Record-High Direct Premiums Written for the U.S. Surplus Lines Segment in 2021

Total U.S. surplus lines direct premiums written (DPW) reached a record $82.6 billion in 2021, with momentum continuing through mid-year 2022, according to a new AM Best report.

In the first six months of 2022, premiums topped $31 billion, and premium bearing transactions pushed 2.8 million. Premiums in the E&S sector rose 32.4% and transactions were up 9.4% over numbers reported through the same period in 2021, according to the 2022 Midyear Report of the U.S. Surplus Lines Service and Stamping Offices released in July.

The Best’s Market Segment Report, titled, “Record-High Direct Premiums Written for the U.S. Surplus Lines Segment in 2021,” states that the U.S. surplus lines companies reported improved underwriting and operating results, and notched their largest year-over-year premium growth since 2003.

In 2021, the surplus lines market grew by nearly 25%, including U.S. domestic surplus lines insurers, the (90) Lloyd’s syndicates writing U.S. surplus lines business, and through regulated non-Lloyd’s alien insurers, David Blades, associate director at AM Best, told Insurance Journal.

“The 2021 surplus lines direct premiums written total we aggregated was $82.653 billion, compared to $66.102 billion in 2020,” Blades said. The key drivers of that growth were the companies identified in the report as “Domestic Professional” surplus lines writers, or those insurers that write more than 50% of their total DPW on a nonadmitted or surplus lines basis.

“The Domestic Professionals wrote $61.2 billion in 2021, up from $46.9 billion, a 30% increase,” Blades said.

In terms of admitted versus non-admitted, or surplus lines, the surplus lines market comprised 10.1% of the total U.S. property/casualty insurance market (in terms of DPW), in 2021, the highest percentage yet, Blades added.

The surplus lines insurers’ market share of total P/C DPW has more than doubled over the last 20 years, to 10.1% at the end of 2021, up from 4.3% in 2001. The surplus lines insurers’ share of the commercial lines’ DPW grew to 20.4% at the end of 2021, from 8.3% at the end of 2001.

The report notes that in the first quarter of 2020 through mid-2022, U.S. property/casualty (P/C) companies and their distribution partners have dealt with myriad challenges, including the wide-ranging effects of a pandemic, a supply chain crisis and rising inflation, while withstanding above average losses from natural catastrophes and substantial investment market volatility. As a result, loss costs continue to rise and price adequacy remains a serious concern for several lines of coverage.

Despite these challenges, the P/C industry has been able to limit underwriting losses and generate surplus growth. AM Best expects surplus lines insurers will continue to benefit from underwriting results, organic capital generation and intelligent management of balance sheet factors, as they have throughout the pandemic. Volatility in the investment markets, however, could constrain overall operating earnings.