AM Best has revised its outlook on the excess and surplus (E&S) lines insurance segment to positive from stable, citing increased business due to declining capacity in commercial lines and some personal lines markets.
The rating agency also referenced strong underwriting results, which are driving favourable operating profitability and strengthened capital positions, as a key reason for the revision.
AM Best observed that admitted carriers continue to constrict their underwriting criteria, leading accounts to seek coverage in the E&S market.
“Lines of business being cast off by admitted carriers include commercial auto and directors’ and officers’ liability,” the firm explained.
Meanwhile, AM Best noted that cyber liability and coverage for the expanding legal cannabis industry also continue to leverage the capabilities of E&S carriers.
The rating agency continued, “As these accounts tap into the core competencies of the surplus lines market, these E&S participants are posting more favourable underwriting results and greater top-line growth than those in the broader property/casualty industry.”
Greg Williams, senior director, AM Best, added, “Fronting carriers 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 carriers to develop customized coverage solutions, all at the same that challenging conditions in the reinsurance market are leading participants to surplus lines underwriters.
“This is providing a significant boost for the E&S segment, and we expect it to remain in high demand.”
