The traditional role of the excess and surplus (E&S) lines industry has been to provide a market for insuring hard-to-place risks not written by the standard markets. The National Association of Professional Surplus Lines Offices outlines three basic categories of surplus lines risks: Non-standard risks that have unusual underwriting characteristics; unique risks that admitted carriers do not offer a filed policy form or rate; and capacity risks where a client seeks a higher level of coverage.

Because of its unique position in the industry, E&S operations are relatively free of regulatory interference. Surplus lines is not, however, immune to the problems of the overall economy. As noted in the November issue of Florida Underwriter, the trending for Florida's E&S premiums written has been a fairly consistent drop off for the past several years.

A report from Gary Pullen, executive director of the Florida Surplus Lines Service Office (FSLSO), showed that total surplus lines premium in 2010 was $3.88 billion versus $4.03 billion in 2009. Total surplus lines policy count in 2010 was 775,000 versus 791,000 in 2009. Pullen noted that while the number of reported policies followed a trend line similar to reported premium, as a percentage the decrease in policies was about half of the percentage decrease in reported premium. Pullen said this is evidence that the premium per policy has decreased as a result of market competition.