Why Is Excess and Surplus Insurance So Critical?

excess and surplus insurance

Excess and surplus (E&S) insurance plays a critical role for clients in high-risk industries, whether that’s arborists who work with dangerous equipment and in hazardous conditions or the owner of a large concert venue worried about the risks that come with hosting large events. 

Clients who carry high and/or unique risks due to the nature of their work or the amount of their professional experience are often refused coverage by insurance carriers. In these cases, they seek excess and surplus insurance.

Businesses with risks that standard insurers won’t cover need to understand exactly why E&S insurance is so critical. This article aims to give insurance brokers some pointers to help them do just that.

What Does Excess Insurance Cover?

When explaining what’s covered under excess and surplus insurance, brokers should identify and understand the specific risks inherent in clients’ businesses. They can then help clients note which risks they face that might not be adequately covered by standard insurance policies, including catastrophic liability claims, specialized equipment damage, or industry-specific risks.

Brokers should explain in-depth how standard insurance policies often have coverage limits and exclusions that might leave clients’ businesses vulnerable in the event of a significant loss. On a case-by-case basis, brokers can illustrate potential loss scenarios and use real-world examples to help clients understand how a substantial loss could impact their businesses. 

This way, they can understand how excess insurance can kick in when the costs of a claim exceed the limits of their primary coverage, preventing financial strain and potential business disruption.

It’s important to emphasize that excess insurance is designed to fill these coverage gaps, offering an extra layer of protection beyond what traditional policies provide.

Flexible, Tailored Coverage Not Available Elsewhere

Even in the most seemingly uninsurable of cases, E&S insurance can be obtainable. Surplus lines insurers often have more flexibility in their underwriting processes and can tailor policies to specific needs to create customized coverage solutions that are unavailable through standard insurers.

E&S insurance can even offer higher coverage limits than standard insurance policies because insurers recognize that their clients will have different needs than the average policyholder. This can be especially valuable for businesses with substantial assets or liabilities that require extensive coverage.

Excess and surplus insurance tends to be flexible and customizable, precisely because of the extraordinary nature of the clientele seeking it. 

What Is Not Covered By Excess Insurance?

While excess and surplus insurance adds a robust layer of security, it doesn’t magically make a business invulnerable. Excess insurance applies to a specific primary policy and therefore aligns with the terms and conditions of it. This means that exclusions and limitations typically found in excess insurance policies will align with those in clients’ primary policies. 

Scenarios in which excess insurance might not be accessible due to exclusions include:

  • Making multiple claims whose total amount exceeds the excess
  • Making claims where the total cost is less than the excess (because it will likely be covered by the primary policy)
  • Being unable to pay the initial insurance claim

As coverage differs vastly from one primary policy to another, brokers have to invest time and effort to thoroughly educate clients on what is not covered by each excess insurance policy option that they are considering. 

By doing so, brokers collaborate with clients to ensure they understand the scope of the excess insurance they are choosing.

With all of that being said, excess and surplus insurance is constantly growing. New trends in E&S insurance mean that coverage, competition, and underwriting are evolving, and brokers need to constantly stay on top of what is and isn’t covered by E&S insurance.

Do Your Clients Need Excess Insurance?

The process of evaluating clients’ risk profiles and exposure levels begins by understanding their industries and businesses. Brokers can identify clients that benefit most from excess insurance coverage by noting if they:

  • Have a business that deals with large volumes of customers (e.g., concert venues)
  • Haven’t been in business for very long (startups are considered high-risk until they’ve achieved a certain business tenure)
  • Regularly work in dangerous environments and/or with dangerous equipment

Insurance brokers play a pivotal role in creating bespoke excess insurance solutions. They must have an in-depth understanding of who their clients are and what they need so that they can find the right solutions for them. 

Additionally, they must be able to find insurance policies that work in tandem to create a strong, multipronged approach to protecting their clients’ best interests. 

Primary policies work alongside additional policies such as excess and surplus insurance, but every situation is different. Depending on the customer, there may be a need for other kinds of insurance as well. 

The bottom line is that the onus is on insurance brokers to ask the right questions so that they can build a cohesive, comprehensive plan for their clients’ protection.  

Unique Solutions for Everyone

With flexibility and the option of customizable coverage, excess and surplus insurance is an excellent way to create a high-coverage insurance plan. While not all businesses require E&S coverage, brokers should work closely with those that do to understand their coverage options and make well-informed excess insurance decisions. 

This process takes communication, transparency, and integrity. It’s no coincidence that here at Cochrane & Co., we believe having these three values at the heart of all we do allows us to offer excellent insurance solutions that are unparalleled in personalization. 

For over six decades and counting, we’ve worked with insurance retail agents and brokers to help deliver clients the very best of the best in insurance. If that sounds like something you’d like to be a part of, then partner with us today. 

Contact Cochrane & Co. to learn more about customized insurance solutions, and start helping your clients get the best policies for their unique needs. 


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