With the challenges of the pandemic, 2020 has certainly been a different sort of year, and it seems like 2021 is just the B-side to 2020’s hit album. Businesses have had to adapt to stay-at-home orders and a struggling economy. Not to mention, February’s deep freeze left many Texans without power or water, including businesses. In spite of these changes, the surplus lines market continues to boom.
Increased risk in the workplace and changes in technology both directly impact the surplus lines market. Insurance agents have to keep statutory and regulatory standards in mind as we adapt to these changes. It is a complex, ever-changing market, and it can be tricky to maintain compliance.
Navigating the waters of surplus lines insurance can be confusing, but here are a handful of key takeaways about surplus lines insurance to keep in mind for 2021 and beyond.
The state fee decreased in 2021.
Effective January 1, 2021, The Surplus Lines Stamping Office of Texas (SLTX) lowered the stamping fee for recording surplus lines insurance policies. The stamping fee dropped from 0.15% of gross premium to 0.075%. This fee decrease applies to any policies put into place on or after January 1st. The new rate also applies to policy date extensions effective on or after this date.
The surplus lines insurance market is expected to reach $125.9 Billion by 2027.
The surplus lines insurance market was valued at $52.1 billion in 2019. By as early as 2027, that number could reach $125.9 billion, according to a recent report1 published by Allied Market Research.
There are a couple of reasons for this explosive growth. For one, the surplus lines market develops and invests in unique customers and industries. These are otherwise untapped opportunities within the economy.
The rise of large corporations or even smaller business enterprises also present more opportunity for risk. Political risk, cyber & confidential data risk, and errors & omission (E&O) risk are all covered by U.S. surplus lines for commercial businesses.
Even retail is expected to grow, and surplus lines insurers can help retail agents enhance their coverage accordingly.
The “Pandemic Risk Insurance Act” bill is currently being drafted.
Discussions are currently in the works for a bill that would establish the “Pandemic Risk Insurance Act of 2020”, or PRIA. The U.S. Department of Treasury would enact it. The act would require insurance companies that offer business interruption insurance to draft insurance coverage for a “public health emergency” such as the pandemic.
The terms of the coverage can’t be different from the terms given to losses arising from other events. There would also be a set individual or industry deductible, allowing for insurers to share losses with the U.S. federal government up to a certain amount.
Most notably for surplus lines insurers, this bill defines “insurer” as anyone licensed to provide primary or excess insurance in any state, as well as “an eligible surplus lines carrier listed on the Quarterly Listing of Alien Insurers”. That means the proposed bill is considering including all manner of surplus lines insurers. It would apply equally to insurance companies that can write surplus lines coverage due to licensing in one state and to alien insurance companies with surplus lines eligibility through listing on the Quarterly Listing of Alien Insurers.
The current draft of the bill makes these measures voluntary, but it isn’t finalized yet. That’s something to keep an eye on in the coming months.
Be flexible – regulations are ever-changing.
In conclusion, there are some big changes underway for the surplus lines insurance market. It is a rapidly evolving and sometimes elusive industry, so it pays to keep up with the current trends.
Serving as the middleman between typical agents and brokers and the non-admitted insurers, surplus lines brokers must be able to adapt to regulatory changes that can fluctuate at any time. This allows surplus line brokers, like Craig & Leicht, to do the challenging job of finding coverage for the risks that standard insurers do not cover, so businesses can focus on activities where they excel with a peace of mind that their trusted insurance provider will cover their unique needs. 1 Allied Market Research – https://www.alliedmarketresearch.com/us-surplus-lines-insurance-market-A06543
