Surplus lines

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Surplus lines is one of the insurance that covers special types of risk[1]. The surplus lines insurance market most often has the risk associated with:

  • improper losses,
  • extraordinary risk,
  • power deficit on the classic market.

For this reason, this type of insurance covers the protection of things that a large percentage of companies can't insure[2].

Characteristics of surplus lines insurance

Surplus lines insurance (also known as excess lines insurance) can be obtained from an insurance company that does not have the relevant permit, where the insured stays. To sell a policy with excess lines, the insurer must have a license for surplus lines insurance. This type of insurance is usually more expensive than the commonly known insurance because it protects the insured against unique financial risk[3]. The functioning of the surplus line insurance companies mainly concerns property and personal insurance. These types of insurance are targeted primarily at enterprises[4].

The role of insurance companies of surplus lines

In the case of a bankruptcy of the surplus line insurer, there is an additional problem due to the lack of a guarantee fund and the possibility of paying compensation from it. When one of the ordinary insurance insurers goes bankrupt, the policy is usually paid out of a state fund, which is funded by state insurance issuers[5]. Insurance companies surplus lines are regulated by other regulations than standard insurers. As a result, they can decide to protect more of the risk. Regular insurers must comply with national regulations on the number of receivables and risks[6].


  1. O. King R. (2010), Deepwater Horizon Oil Spill Disaster: Risk, Recovery, and Insurance Implications, Diane Publishing
  2. Insurance Information Institute (2008), The III Insurance Fact, Insurance Information Inst.
  3. R. Ostrager B., R. Newman T. (2012), Handbook on Insurance Coverage Disputes, Aspen Publishers Online
  4. Burling J., M. Burling J., Lazarus K. (2012), Research Handbook on International Insurance Law and Regulation, Edward Elgar Publishing
  5. Goanos L. (2014), D&O 101: Understanding Directors and Officers Liability Insurance - A Holistic Approach,
  6. G. Barlow Ch. (2017), Licensing & Surplus Lines Laws, National Underwriter Company

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Author: Patryk Schmidt