A recent report from AM Best shows that competitive market pressures have resulted in smaller year-over-year premium growth in the surplus lines market after years of sustained significant growth.
AM Best reported that premium growth in the excess and surplus (E&S) market increased by 9.7% in the third quarter of 2025, down from 13.5% in the same period last year.
The rating agency noted that risks from recognized operators continued to flow into the E&S market as of 3Q25. While premiums have been affected by increasing competition in certain risk categories and lines of coverage, insurers’ surplus lines have continued to surge over the years, absorbing complex risks that insurers have increasingly avoided in property, commercial auto and high-risk casualty lines.
The slowdown also reflects competitive market pressures in certain areas such as commercial real estate, cyber and directors and officer (D&O) liability.
Nonetheless, E&S market participants can still take advantage of current market opportunities through high-volume submissions.
Despite a slowdown in premium growth in 2025, the surplus line market continues to evolve, with increasing exposure to certain categories considered more suitable for the E&S market.
“These changes impact distribution and product strategies,” said David Blades, associate director at AM Best. “One such example is the ability to provide catastrophic property insurance, where remaining line carriers are able to provide flexibility and customization for risks that no longer fit within the standard underwriting framework.”
AM Best believes that the majority of accounts moving to the E&S market are underwritten in a manner that reflects the risk exposure presented, with bespoke policy conditions and rates commensurate with the risk, reflecting the core capabilities of the surplus lines carrier.
However, AM Best notes that some of the premium growth in recent years has been driven by new market entrants, including frontline companies seeking to expand their market share in surplus product lines and the specialty commercial market.
The ratings agency added that some industry reports show that Frontier’s reserves over the past decade have been concentrated in the accident years of 2021 to 2024. Adverse developments in prior year reserves will have a negative impact on the historical underwriting performance of these companies and may have a negative impact on overall surplus lines underwriting performance.
