If you’ve ever wondered about the difference between an insurance policy being written by a non-admitted carrier and having surplus lines insurance, you’re not alone. These terms can be confusing, especially since they’re often used interchangeably for Property Casualty insurance. However, they refer to different aspects of how your coverage is structured.

Non-admitted refers to the insurer, and surplus lines refers to the method of placing coverage. A non-admitted carrier is an insurance company that isn’t licensed in a particular state but is still legally allowed to provide coverage there through a surplus lines broker. Surplus lines insurance, on the other hand, refers to the type of coverage provided for risks that admitted carriers won’t insure—typically because the risk is unusual, high-hazard, or lacks sufficient underwriting history. These policies are placed through licensed surplus lines brokers and are usually written by non-admitted carriers.

Advantages of Using Non-Admitted Carriers

There are several strategic benefits to working with non-admitted carriers, especially when traditional insurance markets fall short.

• Flexibility in Coverage
  • Offers customized policies for unique or high-risk exposures.
  • Less constrained by state regulations, allowing for innovative solutions.
• Access to Hard-to-Place Risks
  • Ideal for emerging industries, catastrophe-prone areas, or unusual property types.
  • Often the only option when admitted markets decline coverage.
• Speed and Responsiveness
  • Faster underwriting and policy issuance in many cases.
  • More agile in adapting to market changes or client needs.
• Global Reach
  • Many non-admitted carriers are international and bring global expertise and capacity.

Potential Drawbacks of Non-Admitted Carriers

While non-admitted carriers offer flexibility and access to specialized coverage, there are also important considerations to keep in mind. Here are some of the common challenges.

• Lack of State Guarantee Fund Protection
  • If the carrier becomes insolvent, policyholders may not have access to state-backed recovery funds.
• Limited Regulatory Oversight
  • Policies may not be subject to rate and form approval, which can lead to less consumer protection.
• Higher Costs
  • Premiums may be higher due to the specialized nature of the coverage.
  • Surplus lines taxes and fees may apply.
• Complex Claims Handling
  • Claims processes may differ from admitted carriers and could be more challenging for insureds.

When Non-Admitted Coverage Applies

You’re most likely to be insured by a non-admitted carrier in the following situations:

• When coverage is unavailable in the admitted market.
• For specialized risks like tough products liability, excessive loss experience and unique coverage needs. 
• During times when admitted carriers are pulling back capacity.

Partnering with a broker like Holmes Murphy can help you identify the best fit for your business and navigate the pros and cons of working with non-admitted carriers.

Make an Informed Decision

Using a non-admitted carrier can be a strategic choice for certain risks, but it’s important to weigh the trade-offs. Working with experienced brokers and understanding the implications can help ensure the right coverage is in place. Our team at Holmes Murphy is ready to help you find the right solution tailored to your unique potential. Contact us today to get started.