Glossary · Insurance agency commissions
Excess and surplus lines
Excess and surplus (E&S) lines are insurance written by non-admitted carriers for risks the standard, admitted market will not cover or will not cover at a workable price. Retail agencies usually reach them through a wholesaler or MGA, so commission is often split, and surplus lines taxes and fees sit beside the premium.
What it means
The NAIC’s surplus lines overview describes the market as “a unique segment of the property & casualty industry consisting of non-admitted specialized insurers covering risks not available within the admitted market.” The same page notes that “the licensed surplus lines broker is responsible for ensuring the surplus lines insurer meets eligibility criteria to write policies in the state and remits payment of the surplus lines premium tax to the ‘home state.’”
How it works: a retail agency that cannot place a risk with its admitted carriers sends it to a surplus lines wholesaler or an MGA. The wholesaler places it with a non-admitted carrier and bills the premium, taxes and fees, usually through the retail agency, which keeps its share of the commission. Rules on diligent search, taxes and filings are set by each state.
How it shows on a commission statement
E&S business usually arrives on the wholesaler’s statement or invoice, not the carrier’s. Expect the retail commission to be a share of the total, often shown net of the wholesaler’s part, with surplus lines tax, stamping fee and policy fee on separate lines. Those taxes and fees are generally not commissionable, so check that commission was figured on premium only.
Example
- Premium
- $20,000.00
- Surplus lines tax and stamping fee (not commissionable)
- $800.00
- Wholesaler policy fee (not commissionable)
- $250.00
- Total commission at 15% of premium
- $3,000.00
- Wholesaler’s share, 5 points
- −$1,000.00
- Retail agency commission, 10% of premium
- $2,000.00
Commonly confused
- A managing general agent holds a carrier’s authority; a wholesaler may place E&S business without it. See managing general agent.
- Policy fees and surplus lines taxes travel with the premium but usually carry no commission. See policy fee.
- “Excess” in E&S does not mean excess or umbrella liability; it refers to the market, not the layer of coverage.
Common mistakes to check
- Applying the commission rate to premium plus taxes and fees.
- Comparing E&S commission with the carrier’s gross rate instead of the retail share after the wholesaler.
- Expecting E&S policies on the carrier’s direct statement when the wholesaler pays them.
- Missing a high minimum earned premium when an E&S policy cancels early.
Questions
What is the difference between admitted and non-admitted carriers?
An admitted carrier is licensed by the state and files its rates and forms there. A non-admitted (surplus lines) carrier is not licensed in that state but is allowed to write business through a licensed surplus lines broker, under the state’s surplus lines rules.
Do agents earn commission on surplus lines taxes and fees?
Generally no. Commission is calculated on premium. Taxes, stamping fees and most policy fees are passed through; check your wholesaler agreement for any exceptions.
Who pays the surplus lines premium tax?
According to the NAIC, the licensed surplus lines broker is responsible for remitting the surplus lines premium tax to the insured’s home state. The tax is usually passed on to the insured as a separate charge on the invoice.
Sources
- National Association of Insurance Commissioners, Surplus Lines, insurance topics page. Retrieved October 13, 2026.
- Big “I” Virtual University, What Is the Surplus Lines Market?. Retrieved October 13, 2026.
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