparison.
• Non-admitted status is not a quality rating. It says nothing by itself about an insurer's strength, so evaluate each insurer's financial ratings and terms.

Excess and surplus lines vs. related terms

• Surplus lines vs. non-admitted. The two are closely related and often used interchangeably. "Non-admitted" describes the insurer's status in a state. "Surplus lines" describes the market segment and the regulatory framework for placing business with those insurers.
• E&S vs. excess insurance. The word "excess" in E&S does not mean the policy sits above another policy. It is a historical label for risks outside the standard market. An umbrella or excess liability policy is a layer that sits above primary coverage, and it can be written by an admitted or a non-admitted insurer.
• Surplus lines vs. unauthorized insurance. A surplus lines insurer is eligible under state rules and placed through a licensed broker. An insurer that is neither licensed nor eligible is a different matter, and coverage from one raises legal and collectability concerns.
• E&S vs. a captive. A captive is an insurer owned by the insured or a group of insureds. It is a risk-financing structure, not a regulatory category of the open market.

A second example: a digital-asset company

Questions to ask your broker or wholesaler

• Is the insurer admitted or non-admitted in my state, and what is its financial strength rating?
• Who is the licensed surplus lines broker, and how was the diligent search handled or exempted?
• What taxes and fees apply, and how are they itemized?
• Is this an MGA program, and which insurer is on the policy?
• How does the wording differ from an admitted form for the same coverage, for example on defense costs, definitions and exclusions?
• Where and how do I report a claim, and is that different from my admitted policies? See first notice of loss.
• If my risk improves, could I move to the admitted market at renewal, and what would change?

Common misunderstandings

• "Non-admitted means low quality." It does not. Many surplus lines insurers are financially strong, and some of the largest insurers write both admitted and non-admitted business. Check each insurer individually.
• "E&S is unregulated." It is regulated differently. States set eligibility, broker licensing, disclosure and tax rules.
• "E&S is always more expensive." Pricing follows the risk and the market. It can be higher or lower than admitted options, and the tax and fee lines should be counted in the comparison.
• "E&S is only for excess layers." E&S insurers write primary and excess coverage.

Why it matters for technology, AI, fintech and digital-asset companies

Emerging exposures such as AI liability, digital-asset custody, and certain fintech activities often lack appetite in the admitted market, so E&S is a common place for them to be insured. Terms are negotiated, and a broker with market access can help compare them. See hard-to-place risks.

Underwriters in the admitted market are often cautious with AI model liability, crypto custody, tokenized assets and novel fintech products, so these companies are frequently quoted by surplus lines insurers, Lloyd's syndicates and specialty MGAs. Venture-backed companies also tend to outgrow standard small-business forms quickly, which is another reason their programs include non-admitted capacity. It is common for a company to hold admitted coverage for lines such as workers' compensation and non-admitted coverage for AI liability, cyber and D&O, so reading each policy's status and wording matters. See digital assets and crypto and AI and emerging tech for how these markets apply.

Related terms

Frequently asked questions