AM Best Revises Outlook on US E&S Lines to Stable

AM Best has revised its outlook for the US excess and surplus (E&S) lines insurance segment from positive to stable, citing slowing premium growth and softening rates in select classes. The decision reflects emerging caution over loss cost uncertainty, including social inflation and catastrophe-related volatility, despite continued underwriting profitability. 

In its latest Best's Market Segment Report, titled "Market Segment Outlook: US Excess & Surplus Lines Insurance," AM Best said the segment continues to attract new entrants and benefits from strong demand. However, insurers are becoming more selective in capacity deployment and are raising performance thresholds at renewals. 

"Although favorable market conditions for E&S writers persist, early rate softening in select classes such as commercial property, slowing premium growth, and more-selective capacity deployment are dynamics that now warrant a stable outlook," Edin Imsirovic, director at AM Best, said. 

The report said admitted insurers are tightening underwriting criteria, pushing more accounts toward the E&S market. This includes business in commercial auto, directors and officers liability, cyber liability, and emerging risks from the expanding legal cannabis industry. Surplus lines are also increasingly used to cover weather-related catastrophe risks and homeowner losses driven by rising repair costs and supply chain disruptions. 

The integration of complex new technologies across industries continues to support demand for tailored E&S solutions. Additionally, managing general agents and other delegated underwriting authority enterprises are collaborating with insurers to craft customized offerings. The global reinsurance market, particularly London-based reinsurers, remains a key partner in supporting E&S capacity. 

At the same time, AM Best said oversight for fronted programs is becoming more stringent, with rising collateral requirements and data reporting expectations—particularly in the United Kingdom and at Lloyd's—adding to operational complexity. 

Despite the challenges, AM Best believes supportive market dynamics for US E&S insurers will remain, though in a more moderate form.

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