AM Best, a credit rating agency, has released a new report showing continued growth in the premiums generated by non-admitted insurers within the US surplus lines market.
This rise in premiums highlights significant opportunities spurred by ongoing challenges in the property and casualty (P&C) sector.
The latest Best’s Special Report reveals that surplus lines insurers, reporting data to 15 state service and stamping offices across the country, saw a 12.1% increase in premiums year-over-year for 2024.
Over the last three years (2022-2024), premiums handled by these offices grew by 28.8%. The growth is largely driven by business lines that have been directly affected by macroeconomic pressures in the post-COVID landscape.
As with the broader property/casualty market, states like California, Florida, Texas, and New York continue to account for the largest share of premiums within the surplus lines market.
The report points out that even before the devastating wildfires in California earlier this year, severe weather, including heavy rains and mudslides, had already resulted in negative outcomes for admitted insurers providing homeowners and commercial property coverage.
These challenges have led many insurers to reconsider their risk exposure. However, surplus lines insurers, with more flexibility, have been able to meet the growing demand during these difficult times.
As a result, premiums for surplus lines homeowners’ coverage more than doubled from $1.0 billion in 2018 to $2.2 billion in 2023. During the same period, the profitability of the P&C industry’s homeowners market exhibited unusually high volatility.
“Although personal lines coverage, specifically homeowners’ insurance, remains a relatively small part of the overall surplus lines market, increased writings in that segment have contributed to the consistent premium growth for surplus lines—or non admitted—insurers,” commented David Blades, Associate Director, AM Best.
“Many states, in addition to multiple lines of business, have been key contributors to the momentum buoying the surplus lines market.”
The report also found that general liability coverages have consistently represented the largest portion of the surplus lines market in terms of direct premium written. Early 2024 data suggests a nearly 10% deterioration in the P&C industry’s net incurred loss ratio for the “other liability (occurrence)” coverage line, which is the larger of the two general liability categories.
“The California property market is likely to face more challenges in the near term, and surplus lines’ insurers could look to fill supply gaps as more admitted insurers become reluctant to provide market capacity in areas of the state,” Blades further added.
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