Surplus lines market reaches new premium record amid industry challenges

The US surplus lines insurance market reached a milestone in 2023, surpassing $100 billion in premiums for the first time and recording more than 115 billion in premiums, according to a new report by AM Best in partnership with the Wholesale & Specialty Insurance Association ( WSIA). ). This represents a strong 16.8% growth over the past year, marking six consecutive years of double-digit growth.

Important growth factors

The sharp increase in premiums for excess lines is mainly driven by the increase in demand for non-admissible insurance solutions, especially for catastrophe-exposed buildings and complex credit risks. As weather-related events, such as wildfires and hurricanes, become more frequent and severe, traditional insurance carriers are becoming more aware, creating opportunities for excess lines providers. Lloyd's of London, a key player in the market, reported a huge increase in premiums of 28.8% in 2023.

Additional growth drivers include higher rates for certain types of coverage and increased submissions from wholesalers and managing general agents (MGAs). Admitted carriers have had considerable experience in developing emerging risk policies, including those related to climate change and cyber security, emphasizing the evolving role of the sector.

Strength in the midst of challenges

Despite economic headwinds such as inflation, regulatory pressures, and the rise of secondary risks such as hurricanes and typhoons, the overhead lines market has shown remarkable resilience. Insurers have adapted by refining strategies, creating new solutions, and emphasizing long-term risk management.

The surplus lines industry's growing role as a “safety valve” for the property and casualty (P/C) insurance industry is becoming increasingly important. It continues to provide customized solutions for high-risk exposures that conventional markets avoid, reinforcing its importance in the industry.

Premium growth and industry impact

The report noted significant growth in several lines of business, non-professional general credit and advanced property. Non-professional loans increased by 36.9%, while property premiums increased by 33.3%. Florida and Texas were among 11 states reporting double-digit premium growth, leading by 27.8% and 25.8%, respectively.

This premium increase reflects a larger trend: premium lines are capturing an increasing share of the P/C market. By 2023, excess lines accounted for 23.7% of total sales lines premiums written in the US, up from just 7.1% in 2000.

Opportunities arise

The AM Best report also highlights the market's potential to address emerging risks in areas such as artificial intelligence, cannabis and environmental debt. These growing industries provide insurers with opportunities to create specialized products that meet the growing critical conditions. The top lines market also dominates the US cyber insurance sector, controlling 59.2% of the market by 2023.

Looking ahead, the report suggests that surplus lines insurers are well positioned to continue to grow, especially as new risks and protection needs arise due to rapid technological and environmental changes.