US Surplus Lines Insurers' 2020 Premium Growth Was Largest Since 2003

The US surplus lines market's 17.5 percent direct premium growth was its largest year-over-year premium increase since 2003, according to A.M. Best.

The Best's Market Segment Report, "Expanding Opportunities Boost Surplus Lines Growth and Spur Operating Profits," says 2020's increase in direct written premiums follows 11.2 percent growth in 2018 and 2019.

Best noted that despite excellent premium growth, surplus lines insurers have found underwriting profitability to be elusive in recent years due to losses resulting from secondary perils such as wildfires and convective storms.

The surplus lines market traditionally performs well during times of tumult and uncertainty, Best said.

"With sales and payrolls down because of pandemic-driven quarantines, lockdowns, and business closures, surplus lines insurer premium growth was due largely to a couple of key factors: opportunities attributable to market dislocation that created lower supply for the market demand; and insurers maintaining discipline despite tumultuous economic conditions and achieving a greater degree of rate adequacy per risk," a Best statement said. "In some cases, renewal carriers looked to get out of the business or risk class entirely, providing surplus lines insurers the opportunity to underwrite and price the risks in accordance with their standards."

Best's report suggests that ongoing uncertainty about COVID-19 variants could reverse some of the surplus lines insurers' gains. Catastrophe losses, uncertainty about casualty claims costs, and price adequacy concerns could present additional headwinds for surplus lines insurers, the rating agency said.

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