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Admitted and non-admitted insurance carriers
June 22, 2019
Admitted and non-admitted insurance carriers
I just noticed my insurance company is offering non admitted and surplus lines placement. Should I run fast? I have been with this broker for many years and have never had a claim.
   I asked insurance expert Crystal Jacobs who represents Security America to respond to this one. Here is her response. Feel free to contact her for E&O and other insurance needs.
    This is probably one of my favorite questions (seriously, it is). The difference between admitted vs non-admitted/surplus lines programs is quite simple. 1. An admitted program is required to file their rates and forms with the individual states they write business in. 2. An admitted program is subject to the state guarantee fund. 3. There are Surplus Lines taxes, fees and requirements that the non-admitted/surplus lines carrier must comply with. Below further outlines these points.
    Filing rates & Forms: While it may seem a positive attribute that a carrier would be required to file their rates and forms with the state (particularly because there is a process they have to go through in order to increase rate), it also doesn’t allow them to easily change with the industry. When a gap in coverage is discovered, a non-admitted market can respond much more quickly than an admitted market. If an individual insured requires a manuscript endorsement to fit a unique exposure to their business, an admitted market cannot make that change quickly or easily. As a non-admitted/surplus lines program, we have the ability to make changes with immediacy.
    State Guarantee Fund: This is my favorite “myth” to debunk.  State Guarantee funds are there for when an admitted carrier become insolvent and unable to pay claims. The State Guarantee Fund is supposed to trigger and pay those losses. The kicker here is – they do not pay the full limits of your policy – there is a cap on what they will pay. So, if you have a $1,000,000 limit, your cap could be $100,000. It varies by state so I can’t speak to the individual states. A Non-    Admitted/Surplus Lines carrier does not have the “back up”. If they go insolvent – that’s it, no claims are paid. That said, our carrier is Lloyd’s of London. Lloyds is the longest standing insuring entity in the world. I always say – if Lloyd’s goes down, we all go down. Many of the admitted programs in the US utilize Lloyd’s reinsurance so that they aren’t stuck with the full bill for large claims. What I encourage people to do is look at the financial solvency of an organization. Lloyd’s is extremely strict with its responsibility to pay claims. Without going into boring detail on how the Lloyd’s market works, in addition to the syndicates each needing to have certain financial reserves in place, Lloyd’s itself has financial reserves in the rare event that a syndicate may go belly up. The Lloyd’s financial reserves far exceed any individual state reserves.
    Surplus Lines Taxes, Fees & Requirements: Other than the fact that an insured has to pay for the taxes and fees and sign acknowledgement documents, this doesn’t really affect them. There are requirements, we as Surplus Lines Brokers, must meet. Licensing, due diligence, filings, etc. That is why insureds have us, though. We deal with it.
Best Regards,
Crystal Jacobs, RPLU, Vice President/Program Manager
214) 647-5003

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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301