Glossary

A surety guarantees the performance of another party by agreeing to stand in the place of its principal if the principal fails to do what it has promised to do. The contract through which the guarantee is executed is called a surety bond.

A surety bond is a contract under which one party (the surety) guarantees the performance of certain obligations of a second party (the principal) to a third party (the obligee).

Surplus is the amount by which an insurer's assets exceed its liabilities.

A surplus debenture is a debt instrument accounted for as equity under statutory accounting rules, used when investors loan surplus to an insurer rather than posting a letter of credit.

A surplus line refers to risks placed with nonadmitted insurers.

A surplus lines broker is a broker who is licensed to place coverage with nonadmitted insurers (insurers not licensed to do business in a given state). Most states require an agent to have a separate license to write surplus lines coverage. Normally, these licenses are held only by insurance brokers that work for surplus lines brokerages, which are firms that mainly place specialty lines coverage.

Surplus lines insurance refers to coverage lines that need not be filed with state insurance departments as a condition of being able to offer coverage.

Surplus notes describe the evidence of a loan to a captive to get additional capital into the captive.

Surplus reinsurance refers to reinsurance of amounts that exceed a ceding company's retention.

Surplus relief involves the insurer's purchasing of reinsurance to offset unusual drains against the insurer's surplus.