Read about the business of business and commercial insurance you never knew.

Learn why specialty lines, E&S, commercial insurance exists.

Own a car? Ride in a car? Use public transportation? Take any prescription medications? Fly on an airplane? Ever been up, up, and away on a hot air balloon? Many of us can check off every item mentioned as a regular and routine activity, except perhaps the hot air ballooning. Did you know that much of what we view as regular and routine would be inaccessible without commercial insurance, in particular, specialty lines commercial insurance?

Think about each of the above activities. They all involve a product or operation which is too risky for standard insurance companies to cover. For example, anything aviation-related (which includes hot air ballooning) is outside the scope of risk that standard insurance companies are able to consider. Several critical components in the manufacture of cars and buses are supplied by specialty manufacturers. These suppliers cannot obtain insurance in the standard commercial insurance market. At some point, all prescription drugs were in clinical stages. Generally, any product or operation in an experimental stage is uninsurable in the standard commercial insurance market.

A specialty market exists for commercial insurance risks that are declined by insurance companies in the standard market. It is known as the surplus lines market or E&S (Excess & Surplus Lines) market. Many businesses would not be able to operate without insurance obtained in the E&S market. By extension, many of our regular, routine activities would not be possible, because they depend on the products or operations of these businesses.

Richey-Barrett Insurance is an independent insurance agency that represents several standard insurance companies. Standard insurance companies are admitted insurers, meaning the insurance department in each state where they operate has granted a license to each of them to do business in that state. Sometimes we have a hard-to-place account, one that admitted insurers we represent decline to consider. We then turn to a specialty broker in the E&S market. Insurance obtained through the E&S market is provided by a non-admitted insurer. Don’t be thrown by the term “non-admitted”. Non-admitted insurers operating in the state of Ohio must obtain approval from the Ohio Department of Insurance to do so. However, policyholders insured through non-admitted insurers do not have any protection afforded through state guarantee funds in the event of insurer insolvency, nor are they able to seek intervention by a state insurance department in a claim handling dispute. That said, there is a real and legitimate need for non-admitted insurers.

Non-admitted insurers in the E&S market have the flexibility to deviate from approved filings, rates, and underwriting rules required of admitted insurers. They can offer tailored coverage to profitably insure unique or specialized loss exposures. I explained some product and completed operations liability exposures above that would likely be beyond the capability and/or interest of admitted insurers. Other commercial exposures typically insured through non-admitted insurers are distressed property risks, risks with poor loss history, and risks requiring multiple layers of excess coverage. Additionally, the E&S market is well-known in the insurance industry for special event coverage, i.e. carnivals, parades; amusement parks; liquor liability; professional liability; long-haul trucking; kidnap, and ransom.

The E&S market is not the Wild West. It performs a vital function in our society and economy, as it specializes in risk categories that the standard market has declined. Premiums are often pricier in the E&S market, and a 25% minimum earned premium is regular and routine. While non-admitted insurers have the ability to tailor coverage, terms and conditions may be more restrictive than parallel coverage would be, if it were available in the standard market.

Whether an insurer is admitted or non-admitted, you should always check its financial stability through one of the financial rating companies.

At Richey-Barrett Insurance, we commit our knowledge and experience to serve as your Trusted Choice Independent Insurance Agent for business and commercial insurance.