Surplus lines premium reached nearly $36 billion through the first six months of 2023, according to the 2023 Midyear Report of the U.S. Surplus Lines Service and Stamping Offices.
Premium increased about 16% overall compared to results reported through the same period in 2022, while the number of premium-bearing transactions rose 2.6% to nearly 2.9 million. The latest results follow last year’s record-breaking midyear premium of $31 billion and growth of 32.4%.
Florida ($8.65 billion), California ($7.83 billion) and Texas ($7.21 billion) accounted for the highest premium totals.
“The massive growth we saw across the country in the wake of the pandemic might be behind us, but the report demonstrates that the E&S market continues a strong trajectory and will be there to meet the needs of Americans seeking unique insurance solutions,” said David Ocasek, CEO of the Surplus Line Association of Illinois.
The midyear report is intended to be a granular tool to analyze and identify market trends by aggregate product line and provide useful information to better serve clients. The accompanying line of business data included provides a valuable indicator of the types of business driving the E&S market.
The Wholesale & Specialty Insurance Association (WSIA) reported that commercial liability and commercial property coverage comprise the bulk of the market. While some states are seeing increases in personal lines coverages such as homeowners and disability policies, those lines continue to constitute only a small portion of the overall E&S market.
Florida Premium Volumes Surge
Mark Shealy, chief financial officer of the Florida Surplus Lines Service Office, noted Florida continues to see a surge in premium volumes – with an increase of 34.7%, while transaction counts show steady upward movement in the low single digits.
“We do not expect any change in these results in the near term,” Shealy said. “Most of this shift is driven by the commercial property market, which continues to experience price hardening and a reduction in policy counts. The change is also supported, to a lesser extent, by the hardening of the commercial general liability.”
He also touched on a softening cyber market, adding that the “cyber line seems to have softened to the point that increases in premium are now exceeded by the policy count growth.”
Growth Slows in California
While California has seen record growth in recent years – 77% from 2019 to 2022 – the first half of 2023 showed signs that some lines are experiencing slower growth and reducing the state’s overall premium from the first half of 2022.
“General liability is down 8% from last year and makes up 25% of the policies while cyber, commercial difference in conditions, and multiperil homeowners are up nearly 50% in total premium,” said Ben McKay, chief executive officer and executive director of the Surplus Line Association of California. “Our experience in the first half of 2023 might indicate a softening of certain liability coverages, or we could be seeing a short-term aberration. California property lines clearly continue to experience a hard market.”
Illinois Growth Moderating
Illinois has seen premium growth moderate to 10.6% after year-over-year growth of 23% in 2022.
“Property coverage continues to be a very strong driver of premium growth in Illinois,” Ocasek said. “The umbrella/excess liability category and commercial auto liability are also seeing solid growth. However, after spiking in 2022, cyber liability has moderated in the first half of this year with a 15% drop in premium.”
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