Continued Growth of the US Excess and Surplus Insurance Market in 2024
In 2024, the Excess and Surplus (E&S) insurance market in the United States has demonstrated remarkable resilience and growth, according to a recent report from Fitch Ratings. This sector saw an impressive 11% increase in direct written premiums, although this figure is a decline from the 15% growth noted in 2023. Despite this slight slip, the E&S market has successfully outperformed the broader property and casualty (P&C) market, which expanded by 8% during the same period.
Fourteen Years of Consistent Growth
Fitch Ratings highlighted that this marks the fourteenth consecutive year of growth for E&S insurers, with gains surpassing 10% for the seventh consecutive year. The market’s share of the entire P&C sector has nearly doubled since 2017, rising from 5% to 9% in both 2023 and 2024. Fitch anticipates that this share could grow even further, potentially reaching 12% in the coming years. However, the agency cautions that such an increase is contingent on substantial changes in property pricing or liability trends in the market.
Diverse Growth Across Lines of Business
Fitch noted that the growth in 2024 was widespread across various lines of business, featuring robust results in:
- Liability
- Property
- Commercial Auto
- Medical Professional Liability
This diversity in growth exhibits the E&S market’s adaptability and strength across different sectors.
Superior Underwriting Performance
One of the standout features of the E&S market is its underwriting performance. In 2024, E&S insurers achieved a direct combined ratio of 88%, notably better than the 95% recorded for the overall P&C industry. Although this represents a slight decline from the 86% ratio of 2023, it remains significantly lower than the five-year E&S average of 97%.
Particularly profitable were the property lines, with a combined ratio of 67%, compared to 103% for casualty lines. This trend marks the third consecutive year that the E&S segment outperformed the broader industry in terms of underwriting profitability.
Factors Driving Continued Momentum
Several factors have contributed to the ongoing success of the E&S sector:
- Withdrawal of admitted carriers from volatile or unprofitable risks.
- Increasing casualty loss costs.
- Surge in demand for specialized coverage designed for complex exposures.
Fitch also observed a shift of business away from admitted property markets, especially in regions prone to catastrophes, alongside the migration of high-net-worth homeowners into the E&S space. However, the agency warned that the rise of managing general agents and fronting arrangements might heighten competition and pressure rates, even as they broaden distribution.
Future Projections for the E&S Market
Looking ahead, Fitch forecasts that while underwriting margins may narrow somewhat in 2025, they will maintain profitability and remain stronger than the P&C industry as a whole, provided there isn’t an unusual spike in catastrophic events. The agency believes that persistent strength in casualty pricing could offset easing property rates, even as liability exposures—especially concerning other liability occurrences—remain susceptible to social inflation and unfavorable reserve developments.
In 2024, the E&S market generated nearly $117 billion in statutory premiums, marking a 10% increase from 2023, including insights from Lloyd’s of London.
Conclusion: A Thriving Segment in a Changing Landscape
Fitch concludes that the Excess and Surplus insurance market is well-entrenched as a vital and profitable component of the US insurance landscape. With enhanced underwriting capabilities and products specifically tailored to address emerging risks, E&S will continue to play an important role as a complementary element to the admitted market.
In summary, the E&S sector’s trajectory of growth, backed by sound underwriting practices and keen market awareness, indicates a promising outlook for insurers and policyholders alike.
