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 percent and transactions were up 9.4 percent 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 percent, 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 DPW total we aggregated was $82.653 billion compared to $66.102 billion in 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 percent of their total DPW on a non-admitted or surplus lines basis. “The Domestic Professionals wrote $61.2 billion in 2021, up from $46.9 billion, a 30 percent increase,” Blades said.

In terms of admitted vs non-admitted, or surplus lines, the surplus lines market comprised 10.1 percent 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 percent at the end of 2021, up from 4.3 percent in 2001. The surplus lines insurers’ share of the commercial lines’ DPW grew to 20.4 percent at the end of 2021, from 8.3 percent at the end of 2001.

The report noted that in the first quarter of 2020 through mid-2022, U.S. 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.

To access the full copy of this market segment report, visit http://www3.ambest.com/bestweek/purchase.asp?record_code=323670.

Source: AM Best

*This article was originally published by Insurance Journal, CM’s sister publication