U.S. Excess and Surplus Lines Market: Insights from S&P Global Market Intelligence

The U.S. excess and surplus (E&S) lines market, a crucial component of the broader insurance landscape, continues to show robust growth despite a recent slowdown. According to S&P Global Market Intelligence (S&P GMI), the market has experienced a deceleration in growth from the extraordinary peak of 32.3% in 2021 to 14.5% in 2023. This marks a decrease from the previous year’s 20.1% but remains the fifth consecutive year of double-digit growth.

Market Overview and Performance

In 2023, U.S. E&S direct premiums written reached $86.5 billion, up from $75.5 billion in 2022. This growth underscores the market’s resilience and its critical role in providing coverage for risks that are not adequately addressed by standard insurance policies. The distribution of premiums in 2023 highlights a continued focus on casualty or liability coverages, which made up 52.5% of the market. Property lines followed at 31.7%, with commercial auto accounting for 5.4%. Overall, E&S premiums represented 9.2% of total U.S. direct premiums written.

Leading Players in the E&S Market

The S&P GMI report reveals that Berkshire Hathaway Group led the E&S market in 2023, with direct premiums of $8.4 billion. This performance puts Berkshire ahead of AIG, which reported $5.0 billion in premiums, and Fairfax Financial at $4.0 billion. Berkshire Hathaway’s growth in the E&S sector was notable, with a 21.2% increase in premiums, largely driven by significant growth in property lines such as fire, allied, commercial multiple peril, and homeowners. The company’s fire line premiums surged by 55.9%, and allied lines grew by 66.4%, reflecting strong performance in these areas.

However, Berkshire Hathaway was not the only player showing impressive growth. STARR Cos., ranked eighth in S&P GMI’s overall E&S ranking, reported a substantial 48.8% growth rate across all lines, with a remarkable 82.3% growth rate in the fire line. This rapid expansion underscores STARR’s strong position in the fire market, capturing a significant 40.6% share of the market in 2023, up from 24.1% a decade earlier.

Sector-Specific Insights

The E&S market’s performance varies significantly across different lines and states. In property lines, the E&S market share was 11.1% in 2023, while homeowners’ coverage remained predominantly on an admitted basis at 98.6%. Liability lines saw a notable increase in E&S market share to 34.9% from 23.8% in the previous year. This growth reflects a shift towards non-admitted policies in the liability sector, contrasting with the more stable property lines.

Despite the overall growth in E&S premiums, some sectors experienced declines. For example, E&S premiums for liability-claims made policies saw year-over-year drops, including a 38.8% decrease for Berkshire Hathaway in this line. This decline highlights the challenges faced by leading E&S writers in specific liability sectors.

Emerging Trends and Future Outlook

The S&P GMI report also emphasizes the performance of lower-ranking E&S writers who achieved growth rates above 40%, such as Kinsale, Starstone, and Travelers. These companies, although smaller in overall premium volume, are capturing significant market share through rapid growth.

As the market continues to evolve, insurers need to stay agile and responsive to emerging risks and trends. The ongoing shift towards higher E&S market share in liability lines and the strong growth in property lines indicate a dynamic landscape where flexibility and innovation are key. Insurers must adapt to these changes by leveraging advanced data analytics, enhancing underwriting practices, and developing tailored solutions to meet the evolving needs of their clients.

S&P GMI’s Methodology and Data

The data provided in the S&P GMI report is based on Schedule T of annual and quarterly statutory statements submitted to the National Association of Insurance Commissioners (NAIC). This includes U.S.-domiciled entities that list their status as “not licensed,” “eligible surplus lines,” or “domestic surplus lines insurer.” Notably, the report excludes alien surplus lines insurers, such as Lloyd’s of London syndicates, which are domiciled outside the U.S. but write domestic business.

The methodology ensures a comprehensive view of the E&S market by focusing on entities directly involved in surplus lines insurance, providing valuable insights into market share, growth rates, and the competitive landscape.

The E&S Market’s Evolution

The U.S. E&S lines market demonstrates continued strength and resilience, with robust growth despite a slowdown from previous peaks. The shift in market dynamics, including the increased E&S market share in liability lines and the significant growth of certain E&S writers, reflects a sector in transition. As insurers navigate these changes, staying informed and agile will be crucial for leveraging opportunities and addressing emerging risks.

At DOXA Insurance, we are committed to understanding and adapting to these market trends. Our focus on innovation and proactive risk management ensures that we are well-positioned to support our clients in a rapidly evolving landscape. As the E&S market continues to grow and change, we remain dedicated to providing exceptional coverage and insights to meet the needs of our clients.