Surplus Lines Leaders Remain Bullish on Outlook in a Shifting Market

The surplus lines and specialty commercial markets are becoming an increasingly competitive space, with supply outweighing demand in some lines of coverage and risk classes creating “micro-market” trends not experienced in previous softer markets.

AM Best reported in its recently released State of the Market report that there remains an “abundance of capital and heightened competition among insurers, reinsurers, and managing general agents (MGAs),” which is shifting the landscape to a policyholder’s market when it comes to negotiating power. “More than ample market capacity–from insurers, reinsurers, and delegated underwriting authority enterprises (DUAEs) such as MGAs and program managers–is outpacing demand and pressuring margins,” the report said.

But the competitive landscape is not reducing surplus lines’ piece of the commercial lines pie. Even with rapidly softening rates in the property market, surplus lines carriers represented 27.5% of the U.S. commercial insurance market in 2025, up from 25.7% in 2024, AM Best noted. That percentage first broke the 20% marker in 2021 and has increased successively each year.

While insurance market cycle history would tell that now is the time to prepare for retreat of business into the admitted market, this historical trend may now be gone forever.

Compared to historical business cycles, the enhanced importance of surplus lines intermediaries will negate any broad, rapid retreat from the surplus lines market as admitted carriers seek opportunities to grow their portfolios, AM Best believes. Also, most carriers now own and operate their own excess and surplus (E&S) entity, allowing them to rebalance exposures across their admitted and non-admitted divisions as market conditions evolve and dictate.

Today’s surplus lines market is not the same as it was in past soft markets, said Tim Turner, CEO of Ryan Specialty and chairman of Ryan Turner Specialty, Ryan Specialty’s wholesale brokerage division.

“This cycle is very different and unique for a number of reasons,” he said. The overall market has been completely restructured. “In the last soft market, 15 years ago, there were less than a dozen wholesale dedicated insurance companies,” Turner said. “Today, there’s 110, and most large, admitted companies now own an E&S company, too,” he added. That change limits the “gravitational pull from admitted companies” to take business back into the admitted-only market, he explained. “We just don’t see that today, and that gives the E&S market long-term stability.”

The world is not becoming less risky or less litigious either. “That is going to be the great stabilizer and probably the growth engine for the E&S market to continue to grow in the future,” said Jim Damonte, president and chief underwriting officer at Upland Capital Group. “The E&S market having the ability to flex on rate and form, and the ability to tailor coverage, will help our market to continue to grow and build as an overall percentage of the entire market.”

The U.S. managing general agent market grew direct written premium from roughly $46 billion in 2020 to approximately $128 billion in 2025, according to Conning, which incorporated Lloyd’s business and other premium not fully captured in statutory reporting. Statutory filings reported $102.6 billion in MGA direct premium written, up 12% from 2024, more than double the broader property/casualty market’s approximately 5% growth rate,

The findings underscore the growing role MGAs play in delivering specialized underwriting expertise, technology-enabled capabilities, and flexible access to insurance capacity.

However, concerns have arisen about the alignment of value between MGAs and (re)insurers centered around the desire for growth and the need to maintain underwriting and pricing discipline, AM Best noted in its report.

“MGAs, at one time primarily known as a highly scrutinized niche within the distribution system, have become a key conduit of surplus lines growth during the past decade, functioning as business originators and, at times, as product developers,” the report said. “With MGAs depending on wholesale distribution channels for submissions, the current competitive environment heightens the importance of maintaining discipline and ensuring the alignment of interests between MGAs and carriers,” the report said, adding this is particularly important considering the commission-based nature of MGA compensation.

There are critics when it comes to the rapid expansion of the MGA space, including Chubb CEO Evan Greenberg, who wrote in a letter to shareholders in Chubb’s 2025 annual report that reinsurers and insurers who support MGAs are making “a bad bet” in a majority of cases.

Greenberg wrote: “An MGA is an agent with underwriting authority. (No conflict of interest in that!) MGAs are not new–they have been around for many decades–but during the recent hard market they proliferated. As agents, they don’t retain underwriting risk. Instead, for a commission, they bind others–insurers, reinsurers, hedge funds, private equity–to risk gathered from retail and wholesale brokers who generally do business with them because they offer cheaper prices and good commissions.”

He went on to describe “four or five layers of intermediaries” that are part of a “volume-based incentive system that amplifies the supply cycle,” including brokers taking commissions from fronting carriers (who take fees) and “broker underwriting facilities” through which brokers “lay off coverage automatically to insurers for additional commission…”

“[A]ll of these intermediaries make their money through commission dollars, which are a function of volume. The clear losers are the ultimate risk takers,” he wrote, referring to business taken at “cheap prices with huge intermediation costs.”

Ryan’s Turner admits that it’s a valid concern as delegated underwriting authority has become 50% of the total non-admitted surplus lines market in various forms, including binding authority, small commercial programs, and affinity business, and then larger entities that come in the form of managing general underwriters. But he stressed that most insurance companies have faith in delegated underwriting authority.

“There’s some skeptics out there, and there’s some concern about it, but there’s always been a flight to quality with delegated underwriting authority,” Turner said. So, while there may be some that are irresponsible, it’s usually a minority, he said. “Most MGUs, including I think our MGUs, are very, very responsible,” he said. “There will likely be some disappointments, but the majority of the industry is very solid and doing the right thing, performing in a profitable, responsible way for their capital providers.”

