Following years of consistent and significant growth, competitive market pressures have resulted in smaller year over year increases in premium growth in the surplus lines market, according to a recent report by AM Best.
In the third quarter of 2025, AM Best reported that premium growth in the excess and surplus (E&S) market increased by 9.7%, down from 13.5% in the same quarter a year prior.
The ratings agency noted that through Q3’25, risks from admitted carriers continued to flow into the E&S market. While premiums have been affected by rising competition across certain risk classes and lines of coverage, surplus lines insurers have continued a multiyear surge, absorbing complex risks that admitted carriers have increasingly avoided in property, commercial auto, and high-hazard casualty lines.
The slower pace of growth also reflects competitive market pressures within certain lines such as commercial property, cyber, and directors and officers (D&O) liability.
Nevertheless, E&S market participants are positioned to capitalise on prevailing market opportunities through the volume of submissions.
Despite the moderation in premium growth during 2025, the surplus lines market continues to evolve, with a growing number of risks in certain classes viewed as better suited for the E&S market.
“These changes have influenced both distribution and product strategies,” said David Blades, associate director at AM Best. “One such example is capacity for catastrophe-exposed property coverage, an area in which surplus lines carriers have been able to offer flexibility and customisation for those kinds of risks that no longer fit standard underwriting frameworks.”
AM Best believes that most accounts transitioning to the E&S market are underwritten in a manner reflecting the exposures presented, with customised policy conditions and rates commensurate with the risk, exemplifying the core competencies of surplus lines carriers.
However, AM Best noted that a portion of premium growth in recent years has been driven by newer market entrants, including fronting companies seeking to expand their market share in the surplus lines and specialty commercial markets.
The ratings agency added that some industry reports show fronting company reserves over the past decade have been concentrated in accident years 2021 through 2024. Adverse development on those prior-year reserves would negatively affect calendar-year underwriting results for these companies and could negatively impact overall surplus lines underwriting results.
