What is E&S (excess and surplus) insurance?

The excess and surplus lines (E&S) market exists to provide insurance for risks that admitted (standard market) carriers are unwilling or unable to write. Admitted carriers are licensed and regulated by each state's department of insurance, and their rates and policy forms must be approved by regulators. E&S carriers, by contrast, are not admitted in the states where they operate and have greater flexibility to set their own rates, terms, and conditions.

Tree service companies frequently end up in the E&S market because of the industry's high-hazard nature. Standard carriers often decline to write tree service risks due to the elevated frequency and severity of claims — falls from height, chainsaw injuries, struck-by incidents, and property damage from falling trees all contribute to a loss profile that many admitted carriers consider unacceptable. Companies that perform crane work, utility line clearance, or operate in hurricane-prone regions are even more likely to be placed in the E&S market.

E&S policies typically cost more than standard market coverage because the carriers are assuming risks that other insurers have rejected. However, the E&S market provides a vital function: without it, many tree service companies would be unable to obtain insurance at all. E&S carriers often specialize in specific niches and develop deep expertise in underwriting those risks, which can actually result in more appropriate coverage terms than a standard carrier that does not understand tree service operations.

There are important differences between admitted and E&S coverage that tree service owners should understand. E&S policies are not backed by state guaranty funds, meaning if the carrier becomes insolvent, policyholders do not have the same safety net as with admitted carriers. For this reason, it is critical to verify the financial strength of any E&S carrier — look for an A.M. Best rating of A- or better. E&S policies must be placed through a licensed surplus lines broker, and the state typically charges a surplus lines tax (usually 3 to 5 percent) in addition to the premium.

If your tree service is placed in the E&S market, it does not mean you are stuck there permanently. As your company builds a track record of safe operations, reduces your EMR, and demonstrates professional credentials (ISA certification, TCIA accreditation), you become more attractive to admitted carriers. Many companies transition from E&S to the standard market within three to five years of establishing a clean loss history.