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Excess and Surplus Insurance

(1) Insurance to cover losses above a certain amount, with losses below that amount usually covered by a regular policy. (2) Insurance to cover an unusual or one-time risk, e.g., damage to a musician’s hands or the multiple perils of a convention, for which coverage is unavailable in the normal market. (See also “Umbrella liability” and “surplus lines.”)

EXCESS AND SURPLUS LINES

Property/casualty coverage that isn’t available from insurers licensed by the state (called admitted insurers) is often written by non-admitted insurers. Before an agent can place coverage in the non-admitted market, there must have been a good faith effort to place the coverage with an admitted insurer. Only agents licensed as surplus lines brokers can directly place coverage with a non-admitted company.State insurance departments do not have the same financial regulatory control over non-admitted insurance companies as they do admitted companies. (See Admitted Insurer). Additionally, non-admitted companies are not part of the state guaranty fund. Further, the rates and forms used by non-admitted companies are not subject to state regulation giving those companies more freedom to adjust to unusual risks.

There are two reasons the excess and surplus lines market exists. One is that an unusual risk cannot be underwritten in the same way more common risks are written. For example, an oil refinery has inherently more risk associated with it than does a convenience store. Thus, the criteria for insuring convenience stores cannot be applied to oil refineries. Second, insurance rate making is based, in part, on the law of large numbers. That is, if the insurance company can insure a large number of homogenous risks (e.g., convenience stores), statistically the company can predict with relative accuracy the number and amount of losses. Moreover, there are thousands of convenience stores and very few oil refineries. Therefore, if the oil refineries were lumped in with the convenience stores, one large refinery loss would skew the entire loss data for convenience stores. The excess and surplus lines market is designed, then, to handle the unusual and out-of-the-ordinary risk.

Excess benefits/contributions

Benefits/contributions that are not subject to the rules applicable to protected rights benefits and contributions. They are provided by contributions to contracted out money purchase pension scheme or appropriate personal pension plan that are in excess of the level needed to secure protected rights benefits.

Excess Clause for Fire Insurance

(i) For policies having sum insured up to Rs. 10 crore per location (not applicable to Dwellings) – (a) the first 5% of each and every claim subject to a minimum of Rs. 10,000 in respect of each and every loss arising out of “Act of God perils.” (b) The first Rs. 10,000 for each and every loss arising out of other perils in respect of which the insured is indemnified by the policy. (ii) Policies having sum insured above Rs. 10 crore per location: (a) The first 5% of each and every claim subject to a minimum of Rs. 25,000 in respect of each and every loss arising out of “Act of God” perils. (b) The first 5% of each and every claim subject to a minimum of Rs. 10,000 for each and every loss arising out of other perils. Excess shall apply per event per insured.

Excess insurance

MEDICAL,USA: 1. Insurance policy or bond that covers the insured against certain hazards. It applies only to loss or damage in excess of a stated amount. 2. Portion of a line that exceeds the insurance company’s net line or retention. 3. Insurance policy that pays over the primary amount of coverage.
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A secondary coverage that pays in excess of the primary policy. Excess insurance does not pay unless the amount lost exceeds a specified amount.
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UK: An insurance adding an excess layer to a primary insurance or other excess layers. It does not contribute to a loss until the limit of the primary or underlying insurances has been reached. Excess layers are used in liability insurance where the limits of indemnity of the underlying insurances do not meet the requirements of the insured.
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Coverage that applies on top of underlying insurance that is primary—insurance that pays until its coverage limit is exhausted at which point the excess coverage takes over. Also see Umbrella liability insurance.
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Insurance Policy designed to provide coverage over one or more similar primary coverage, and which does not pay until the primary Insurer has paid its limit for a particular loss.