Surplus Lines Insurance in California
Surplus Lines Insurance in California
In California, a surplus lines insurance policy is a type of insurance that can help businesses protect themselves from financial hazards that are beyond the scope of standard commercial insurance coverage. Excess and surplus lines market typically insures hard to place risks, very costly items, hazardous materials, and high liability coverage. The following are characteristics of California surplus lines insurance:
- Surplus lines market insurance policies are typically more expensive than standard insurance coverage.
- Unlike standard insurance policies, surplus line policies can be obtained from multiple companies operating in different states in the United States.
- Surplus lines insurance companies typically respond faster to claims.
- Unlike the admitted market insurance companies, a Surplus lines insurer does not pay into the California insurance guarantee association fund (guaranty fund), which is meant to ensure that if the insurer goes out of business - the fund will be able to pay claims for them.
There are over 130 approved surplus lines insurers in California, Discuss your insurance needs and further surplus questions with California-licensed commercial insurance agents who can sell surplus lines insurance.
What is an Example of Surplus Lines Insurance in CA?
Some of the risks that a surplus lines insurer covers in California include:
- Distressed risk coverage: This type of insurance can protect against certain negative risks, such as timber balconies and fire breaks commonly associated with high-rise office buildings. Unfortunately, standard insurance policies do not usually cover these types of risks. Getting the proper resources and training to address these issues can be extremely time-consuming and challenging if you do not have the proper insurance coverage.
- Unique risk coverage: Unlike standard insurance policies, surplus lines insurance provides coverage for highly specialized risks such as medical malpractice, pollution, or growing and distributing cannabis.
- High capacity risk coverage: Surplus lines insurance provides financial protection against various risks that are typically beyond coverages provided under commercial insurance.
What Purpose Do Surplus Companies Serve in California?
When a California business cannot find the appropriate insurance coverage suitable for its needs from standard carriers (also known as admitted carriers) on a standard market (also known as admitted market), it must find surplus line insurers willing to provide the coverage to fit the business’ unique risks. These excess and surplus lines insurers carry risks and high coverage amounts not typically covered by a standard commercial insurance company policy.
Here are some examples of why California businesses may need surplus lines insurance:
- A business with less than 3-4 years in existence is commonly considered high-risk and may have to rely on non-admitted market surplus commercial insurance providers.
- A business that transports hazardous materials or has other similar difficult exposures to liabilities and risks.
- A business that does construction and contracting work that involves heights, typically requires insurance products from a surplus insurer.
- If a business wants to insure a special event, where the risks are not easy to determine - a surplus insurer will be able to help.
A licensed California-based agent can help you find the best possible surplus line insurance coverage to manage your highly specialized or unique needs.
Why Would Someone Place Their Insurance With a Surplus Lines Broker?
Surplus line insurance can help businesses manage their unique and highly specialized risks and meet their financial obligations in California. These risks are usually not borne by standard commercial insurance companies. Some of the risks typically insured by surplus line carriers include:
- A property developer re-building businesses in areas prone to hurricane damage
- Professional athletes seeking to purchase insurance coverage for their hands and legs
- A school district's building a new high school
- A non-profit organization seeking to provide medical care, education, and food to third-world countries
- A research lab that's developing an unproven new drug
- A law firm that focuses on intellectual property issues
- A cannabis crop grower and/or a distributor
How Are Surplus Lines Insurers Regulated in California?
The California Insurance Code (CIC) regulates surplus line transactions in the state.
Surplus line coverage can be purchased through the state’s pre-approved carriers because they have met the standards provided in California Insurance Code (CIC) Section 1765.2. Businesses can use the List of Approved Surplus Line Insurers (LASLI) to find a suitable surplus line insurer from among over 130 companies. Likewise, businesses can contact eligible surplus line carriers who have met the standards outlined in CIC Section 1765.1 and the Non-Admitted and Reinsurance Reform Act (NRRA). Note that eligible carriers are not pre-approved by the California Department of Insurance.
Only surplus lines insurance carriers on the California Department of Insurance list can sell surplus lines in California. You can confirm if your intended surplus lines insurance carrier is eligible in the state via the CID’s website. You can also contact the CID by email, by calling (800) 927-4357 or (800) 482-4833, or by visiting the CDI headquarters offices at:
CDI - Los Angeles Office
300 South Spring Street, 14th Floor
Phone: (213) 346-6464
CDI - Oakland Office
1901 Harrison Street, 6th Floor
Phone: (415) 538-4500
CDI - Sacramento Office
Phone: (916) 492-3500
