What is "excess and surplus lines insurance"?

Excess and surplus lines insurance refers to coverage provided for risks that are not typically available in the standard insurance market. This type of insurance is essential for unique or high-risk exposures that traditional insurers may avoid due to their unpredictability or lack of actuarial data. It serves specialized needs by allowing insurers to offer products tailored for particular scenarios, industries, or types of coverage that don't fit into standardized underwriting criteria.

For example, businesses in niche markets or those that engage in high-risk activities may seek coverage that traditional insurers are unwilling to provide or do not offer. Consequently, excess and surplus lines insurers can write policies that meet specific requirements without adhering to the same restrictions as traditional markets.

In contrast, the other options do not accurately describe excess and surplus lines. While it can cover high-risk individuals or businesses, it is not limited to just that demographic. Likewise, it does not specifically pertain to natural disasters nor is it mandatory by law, as these aspects relate more to general insurance requirements and coverages rather than the specific function and purpose of excess and surplus lines insurance.