The U.S. excess and surplus lines (E&S) insurance market experienced a 14.5% increase in direct premiums written in 2023, marking a slowdown from the higher growth rates seen in recent years, according to a report from S&P Global.

Despite this deceleration, E&S premiums now account for a substantial 9.2% of the total U.S. insurance market, a notable rise from just 5.2% in 2018, underscoring the increasing significance of this segment.

“Although the rate of growth in U.S. excess and surplus lines premiums written will continue to slow in 2024, the non-admitted market’s share of the overall P&C industry should remain at a historical high,” said Tim Zawacki, insurance sector strategist, S&P Global Market Intelligence. “The current cycle has underscored the E&S market’s role as a key supplier of needed capacity across a broad range of business lines, classes and geographies.”

Robust Growth Trends in E&S Market

The U.S. excess and surplus lines (E&S) insurance market has experienced substantial growth in recent years, even as the pace of expansion moderated somewhat in 2023, according to S&P. E&S direct premiums written increased 14.5% to $86.47 billion in 2023, down from year-over-year growth of 32.3% in 2021 and 20.1% in 2022 but still robust.

The majority of E&S premiums last year were concentrated in liability and casualty coverages, which accounted for 52.5% of the total. Property lines made up 31.7% of 2023 E&S premiums, while commercial auto represented 5.4%.

S&P reported that the largest E&S writers in 2023, based on direct premiums written, were Berkshire Hathaway with $8.39 billion, American International Group with $4.96 billion, and Fairfax Financial with $4.04 billion.

Property Lines: Challenges and Opportunities

The admitted insurance market has been pulling back or exiting markets with high potential for catastrophe losses, such as wildfires and hurricanes, driving a significant shift in property premiums to the E&S market, S&P observed.

Timothy Turner, president of wholesale E&S-focused distributor Ryan Specialty Holdings Inc., noted during the company’s year-end 2023 earnings call that a combination of factors, including “heightened frequency and severity of property losses, particularly in coastal areas, and more recently in the Midwest,” is fueling this growth in the E&S market, the S&P report stated.

The impact of this trend is evident in the states that have seen the highest growth in E&S property premiums as a percentage of their total property market since 2018, S&P reported. South Carolina experienced a 9.0 percentage point increase, reaching 19.4% of the market, while California saw an 8.8 percentage point rise to 14.2%. Louisiana’s E&S property premiums grew by 8.3 percentage points, now accounting for 22.7% of the state’s total property market in 2023.

On a national level, U.S. E&S property direct premiums have seen remarkable growth, reaching $27.44 billion in 2023, a year-over-year increase of approximately 41%. This marks the fifth consecutive year that aggregate premiums in the property lines have grown by at least 20%, S&P found. As a result, E&S premiums now account for 11.1% of the nation’s total property premiums, nearly double their share of the market in 2018.

Liability Lines: Continued Expansion

E&S liability premiums continued to expand in 2023, reaching $45.40 billion, a 4.2% year-over-year increase. While still growing, this marks a slowdown from the double-digit increases seen in the previous four years, the report stated. Despite the deceleration, E&S now accounts for an impressive 35% of total U.S. liability premiums, a significant increase from its 26% share in 2018.

Among the various liability lines, other liability (occurrence) stood out as the only one experiencing double-digit growth in 2023, with premiums rising 11.6% to $25.29 billion. A closer look at 173 predominantly U.S. E&S insurance subsidiaries reveals that the largest shares of other liability premiums were in commercial general liability (29.3%), commercial excess & umbrella (28.1%), errors & omissions (13.3%), and cyber (7.7%). &

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