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Surplus Lines

Last Updated 10/14/2021

Issue: The U.S. insurance market is very competitive with many insurers licensed and admitted by states to provide coverage for numerous risks through a variety of distribution channels. The surplus lines market (inclusive of U.S. and non-U.S. domiciled insurers) is a distinct segment of the industry consisting of non-admitted specialized insurers covering risks not available within the admitted market. Simply stated, in most states surplus lines insurers cannot write insurance coverage available from admitted insurers and may only write coverage rejected by a number of admitted insurers. 

Overview: Surplus lines insurers mainly focus on the development of new coverages and the structuring of policies and premiums appropriate for risks. New and innovative insurance products for which there is no loss history are difficult, if not impossible, to appropriately price using common actuarial methods. Often, after a new coverage has generated sufficient data, the coverage eventually becomes a standard product in the admitted market.

As of year-end 2018, surplus lines direct premium volume was $49.9 billion representing 7.4% of the $676.6 billion of total U.S. direct premiums written. Although the surplus lines premium seems minimal compared to the total, in the absence of this market, many insureds would be unable to secure coverage. 

The U.S. surplus lines market experienced direct premium growth of 17.5% in 2020, representing the largest year-over-year premium increase since 2003, according to the 2021 AM Best segment report, “Expanding Opportunities Boost Surplus Lines Growth and Spur Improved Operating Profits.” 

Lloyd's of London is the largest writer of surplus lines insurance.  According to AM Best, in 2020 the Lloyd’s market represented 19.4% of the total surplus lines market share and wrote $12.8 billion in surplus lines premiums.  The Berkshire Hathaway Ins. Group and the American International Group followed with both about 5.4% of the U.S. surplus market share. 

While the surplus lines insurance market is regulated differently than the admitted market, it is a regulated marketplace. Surplus lines insurers are subject to regulatory requirements and are overseen for solvency by their domiciliary state or country. While solvency regulation is the responsibility of the surplus lines insurer’s domiciliary state or country, the surplus lines transaction is regulated through a licensed surplus lines broker. These brokers are responsible for ensuring the surplus lines insurer meets eligibility criteria to write policies in the state and to ensure the insurers are financially sound.

Surplus lines brokers and producers must be licensed to sell surplus lines insurance. Moreover, state insurance departments may suspend, revoke, or non-renew the license of a surplus lines broker or producer for various reasons, such as:

  • Failure to file required reports.
  • Failure to collect or remit required tax on surplus lines premiums.
  • Failure to remit premiums due insurers or return premiums due insureds within reasonable time limits.
  • For any other cause for which action can be taken against an insurance broker or producer.

Whereas states monitor the eligibility of U.S. domiciled surplus lines insurers, alien insurers eligible to write surplus lines premium are listed on the NAIC Quarterly Listing of Alien Insurers and are subject to shareholders' equity and U.S. trust account requirements. Alien insurers are also held to ethics and integrity standards. They are prohibited from establishing a U.S. branch office.

A consumer benefit available to admitted insurer policyholders but not available to surplus line insurers is protection by the state’s guaranty fund. This guaranty is funded by admitted insurers and will pay claims should an insurer become insolvent.

Due to the strong and effective state-based solvency monitoring framework, the insolvency rate of surplus lines insurers has been historically equivalent to the admitted marketplace.

Status: Issues regarding the activity and financial condition of U.S. and non-U.S. surplus lines insurers are addressed by Surplus Lines (C) Task Force whose primary mission is to monitor the surplus lines market and its operation and regulation. The Task Force is also charged with developing or amending relevant NAIC model laws, regulations and/or guidelines. The Surplus Lines (C) Working Group provides NAIC/International Insurers Department (IID) financial staff guidance and expertise relative to regulatory policy and practices with respect to individual companies and Lloyd's syndicates that are either listed on or seeking admission to the NAIC Quarterly Listing of Alien Insurers.  During the 2021 Summer National Meeting, the Surplus Lines Task Force discussed and formed a drafting group to amend the Nonadmitted Insurance Model Act (Model #870).  

Committees Active on This Topic

Additional Resources

Surplus Lines (Insurance Information Institute)

2021 Excess and Surplus Lines Laws in the United States (Lock Lord)


Media queries should be directed to the NAIC Communications Division at 816-783-8909 or

Andy Daleo
Sr. Manager, P/C & Title Financial Analysis
Phone: 816.783.8141 

NAIC Center for Insurance Policy and Research (CIPR)

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