The U.S. surplus lines insurance market reached a significant milestone in 2023, surpassing $100 billion in premiums for the first time and recording more than $115 billion in direct premiums, according to a new report from AM Best in collaboration with the Wholesale & Specialty Insurance Association (WSIA). That represents a robust 16.8% growth over the previous year, marking six consecutive years of double-digit expansion.

Key Growth Factors

The sharp rise in surplus lines premiums is largely driven by growing demand for non-acceptable insurance solutions, particularly for property-prone and complex liability risks. As climate-related events, such as wildfires and severe storms, become more frequent and severe, traditional insurers are becoming more cautious, creating opportunities for surplus lines providers. Lloyd’s of London, a major player in the market, has announced a significant 28.8% increase in premiums in 2023.

Additional growth drivers include higher prices for some types of coverage and increased demand from wholesalers and general agents. Non-admissible carriers have been particularly adept at crafting policies for emerging risks, including those related to climate change and cybersecurity, underscoring the evolving role the sector is playing.

Resilience in the face of challenges

Despite economic headwinds such as inflation, regulatory pressures, and rising secondary risks such as hurricanes and storms, the surplus insurance market has shown remarkable resilience. Insurers have adapted by improving strategies, developing innovative solutions, and focusing on long-term risk management.

The surplus lines sector’s growing role as a “safety valve” for the property and casualty insurance industry is becoming increasingly vital. It continues to provide tailored solutions for high-risk exposures that standard markets avoid, further enhancing its importance in the industry.

Outstanding growth and industry impact

The report noted significant growth across several lines of business, with nonprofessional general liability and real estate leading the way. Nonprofessional liability saw a 36.9 percent increase, while real estate premiums grew 33.3 percent. Florida and Texas were among 11 states that reported double-digit premium growth, at 27.8 percent and 25.8 percent, respectively.

This increase in premiums reflects a larger trend: Surplus lines are capturing a growing share of the property and casualty insurance market. In 2023, surplus lines accounted for 23.7% of total direct commercial lines premiums written in the United States, up from just 7.1% in 2000.

Emerging Opportunities

AM Best’s report also highlights the market’s potential to address emerging risks in sectors such as artificial intelligence, cannabis, and environmental liabilities. These growing industries provide insurers with opportunities to create specialized products tailored to increasingly complex risk environments. The surplus lines market also dominates the US cyber insurance sector, accounting for 59.2% of the market in 2023.

Looking ahead, the report notes that surplus lines insurers are well positioned to continue expanding, especially as new risks and coverage needs emerge in response to rapid technological and environmental changes.