The year 2020 reshaped the insurance landscape, ushering in unprecedented challenges. From the COVID-19 pandemic to global unrest and climate-related catastrophes, the property and casualty markets faced significant disruptions. Insurers tightened restrictions, nonrenewals became common, and finding coverage became increasingly difficult. In response, insureds and agents sought alternatives outside the admitted markets, driving business towards surplus lines.
As we enter 2024, the property market is in a state of transition. One certainty amidst this flux is the prominence of the surplus lines market, which has emerged as a major player in property insurance. According to PropertyCasualty360, the surplus lines market now stands at $98.5 billion, contributing 11.2% to total property and casualty premium. Understanding the trends shaping the property and casualty markets, as well as the trajectory of the surplus lines market, is imperative for carriers, agents, and insureds alike. Here’s what to keep an eye on in the coming year.
What are Surplus Lines?
Surplus lines, also known as excess and surplus (E&S), provide coverage for risks deemed too high or unusual for standard insurance carriers in the traditional, admitted market. Offered by non-admitted specialized insurers like Lloyds of London or Berkshire Hathaway, surplus lines cater to individuals and businesses facing unique risks requiring tailored coverage solutions. Homeowners, for instance, may turn to the surplus market for coverage in high-risk areas prone to natural disasters such as hurricanes, earthquakes, or wildfires.
Surplus Marketplace Trends to Watch in 2024
1. Continued Shift from Admitted to Surplus Lines: Hard-market underwriting in admitted markets continues to drive business towards the surplus market. Admitted carriers, becoming increasingly risk averse, have pulled back on coverage, raised rates, reduced limits, and tightened terms. This has compelled homeowners with unusual or high-risk properties to seek coverage in surplus lines. The surplus lines market’s flexibility and adaptability have expanded capacity to offer coverage that admitted markets cannot provide.
2. Climate-Related Risks: Climate and weather-related catastrophes are increasing risk in certain states and regions. Homeowners in catastrophe-prone areas like Florida and California face challenges in obtaining adequate coverage amidst rising climate risks. Admitted carriers are raising rates, reducing exposures, targeting premier businesses, or exiting the market altogether. This trend has led to a surge in surplus lines business, particularly in states prone to weather-related events.
3. Expansion of Surplus Lines to Lower/Middle-Market Risks: Surplus lines, traditionally associated with high-risk scenarios, are increasingly catering to lower and middle-market risks. Factors such as weather-related catastrophes, rising claim costs, capacity constraints, and higher reinsurance costs have made it difficult to place even “desirable risks” in the admitted market. Consequently, surplus lines providers are filling the gap for a broader range of clients.
4. Influx of New Carriers and Solutions: The surplus lines market has witnessed an influx of new carriers attracted by opportunities in the E&S space. These newcomers bring fresh perspectives and innovative solutions, expanding options for consumers seeking surplus coverage. With advancements in technology, underwriters can automate processes, respond faster, prequalify accounts, and assess risks more effectively. However, the challenge remains whether these carriers can offer solutions at a price point acceptable to insureds.
5. Talent Shortage: There’s a talent shortage across the property and casualty market, particularly in surplus lines, where expertise and innovative thinking are crucial. Insurance brokerages and carriers are grappling with hiring enough talent to meet increasing business demands. The shortage may be felt most acutely during the submission process, highlighting the importance of working closely with brokers who have strong relationships with surplus carriers and underwriters.
The DOXA Advantage in the Surplus Market
While the surplus lines homeowners market faces challenges, it remains one of the most innovative sectors in the insurance space. As traditional markets become less viable, other enterprises emerge to fill the market need. DOXA, offers nationwide access to both admitted and surplus markets. By partnering with DOXA, retail agents can access a broad range of surplus markets and negotiate favorable terms and pricing for homeowners. Contact DOXA today to learn more about navigating the evolving surplus lines market and securing the solutions your homeowner clients need.
