Best’s Market Segment Report: US Surplus Lines Segment’s Direct Premium Surpassed $100 Billion for First Time in 2023

Total U.S. surplus lines direct premiums written (DPW) surpassed $100 billion for the first time in 2023, reaching a record $115.6 billion, which represented a 17.4% increase over 2023, according to a new AM Best report.

The Best’s Market Segment Report, titled, “Improved Underwriting and Operating Results Sustain US Surplus Lines Market Momentum,” states the surplus lines market has enjoyed a surge resulting in yearly double-digit DPW growth since 2018, with abundant submission flow from distribution partners fueling growth. Another key factor has been market dislocation on the property side, reflecting the challenges presented by increased climate risks and more-volatile weather patterns that have led to higher insured loss totals. These factors, along with the impact of inflation on repairs of damaged property, has led more admitted carriers to re-assess their risk appetites for certain risks and has expanded opportunities for non-admitted insurers, especially in states and areas subject to repeated extreme weather events.

Additionally, pricing for many commercial lines of coverage has risen in the last three years, and consequently, surplus lines insurers have used their greater familiarity with tougher commercial risks to take on more of these exposures. In 2023, surplus lines DPW as a percentage of the property/casualty industry’s commercial lines DPW increased again, ending 2023 at 23.8%.

“The surplus lines market’s resilience has been marked by insurers’ ability to withstand tumultuous times by adjusting strategies, innovating solutions and modifying enterprise risk management principles,” said David Blades, associate director, Industry Research and Analytics, AM Best. “These strengths are embodied by the development of practices that have led to short-term improvements during tough times, while also setting the stage for long-term success.”

According to the report, the Lloyd’s market generated the largest premium increase in 2023. The 86 syndicates that wrote U.S. surplus lines business in 2023 increased the Lloyd’s market’s premium total by a substantial 28.8%. AM Best’s composite of domestic professional surplus lines companies, or those writing more than 50% of their direct business on a surplus lines basis, also maintained market momentum, improving its combined ratio to 90.0 for 2023, more than 11 percentage points lower than the property/casualty industry’s combined ratio of 101.5.

“New distribution platforms, along with geographic or product line diversification, continue to play a meaningful role in leading surplus lines groups’ ability to defend their market positions. In addition, new distribution partnerships, including instances in which insurers delegate authority to managing general agents or other delegated underwriting authority enterprises or DUAEs have helped fuel the growth of newer surplus lines entities,” said Blades.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=346850.

AM Best will host a complimentary webinar today, Sept. 18, 2024, at 11:00 a.m. (EDT), titled, “Inside Today’s Surplus Lines Market.” For more information or to register, please visit the event webpage.

Lastly, AM BestTV will be conducting interviews at the upcoming Wholesale and Specialty Association’s (WSIA) Annual Marketplace, beginning on Sept. 22, 2024. Look for the WSIA-related playlist during the event under the “Event Coverage 2024” tab at www.ambest.tv.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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