What's Happening?
The U.S. excess and surplus (E&S) lines market is experiencing a slowdown in premium growth, according to a report by insurance industry rating agency AM Best. The report highlights that premium growth through September 2025 was 9.7%, a decrease from the 13.5% growth observed in the same period the previous year. This deceleration is attributed to competitive pressures in certain lines of coverage, including cyber, commercial property, and directors and officers liability. Despite the slowdown, the E&S market continues to handle a greater number of risks that are better suited for its flexible and customizable offerings. New market entrants, particularly fronting companies, have contributed to recent growth, although they face potential challenges
from adverse developments in accident years 2021 through 2024. Notably, nine of the top ten E&S market participants increased their direct premiums written, with Berkshire Hathaway being the exception, reporting a 12.4% decrease in Q3 2025 compared to the previous year.
Why It's Important?
The moderation in growth within the E&S market is significant as it reflects broader competitive dynamics in the insurance industry. The E&S market plays a crucial role in providing coverage for risks that do not fit standard underwriting frameworks, offering flexibility and customization. The slowdown could impact the ability of businesses to secure necessary coverage, particularly in high-risk areas like catastrophe-exposed properties. Additionally, the performance of new entrants, such as fronting companies, will be closely watched as they navigate potential adverse developments. The decrease in Berkshire Hathaway's premiums could signal shifts in market strategies or risk appetites among major players. Overall, the E&S market's performance is a barometer for the health and adaptability of the insurance sector in addressing emerging risks.
What's Next?
Looking ahead, the E&S market is expected to continue adapting its distribution and product strategies to maintain its role in covering non-standard risks. The market may see further consolidation or strategic shifts as companies respond to competitive pressures and adverse developments. Stakeholders will likely monitor the performance of fronting companies and other new entrants to assess their resilience in the face of potential challenges. Additionally, the market's ability to innovate and offer tailored solutions will be critical in maintaining its relevance and growth trajectory. The insurance industry will need to balance competitive pricing with the need to cover increasingly complex and high-risk exposures.
