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Excess Line Coverage

Simply put, Excess lines is a specialty market that insures things standard carriers won't cover. The difficult or high-risk exposures in which carriers specialize may range from a mobile home or a day care center to a multinational oil company.

Excess of line reinsurance is a type of reinsurance policy offered by companies that are not registered to do business directly within a state’s borders. Excess of line reinsurance can be sold by carriers who are not subject to the same regulatory requirements as policies sold by state-licensed carriers. This insurance is also known as excess or surplus lines insurance.

Individual states regulate the sale of insurance products within their borders. To sell insurance in a state, a standard insurance company, known as an admitted carrier, must comply with the state’s insurance regulations. State regulations may include how an insurer reports financial information, the construction of policy provisions, how they deal with insolvency, and how the company establishes rates.

In some cases, admitted carriers are unwilling to cover specific risks or cannot assume additional risks in a particular region. A state may allow non-admitted companies to sell insurance to prevent gaps in risk coverage. This type of insurance is called an excess of line reinsurance.

Companies that offer an excess of line reinsurance do not have to be licensed in a particular state to do business there. Sometimes, they may be located internationally with no domestic presence. These insurers employ brokers and wholesale agents to offer and sell their products. Obtaining insurance from these carriers is a last resort after conventional line carriers reject an application.