Introducing Surplus Lines 360

Episode: Introducing Surplus Lines 360
Speakers: John Emmanuel and Zachary Lerner
Aired: November 10, 2025

John Emmanuel (00:17):
Hello, welcome to the first of our surplus line series. I’m John. This is Zach. Today we’ll be talking about what is surplus lines. Zach?

Zachary Lerner (00:25):
Yeah. So I’m gonna tell you what surplus lines is not, it’s not a totally unregulated market. In fact, that’s probably one of the biggest misconceptions of the surplus lines industry. In reality, the surplus lines market is comprised of unauthorized but eligible surplus lines of certain insurers. So they do not obtain licenses traditionally in states. Rather they obtain eligibility. Eligibility is maintained through really one of two ways. If you are a U.S.-based carrier, you become licensed in your domiciliary jurisdiction, sometimes as a domestic surplus lines insurer. And then you obtain eligibility in other states through following various procedures as outlined, both under federal and state law. If you are a non-U.S. company, what we call an alien insurer, you maintain eligibility a different way via inclusion on the NEIC quarterly listing of alien insurers, which is a separate and distinct process, usually managed by law firms or other U.S. representatives.

John Emmanuel (01:23):
One other thing to add to that, Zach, is that most people assume it’s just commercial lines. That’s where it’s traditionally been. But you’ve seen a growth recently in personalized segment for surplus lines as well.

Zachary Lerner (01:33):
Yeah, that’s absolutely right. As the years have gone by, the surplus lines industry is no longer limited to the traditional heart place niche products, rather, especially when the dawn of the InsureTech age, where distribution has become much more efficient and quite frankly quick. The surplus lines industry has been quick to penetrate into the marketplace in areas that were traditionally occupied by admitted carriers. So homeowners coverage, for example, is a line that we see more and more written through the surplus lines market, whereas in traditional times you would never see such coverage written through the access and surplus lines market.

John Emmanuel (02:08):
And another area of growth is accident health, been traditionally just property and casualty, which is a recent influx in accident health type policies where you see that more and more.

Zachary Lerner (02:18):
Right. And John is actually getting a bit ahead here because in our future iterations of this series, we’re gonna talk about the lines that can and cannot be written on a surplus lines basis. And that is really changing year to year, both through initiatives by the NAIC as well as various states wanting to expand the ability for the surplus lines market to service their policy holders.

John Emmanuel (02:39):
And are they regulated just by the states, or it could be federally regulated as well?

Zachary Lerner (02:43):
Right. Well, it’s a really good question, and it’s a bit of tension with regards to eligibility. So prior to the year 2010, it was really a state-by-state issue regarding the eligibility of surplus lines carriers with the passing of the Nonadmitted and Reinsurance Reform Act of 2010, it became largely federalized where you look to the home state of the insured with respect to regulation of that transaction. Nevertheless, a number of states still maintain state specific whitelists or eligibility lists that require these surplus lines insurers to obtain listing on such list and do business in the state. There is that inherent conflict between federal and state law. Some states like New York and California expressly recognize this and have their states as a voluntary nature whereas some other states still maintain the position that carriers must be on their whitelist in order to do business in the state. Some really divide between U.S. carriers versus alien non-U.S. carriers. Sometimes they’ll say the former needs to be on the whitelist, and other times they’ll say that neither have to be on the whitelist.

John Emmanuel (03:47):
So, bottom line, while there’s certain benefits to being a surplus lines insurer, it is definitely not an unregulated area.

Zachary Lerner (03:53):
Thanks so much, John. We hope you’ll tune in next time when John and I discuss surplus lines broker licensing, including both entities and individuals.

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