By Peter Crowe | December 09, 2024 at 02:19 PM
Originally published on ALM / PropertyCasualty360
There is growing interest in excess and surplus (E&S), or non-admitted, lines of business (LOBs) in the U.S. insurance market. What was once only worthy of handling niche products catering to complex, perilous, and unconventional situations, is becoming a mainstream solution for businesses and individuals.
This rise in the popularity of E&S insurance also reflects broader shifts as insurers and managing general agents (MGAs) adapt to an environment increasingly shaped by natural disasters, emerging risks, and regulatory challenges.
Today, E&S insurance is no longer a niche; it’s a critical component of a modern, responsive insurance ecosystem. The slideshow above illustrates trends that will continue to shape the E&S insurance market in 2025.
Why E&S insurance is gaining popularity
The new popularity of E&S insurance can be traced to several factors, but at its core, the rise is driven by the industry’s need to adapt to a more unpredictable risk landscape. Regulated by stringent state requirements, insurance companies handling admitted LOBs can struggle to cover high-risk exposures. The increase in natural disasters, particularly in vulnerable areas such as Florida and California, has made it difficult for traditional insurers to provide affordable coverage within admitted LOBs. Further, the growing frequency of black swan events — “once in a lifetime,” severe occurrences, such as pandemics or cyberattacks — has made insurers more cautious.
E&S insurers, however, thrive in this space. The beauty of E&S is the flexibility non-admitted lines provide. Having the ability to operate outside of some of the more stringent regulatory restrictions can mean the difference between being able to design policies tailored to specific risks, or not. For example, businesses in wildfire-prone California or hurricane-hit Florida may find it difficult to secure affordable, comprehensive coverage from traditional insurers. E&S carriers can step in, offering customized solutions not available in the standard market. Moreover, E&S products are increasingly used to test coverage for emerging risks, such as cyber threats, cannabis businesses, or intellectual property (IP) disputes, allowing insurers to stay ahead of the curve without the constraints of regulatory red tape.
The agent perspective on E&S is evolving
Historically, E&S insurance was seen by many agents as a last resort — a backup option when traditional coverage couldn’t be secured. It was associated with higher premiums, less predictable service, and more complex claims processes. However, as E&S becomes more mainstream, the perception of these products is evolving. Agents are recognizing that E&S policies can offer a higher level of flexibility and customization that standard policies simply cannot match, making them an attractive option even when traditional coverage is available.
Today, agents are getting comfortable working with E&S insurers because the market has become more established and competitive. E&S policies are no longer just a fallback, and there is a growing understanding that E&S insurers can move faster and be more innovative in addressing emerging risks. Moreover, agents now expect the same level of customer service from E&S insurers as from insurers operating exclusively in standard markets. This means quick response times, transparent pricing, and comprehensive policy support.
For agents, the rise of the popularity of E&S insurance is an opportunity to expand the portfolios of clients who have been underserved by traditional insurers. By partnering with E&S insurers and MGAs, agents can offer a broader range of solutions and become advisors who can navigate admitted and non-admitted markets, providing clients with tailored coverage options.
Meeting the rising expectations of service
No longer seen as a secondary option, E&S policies are now expected to come with the same level of service, support, and responsiveness as traditional insurance products. This shift places new demands on E&S insurers and MGAs to maintain high standards of customer service.
Policyholders in the E&S market are no longer willing to accept inferior service simply because they are in a high-risk category. To keep pace, E&S insurers and MGAs are investing in better customer service infrastructures, including user-friendly online platforms and efficient claims processes that facilitate proactive communication with agents and policyholders.
Further, as E&S insurers expand into emerging risk categories, like cyber and technology, the need for specialized expertise and top-tier service becomes even more critical. Insureds facing novel risks want to be confident that the chosen insurance company understands the risk’s unique challenges and can offer comprehensive, well-thought-out coverage.
The future of E&S insurance
For E&S insurers and MGAs, the future lies in finding new ways to address emerging risks while continuing to meet the rising expectations of agents and policyholders. (Easier said than done, right?) The lines between admitted and non-admitted markets are blurred and the U.S. is looking at a more integrated, responsive insurance landscape than ever before.
E&S may have once been a last resort for coverage of emerging risks, but today’s structural industry changes mean some of the business first launched or covered there won’t be transitioning to admitted markets going forward. For traditional insurers, the translation is “potential lost business,” unless new partnerships with niche MGAs can be forged or an E&S division created in-house.
The growing importance of E&S insurance marks a new era for the U.S. insurance market. As risks evolve, the demand for tailored, flexible coverage solutions will only increase. For insurers, MGAs, and agents, this presents opportunities and challenges. Those who can navigate this shifting landscape, offer innovative products, and maintain high standards of customer service will be well-positioned to thrive. Those who adapt quickly to these changes will find themselves at the forefront of this growing sector, driving growth and resilience in an uncertain world.
Peter Crowe is the president of FOCUS. He can be reached for further comment or information via email at peter.crowe@teamfocusins.com. This article is published with permission from the author and may not be reproduced. PC360: These trends are driving the rising popularity of E&S insurance
