Investing.com -- Premiums generated by non-admitted insurers, part of the U.S. surplus lines market, are on the rise, pointing to growth opportunities stemming from market pressures in the property/casualty (P/C) segment. This is according to a new special report from AM Best.
The report reveals that a key benchmark shows a 12.1% year-over-year premium increase in 2024 for surplus lines insurers who report data to 15 state service and stamping offices across the U.S. Over the last three years, from 2022 to 2024, premiums produced by these offices have grown by 28.8%. This growth is driven by business lines directly impacted by post-COVID macroeconomic pressures.
David Blades, associate director at AM Best, stated that although personal lines coverage, especially homeowners’ insurance, is a relatively small part of the overall surplus lines market, increased writings in that segment have contributed to the consistent premium growth for nonadmitted insurers. Many states and multiple business lines have played significant roles in supporting the surplus lines market’s momentum.
The report also found that California, Florida, Texas, and New York consistently account for the largest share of surplus lines premium, similar to the broader P/C market. Even before the destructive California wildfires earlier this year, extreme weather events, including heavy rains and mudslides, led to unfavorable results for admitted writers of homeowners and commercial property coverage, causing many companies to reassess their risk appetite.
Blades suggested that the California property market is likely to face more challenges in the near term. Surplus lines insurers could step in to fill supply gaps as more admitted insurers become hesitant to provide market capacity in certain areas of the state.
Over the past six years, surplus lines’ homeowners’ premium has more than doubled, from $1.0 billion in 2018 to $2.2 billion in 2023. During this period, the P/C industry’s year-over-year homeowners market profitability has shown a higher-than-normal level of volatility.
The report also found that coverages under the general liability banner consistently represent the largest portion of the surplus lines market from a direct premium written perspective. Initial data for 2024 indicate a nearly 10 percentage point decline in the P/C industry’s net incurred loss ratio for the other liability (occurrence) coverage line, which represents the larger of the two general liability coverage lines.
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