Total US surplus lines direct premiums written (DPW) exceeded $100 billion for the first time in 2023, reaching a record $115.6 billion, according to a new report from AM Best. This marked a 17.4% increase over the prior year.
The Best’s Market Segment Report, titled "Improved Underwriting and Operating Results Sustain US Surplus Lines Market Momentum," noted that the surplus lines market has experienced strong growth, with annual double-digit DPW increases since 2018.
A key factor in this expansion has been the high volume of submissions from distribution partners, as well as market dislocation in property coverage. Rising climate risks and volatile weather patterns have resulted in higher insured losses, causing many admitted carriers to reassess their risk appetite.
This shift has created more opportunities for non-admitted insurers, particularly in regions prone to extreme weather.
The report also highlighted the impact of rising commercial lines pricing over the past three years. Surplus lines insurers, with their expertise in higher-risk commercial exposures, have taken on more of these risks. In 2023, surplus lines DPW as a percentage of the property/casualty industry’s commercial lines DPW increased, reaching 23.8%.
David Blades, associate director of Industry Research and Analytics at AM Best, said that the resilience of the surplus lines market is demonstrated by insurers’ ability to adjust strategies, innovate solutions, and modify enterprise risk management practices.
These developments have contributed to short-term improvements while positioning the market for long-term success.
The Lloyd’s market recorded the largest premium increase in 2023, with its 86 syndicates writing US surplus lines business growing their premium total by 28.8%. AM Best’s composite of domestic professional surplus lines companies, those writing more than 50% of their business on a surplus lines basis, also saw strong performance.
Their combined ratio improved to 90.0 in 2023, over 11 percentage points lower than the property/casualty industry’s 101.5 combined ratio.
Blades pointed out that new distribution platforms and diversification across geographic regions and product lines have played a role in helping surplus lines groups maintain their market positions.
Partnerships with managing general agents and other delegated underwriting authority enterprises (DUAEs) have also contributed to the growth of newer surplus lines entities.
Over the 30 years AM Best has produced this report, the top 25 surplus lines groups, along with the syndicates comprising the Lloyd’s market, have consistently accounted for more than 70% of the surplus lines market DPW. Solid underwriting performance has attracted new carriers to the market and encouraged others to expand their surplus lines capabilities.
In 2023, the top 25 surplus lines groups, including Lloyd’s, generated more than 68% of total surplus lines DPW. Excluding Lloyd’s, the top 24 groups accounted for 51.3% of surplus lines premium, down from 53.5% in 2022.
Lloyd’s syndicates operate as independent entities, but their collective size allows them to compete with major international insurers under the Lloyd’s brand. The Lloyd’s portfolio, while globally diversified, maintains a focus on US surplus lines and commercial specialty risks.
Despite some geographic expansion into Asia, Europe, and South America, the US market remains a significant portion of its business. Lloyd’s global network of licenses provides a competitive advantage, and many syndicates are owned by larger insurance groups that also have US subsidiaries.
Berkshire Hathaway remains the largest US surplus lines organization, with DPW growth of more than 20% in 2023. This follows a 63% growth surge in 2022 after the group’s acquisition of Alleghany Corporation. Berkshire’s surplus lines business is primarily driven by its subsidiary, National Fire & Marine Insurance Company.
AIG, the second-largest US surplus lines group, saw DPW grow by 9.2% in 2023, slightly up from 8.6% in 2022. AIG has streamlined its operations in areas such as reinsurance, crop, and travel, while its lead surplus lines insurer, Lexington Insurance Company, remains integral to the group’s overall strategy.
Fairfax Financial (USA) Group overtook Markel Corporation for the third position in 2023, with Fairfax’s 7% growth contrasting with a slight decline in Markel’s writings. Other top performers in the surplus lines market included W.R. Berkley Insurance Group, Chubb INA Group, Nationwide, Liberty Mutual, and XL America, all of which retained their positions in the top 10.
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