A Look at the Excess and Surplus Lines Market
In the highly regulated insurance world, there is a significant and often misunderstood segment known as the Excess and Surplus (E&S) lines market. This market exists to fill coverage gaps that the admitted—or “standard”—insurance market cannot or will not handle. For a more complete understanding of insurance, knowledge about the E&S sector is essential. In recent years, the E&S market has experienced significant growth and increasing scrutiny. A recent lawsuit involving AIG and a startup called Dellwood Insurance Group and my testimony to the Florida House Insurance and Banking Committee brought to my attention the need for greater discussion about this corner of the insurance industry. But, before exploring the lawsuit, it is important to understand what the E&S market is and why it plays such a vital role in the larger insurance landscape.
What Is the Excess and Surplus Lines Market?
The E&S market operates outside the constraints of the admitted market. Admitted carriers must be licensed by each state where they operate and are subject to state oversight, including rate and form filing requirements. Their policies and pricing must be approved by state insurance regulators, and they are backed by guaranty funds that offer a financial safety net if the insurer becomes insolvent.
In contrast, E&S carriers are not admitted carriers in the states where they write business. Instead, they are licensed in one state—often called the “domiciliary” state—but permitted to write business in other states on a “non-admitted” basis. This means they are not required to file rates and policy forms with every state, allowing them far greater flexibility in designing and pricing coverage.
This flexibility is the key feature of the E&S market. It traditionally allows insurers to craft customized policies for unique, high-risk, or hard-to-place exposures—scenarios that standard carriers may decline outright. Examples include:
- Catastrophe-exposed property (such as coastal homes or earthquake-prone commercial buildings)
- High-hazard liability risks (like nightclubs or trampoline parks)
- New and emerging industries (such as cannabis operations or cryptocurrency exchanges)
- Entities with unusual claims histories or loss experience
The E&S market is often described as the insurance industry’s “safety valve,” a place where risk can find coverage even when it doesn’t fit traditional underwriting boxes. My impression is that the E&S market is encroaching on the traditional admitted marketplace. I raised that issue in Insurance Regulation and the Attack on Admitted Insurance Carriers in Florida. That discussion is for a different day.
Size and Scope of the E&S Market
The E&S market is not a niche segment—it is a substantial and growing part of the U.S. insurance industry. According to industry data, E&S premiums in the United States exceeded $100 billion in 2023, nearly doubling over the past decade. This growth is driven by several trends: increasing natural catastrophe risks, evolving litigation exposures, inflation in loss costs, and the need for greater underwriting flexibility across industries.
Many of the world’s largest insurance groups have E&S divisions. Companies like AIG, Zurich, Markel, Lloyd’s of London, and others participate heavily in this market. These carriers often use E&S operations as innovation labs, where they can test new products or expand into emerging sectors before bringing them into their admitted portfolios.
How E&S Insurance Is Sold and Regulated
Unlike standard policies that can be sold directly by admitted agents, E&S policies must be placed by specially licensed surplus lines brokers. These brokers are trained to understand both the risks involved and the regulatory requirements associated with non-admitted placements.
In most states, brokers must complete a “diligent search” to confirm that coverage was not available in the admitted market before turning to an E&S carrier. This requirement exists to prevent insurers from bypassing the consumer protections that admitted insurance is designed to provide. Once the diligent search is completed, the broker may access the E&S market and negotiate a policy with an E&S insurer.
While E&S carriers are exempt from rate and form filings, they are still subject to financial regulation to ensure they remain solvent and capable of paying claims. However, their policies do not come with the same consumer safety nets. Most notably, E&S policies are not backed by state guaranty funds. If an E&S insurer fails, the policyholder may have limited recourse. This is one reason why the role of the public adjuster becomes even more critical when a claim arises under an E&S policy.
Key Differences Property Insurance Adjusters Should Understand
Property insurance adjusters working on E&S claims must be aware of the fundamental distinctions from admitted market claims:
- Policy language may be unique and heavily customized.
- Consumer protections, such as mandatory appraisal or prompt-payment laws, may not apply.
- Regulatory oversight is more limited, making claims disputes not subject to state laws and regulations.
- Filing a complaint or seeking regulatory intervention is often more difficult. The applicable law may be designated in the policy as a different state or even country.
E&S insurance is, by nature, more sophisticated. Policyholders may not realize they have a non-admitted policy until a dispute arises.
Allegations, Accusations, and a Startup Under Fire
The E&S market’s flexibility, while beneficial for innovation, can also make it a competitive and contentious space. A lawsuit filed by American International Group (AIG) against a new entrant, Dellwood Insurance Group, illustrated just how high the stakes have become. 1
According to the allegations of a complaint, Dellwood was founded by several former AIG executives who allegedly took confidential documents, internal planning materials, and trade secrets with them when they left the company. AIG contends that these materials gave Dellwood an unfair head start and helped the startup position itself in the market using knowledge it should not have had access to.
Among the specific allegations that will need to be proven is that one executive emailed himself sensitive financial spreadsheets and planning documents prior to his departure. AIG says Dellwood then used that knowledge to secure funding, hire staff, and build out its infrastructure—all under the shadow of AIG’s intellectual property.
But the plot thickens.
After initially suing the individuals involved, AIG later chose to dismiss them from the case—with prejudice, meaning they cannot be sued again over the same facts. The lawsuit now focuses solely on Dellwood itself. That legal maneuver has prompted Dellwood’s lawyers to argue that the case should be thrown out entirely. Their reasoning? If the people who allegedly took the documents are no longer part of the case, the company that acted through them cannot be held liable on its own.
Dellwood, in its response, strongly denies wrongdoing. It argues that the documents in question contained general knowledge or publicly available information, not trade secrets. The company also claims AIG is simply trying to crush a new competitor in a rapidly evolving insurance space.
It’s important to stress this: lawsuits contain allegations, not facts. In the American legal system, anyone can file a complaint, but it is up to the courts to decide whether the claims have merit. Nothing has been proven yet. The accusations may turn out to be accurate, exaggerated, or completely unfounded. Until the case proceeds and a judge or jury weighs the evidence, the public should view the claims as one side’s version of the story.
Why This Lawsuit Is Worth Watching
This case is more than just corporate drama. It reflects how competitive the E&S market has become—and how aggressively established players may defend their market share. The freedom and flexibility of the E&S sector attract innovation but also create friction when talent moves between companies.
For insurance industry professionals, this case reminds us that understanding and keeping up with the legal and regulatory framework of E&S is not optional—it’s essential. The carriers, policies, and even the business models involved are fundamentally different from those in the admitted market.
As for the AIG-Dellwood showdown, it may take months—or even years—before there’s a resolution. In the meantime, the E&S market will continue to grow, evolve, and shape the future of insurance in the United States.
Stay tuned. The courtroom, like the insurance world, is full of surprises.
Thought For The Day
“Knowledge is knowing a tomato is a fruit; wisdom is not putting it in a fruit salad.”
—Miles Kington
1 AIG v. Dellwood Ins. Group, No. 2:24-cv-04456 (D.N.J.). (See also, the court’s Mar. 25, 2025, Order granting defendant’s motion to dismiss counts II, II, and IV of the complaint without prejudice to file an amended complaint).
