Building Owners » Hard To Place

High Risk Insurance Frequently Asked Questions


Question: What forms of coverage are considered Surplus Line?

Answer: Generally, any coverage which cannot be obtained from an admitted carrier would be considered Surplus Lines coverage.


Question: What are some of the requirements for a non-admitted carrier to transact business?

Answer: They must retain at least $15 million in capital and surplus to show they can pay claims and are not in imminent danger of becoming insolvent, and they must have transacted business for at least three years prior to the date of binding.


Question: Do non-admitted carriers offer less coverage since they are not licensed to operate?

Answer: No. In the event your non-admitted carrier becomes insolvent, and you file a claim, that claim will not get paid. However, they do offer coverage of the same quality, and although they are not admitted to transact in California, they must still be admitted in at least one state. There are also certain requirements for non-admitted carriers to meet which secures it from becoming insolvent, and the premiums are usually lower. The bottom line is, anyone seeking coverage with a non-admitted carrier should not be discouraged.


Question: If I have filed many claims, where can I buy insurance?

Answer: In this case the objective is to match a claim, damage or loss to a policy that will provide coverage. In a case where claim activity is high, you will most likely be forced to insure with an excess and surplus carrier (Non-admitted). It is harder to buy insurance if you have filed many claims. Claims due to water-pipe leaks, fire, theft and vandalism have negative effects on your claim history. Future coverage may be reduced (no more all-risk or replacement cost) and deductibles may be increased.


Question:Should I be concerned with placing my coverage with a Non-Admitted Carrier?

Answer: Many fears about non-admitted insurers are exaggerated or unfounded. While non-admitted insurers do not participate in your state's insolvency fund, the potential recovery from such funds is usually quite limited and often difficult to obtain. More important is the financial strength of the insurer. Recent studies by rating firms such as A.M. Best indicate that surplus lines insurers have continually outperformed the admitted insurance market on financial rating tests and that the solvency record of the two is equal.


The bottom line: You would be better off to consider the insurer's quality and financial strength more than its regulatory status.


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