Property Drives E&S Growth of 15% in 2023 to Increase Overall P/C Share

For the sixth straight year, U.S. excess and surplus insurers in 2023 saw double-digit growth in direct written premiums.

E&S direct written premiums (DWP) grew 15% last year to increase its share of the total property/casualty market to 9%, according to a report from Fitch Ratings.

“Expectations are for continued profitable growth, albeit at a reduced rate, and to remain at nearly 10% of the total market,” said Douglas Pawlowski, senior director. The E&S sector had maintained a 5% share of the total P/C market until its “growth spurt” began in 2018.

The now years-long expansion of the E&S market grew faster in 2023 than the overall P/C market’s 7% DWP uptick in 2023, and its combined ratio of 86 bettered the total P/C market’s 99. The E&S market reported combined ratios of 96 in 2022 and it broke even in 2021, Fitch said.

“We expect E&S underwriting performance to remain profitable in 2024 and better than the standard P/C market, barring severe catastrophe losses,” Fitch added, with the expectation that favorable pricing will keep up with loss costs.

Growth in E&S DWP has been recently driven by property insurance premiums leaving the standard market in catastrophe-exposed states, as major insurers of home insurance exited the admitted market for E&S. Profit and pricing trends continue to attract additional competitors to the market as property lines recorded a combined ratio of 66—a 27-point improvement from 2022. However, Fitch noted great volatility in property combined ratios over the last decade.

The allied and fire line of business, which include homeowners, recorded a combined ratio of 63 in 2023, with improved results also seen in commercial multiperil and other liability-claims made.

Commercial auto, medical professional liability, and other liability-occurrence did not enjoy a profitable year, with combined ratios of 122, 105 and 101, respectively.

In E&S casualty, the combined ratio was 99 in 2023, up two points from 2022. Rate increases seem to be keeping up with loss costs but “the impact of inflation on loss costs remains a nagging challenge for the sector,” Fitch said.

Last year 70 insurance groups wrote more than $200 million in E&S premiums, led by Lloyd’s of London, Berkshire Hathaway, AIG, Fairfax, and Markel. The top three accounted for 31% of total E&S DWP in 2023, reported Fitch.