A.M. Best Revises Excess and Surplus Segment's Outlook to Positive

A.M. Best has revised its outlook on the excess and surplus (E&S) lines insurance segment to positive from stable.

In announcing the outlook change, the rating agency cited the E&S segment's increased business due to declining capacity in commercial lines and some personal lines markets, along with strong underwriting results that are driving favorable operating profitability and strengthened capital positions for excess and surplus insurers.

According to the Best's Market Segment Report, "Market Segment Outlook: US Excess and Surplus Lines Insurance," admitted insurers continue to constrict their underwriting criteria, prompting leading insurance buyers to seek coverage in the E&S market. Among the lines of business affected are commercial auto and directors and officers liability, Best said.

In addition, buyers continue to look to the excess and surplus market for cyber-liability coverage and capacity for the expanding cannabis industry, the rating agency said.

Best said that as those buyers tap into the surplus lines market's core competencies, excess and surplus insurers are posting more favorable underwriting results and greater top-line growth than insurers in the broader property-casualty industry.

The report also said that the use of the E&S lines structure has expanded.

"Fronting insurers are applying the freedom of rate and form to meet insureds' coverage needs, and delegated underwriting authority enterprises such as managing general agents are working with insurers to develop customized coverage solutions, all at the same time that challenging conditions in the reinsurance market are leading participants to surplus lines underwriters," Greg Williams, senior director at A.M. Best, said in a statement. "This is providing a significant boost for the E&S segment, and we expect it will remain in high demand."

Copyright © 2023 A.M. Best Company, Inc. and/or its affiliates. ALL RIGHTS RESERVED.