Ben Beazley, Jencap’s president, Atlanta Branch – National Property Practice Leader, said there’s a distinction to be made when it comes to MGAs. “There are a lot of good MGAs in the property sector, he said. “I actually get capacity for what you might deem as an MGA, but there are different types of MGAs with different ownership.” He finds it interesting to look at the capacity behind some newer MGAs. “It’s not just insurance markets backing these MGAs, but other capital coming into the market.” The growth in property capacity as a result has been “staggering,” Beazley said. “The last six months of ’25, I would say without exaggeration, every two weeks I was hearing of a new MGA being propped up.”

Beazley describes the E&S property market as “unprecedented” from 2020 through 2024, as property valuations went up 100%-200%, insurance markets began increasing rates, and retentions blew up for more challenged classes of business with more challenging perils. Then profits started rolling in, he said, and so did other capital to add even more market capacity.

Still, in Beazley’s view the far bigger concern is what he calls the “evil eye in the sky: retentions.”

“What happened during this time was that retentions rose to a level where claims, or the attritional losses, weren’t making it to the insurance companies,” he said. “Therefore, because that wasn’t happening, the public adjusters all went back under their rocks and a lot of the litigation wasn’t happening, specifically talking about property business,” he said. “Now that retentions are going down and dropping again, they’re dropping almost faster than rates are, quite frankly.” That’s pushing the losses a lot closer to the insurance carriers, he said.

“So, now we are seeing the public adjusters (PAs) coming out from underneath their rocks and inflating these claims totally unnecessarily. … I’ve had two claims recently that I’ve been involved in where the PA was trying to inflate the claims by 300% to 400%,” he said.

In this climate, insurance companies and MGAs need to really focus on how to mitigate claims and make sure they’re not giving the world away when it comes to retention, Beazley suggested.

“The old adage is doubling a deductible is probably worth 200% of rate. So, if you’re going to half the deductible and you’re deducting the rate, you’re putting yourself in a far more vulnerable situation when it comes to claims activity,” he said.

“We have had a very benign CAT season, so everyone’s got this false sense of confidence,” he said. That will change. “I did hear from one insurance company, their property book just crept over 100% combined, so now maybe we’re seeing at least from the direct carriers a little bit of caution.”

Even though the property market remains soft, typical property surplus lines business isn’t leaving the E&S sector.

“We’re retaining our business and other wholesalers are retaining their business,” said Ryan Specialty’s Turner. “It’s just that the prices have come down dramatically for two years in a row, but it’s not leaving the sector.” He agrees, at some point the property market will firm again. “The global warming factor is not going away, unfortunately, so pricing will ultimately moderate and flatten in property, and at some point, it will firm up again. We just don’t know when, but we’re getting there.”

The casualty market hasn’t hit the softening pricing trends as significantly as other areas of the E&S sector. According to WTW’s latest Commercial Lines Insurance Pricing Survey (CLIPS), the largest price increases in second-quarter 2026 continued to come from excess/umbrella liability, but even this area dropped to a high-single-digit increase.

Upland’s Damonte said his specialty carrier hasn’t been impacted by some of the significant rating decreases seen in property.

“We view the market as sort of a whole host of micro markets, and we tend to participate in some of the tougher marketplaces when we think about some of our transportation business or public entity business,” he said. “But some of the areas that we play in, we’re certainly seeing the pricing pressure… It doesn’t necessarily mean that we’re not able to get rate increases, just probably not at the same level that we had in years past,” he said. “But it’s undoubtedly a softening market at this point.”

He added there is a stark difference between primary casualty business and excess casualty business, however. “We are seeing some different characteristics there,” he said. “Excess liability, when you’re building larger towers of insurance, that lends itself to having multiple parties in order to put those towers together. It’s going to require two, five, 10 different participants, and so that allows for a firmer market.” It’s a different dynamic when looking at primary versus excess. “I’d say that the primary side of things is a good deal more competitive at this point.”

While medium-hazard casualty business has a little bit of softness in it, there are several very firm niches within casualty that are providing tremendous opportunities for wholesalers in the U.S., according to Turner. “Examples of that would be transportation-related business. It’s a loss leader in the reinsurance world and long-tail casualty business, so anything that has latency and long-tail aspects to it is very firm.”

The lost cost adjustment factors in long-tail casualty business are accelerating and continue to accelerate, making it very difficult to price, he added. “Lots of examples of what I would call niche firming phenomenon that continue to keep the casualty segment very firm, including shared economy, delivery, trucking, basically anything in transportation is tough,” Turner said.

The softening market in E&S is not dampening the optimism of surplus lines leaders.

“I think the future is very bright for E&S and for specialty broking and underwriting,” Turner said. “The world unfortunately continues to be riskier, and global warming’s not going away.”

The demand for specialty services and for the services of delegated underwriting authority and wholesale broking altogether will continue to be there, Turner noted. “We see opportunities for creativity and innovation in E&S and in the trading relationships that we have with our retail customers and our markets. I’m very bullish on the E&S market moving forward.”

“A couple of softening cycles of property does not change the entire outlook for E&S business, in my opinion,” agreed Neil Kessler, CEO of Specialty at CRC. “Look at the world, it’s just a riskier place.”

Kessler keeps a focus on macroeconomic trends in the U.S. that are driving specialization and a move toward more specialty distribution. “That’s only going to continue,” he added.

“I think the standard, the level of expertise and specialization needed will continue,” he said. “As things get riskier and continue to evolve in the economy, people are looking for specialization, and our retail partners rely on us to provide that expertise.”