Surplus lines premiums increased by a double-digit percentage for the fifth year in a row last year despite emerging challenges, and the sector’s favorable underwriting results and capital generation are expected to continue, says A.M. Best in a report.
Total annual surplus lines market premiums increased 19.2%, to $98.5 billion, according to the report issued by Oldwick, New Jersey-based Best.
This was despite challenges that included secondary weather perils, the financial impact of regulatory constraints, and the proliferation of litigation financing and its effect on liability claims loss severity, the report said.
These were in addition to the “usual headwinds,” including rising loss costs, above-average catastrophe activity and merging adverse trends in personal auto, it said.
Weather-related catastrophes in the U.S. remain a significant problem for property insurers, the report said. Losses from 2022’s Hurricane Ian, estimated to be $50 billion to $65 billion, were followed by above-average cat losses during this year’s first half, which “could make 2023 a costly year for insured losses,” the report said.
However, the segment should continue to report favorable results. While investment market volatility could constrain overall operating earnings, “excess and surplus lines insurers typically fare well during cycles when market conditions stress standard market insurers,” the report said.
