White List States

White List States are the group of U.S. states that permit the addition of specialized liability or property coverage by a non-admitted insurer in the policy. White list states allow surplus lines for coverage provided by a non-admitted insurer in the event that this coverage is currently unavailable from insurers that are licensed by the state. Surplus line producers can provide coverage for risks that the licensed insurers will not accept because they do not meet their guidelines or the risk is too unusual or large.

Each white list state may have a long list of eligible surplus line suppliers. Surplus line insurers are not necessarily unable to become licensed in a state; they typically choose to operate on a surplus line and unlicensed basis in certain states. Because they are not licensed in a particular state, they are not regulated by that state's Department of Insurance in the same manner as the licensed insurers, which gives them more leeway in terms of rate and form regulation.

The surplus lines market is also referred to as the specialty, non-admitted or excess lines market. Surplus lines insurance protects against a financial risk that is too high for a regular insurance company to take on. Surplus lines insurance, unlike regular insurance, can be purchased from an insurer that is not licensed in the insured’s state, though the surplus lines insurer will still need to be licensed in the state where it is based.

An insurance agent must have a surplus lines license to sell a surplus lines policy. Also called excess lines insurance, surplus lines insurance makes it possible to get insurance for entities with unique risks that most insurers don’t cover or those with a claims histories that makes them otherwise uninsurable.

Example of a major surplus lines insurers include American International Group, Nationwide Mutual Insurance, W.R. Berkley Corp., Zurich Insurance Group, Markel Corp., Chubb, Ironshore Inc., Berkshire Hathaway Inc., Fairfax Financial Holdings, CNA Financial Corp., XL Group plc and Lloyd's of London. One type of surplus lines insurance that consumers might purchase is flood insurance. Lloyd’s offers this insurance through the Natural Catastrophe Insurance Program, which offers an alternative to the Federal Emergency Management Agency’s (FEMA) flood insurance. Consumers who find FEMA’s insurance too expensive might be able to get a more-affordable policy through surplus lines insurance. That being said, surplus lines insurance is often more expensive than regular insurance because it protects against unusual or higher-than-usual risks that other insurers won’t cover.