“We do anticipate continued growth [in surplus lines] based on reports all pointing to a healthy market and increased demand for specialty insurance coverages. [Intel suggests] that growth will continue into 2025”

Brady Kelley, WSIA

“There’s never a cost to seek a wholesale quote, yet there can be a great return when an insurance buyer needs a competitive, tailored solution. Buyers benefit from the technical expertise we bring to the table”

Brenda (Ballard) Austenfeld, rt specialty

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Growing demand fuels surplus lines expansion

Surplus lines reached unprecedented levels in 2023, driven by heightened demand for specialty coverages in a changing market landscape. How can retail agents capitalize on this growth?

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Brady Kelley

WSIA

Brenda (Ballard) Austenfeld

RT Specialty

Phillip McCrorie

RSUI

Industry experts

THE EXCESS and surplus lines market has been setting unprecedented records. In 2023 alone, direct written premium in this segment surged to $115.6 billion, reflecting a growth rate of 17.4 percent over the previous year, according to AM Best. This represents not only the highest premium level on record but also a significant expansion, driven largely by heightened demand for specialty coverages. The market is evolving to meet new challenges as demands for specialty coverages rise, positioning it as an increasingly vital segment of insurance.

The increase suggests that demand for specialty coverages is not isolated but reflects broader shifts in insurance needs across different regions.

Various individual lines of business are contributing to the overall rise in demand for E&S coverage. Commercial liability and property coverage represent a significant portion of surplus lines, with other areas also gaining ground, according to WSIA. Some areas have drawn particular interest due to external factors, like shifting appetites in the standard market and climate-related risks. States like California and Florida, with their respective vulnerabilities to wildfire and hurricane risks, have been especially reliant on surplus lines to cover these challenging exposures.

In an episode of Insurance Business TV, Brady Kelley, CEO & president of the Wholesale & Specialty Insurance Association (WSIA), said this robust growth indicates the resilience and versatility of the wholesale insurance industry, which has seen 12 years of sustained growth, nearly tripling since it last contracted in 2011. “We do anticipate continued growth based on reports all pointing to a healthy market and increased demand for specialty insurance coverages,” said Kelley. “Intel from our members would suggest this trend will continue into 2025.” Kelley pointed out that the growth of the surplus lines market has been widely distributed, with 15 states with surplus line stamping offices also reporting growth. In the first half of 2024, these states collectively saw a 10.1 percent increase in filings over the same period in 2023.

The appetite in the standard markets has been on the decline for tougher and riskier property coverages,

Brenda (Ballard) Austenfeld, president of RT Specialty, CEO of national property, and chair of the WSIA board of directors, emphasized that this shifting demand reflects larger social and environmental trends impacting the industry. “The momentum of growth within the E&S market continues to be extremely positive,” Austenfeld said. “The demand for expertise within the specialty lines arena is greater now than ever before.” She added that growing concerns around climate risks and “social inflation” have boosted the demand for shorter limits and more sophisticated risk management in property and liability segments. “With admitted markets withdrawing from various key states like California and Florida, there’s been much more opportunity for surplus lines to really step in and offer creative solutions,” Austenfeld said.

Phillip McCrorie, CEO and chairman of RSUI and vice chair of the WSIA board of directors, echoed these sentiments from a carrier’s perspective, noting that surplus lines markets remain uniquely equipped to handle the challenges of excess and umbrella policies. McCrorie described the pressure created by factors like social inflation and the increasing frequency of so-called nuclear verdicts in liability cases, which have shaped the current state of casualty coverage. Combined with eroding reserves from previous accident years, these factors have prompted carriers to revisit their approach to liability, focusing on excess and umbrella options. At the same time, property markets are also reacting to recent natural disasters, including Hurricanes Helene and Milton. In the aftermath of significant losses, carriers and brokers in the standard market will likely reevaluate pricing,

coverage availability, and broader strategies for meeting client needs in a shifting risk environment. This will likely drive more risks into the surplus lines. “We’ll see what happens now as the market absorbs these events,” McCrorie said. “When you’re dealing with natural catastrophes, those are momentum changers.”

“Wholesale brokers can also provide coverage and options that are often not available in the standard market,” she said. “We can also access markets that not all retail brokers have access to.” Finding wholesale partners is increasingly accessible, particularly through platforms like WSIA’s “Find a member” tool, which connects retail brokers with qualified specialists. This easy access aims to break down remaining barriers and expand opportunities for brokers across different segments. Kelley believes that fostering connections within the industry will ultimately help both wholesalers and retailers thrive.

are growing. To keep up with demand, the industry needs to address one of its biggest challenges: talent. Historically, recruitment efforts have focused on universities with risk management and insurance programs. However, Kelley acknowledged that much of the industry’s leadership, including prominent figures like Austenfeld and McCrorie, entered the industry without specialized degrees. WSIA’s recent initiatives, including the creation of the WSIA Diversity Foundation, aim to broaden recruitment channels and draw talent from various backgrounds. The foundation, which has raised over $4.2 million since 2020, has expanded outreach beyond traditional pipelines to promote inclusivity in hiring. “There’s definitely a race for talent, and it’s only accelerating as the market grows,” said Kelley. McCrorie emphasized that these efforts are about not only expanding the talent pool but also fostering a culture of inclusivity within the industry. For him, diversity within RSUI and the industry is both a cultural and strategic priority, one that brings broader perspectives and enhances problem-solving capabilities. “Living in a diverse city like Atlanta, I can see that by not reaching out to all communities, we’d be selling ourselves short,” he said. “There’s an old saying: you can be invited to the dance, but unless you’re dancing, you’re not included.” RSUI is committed to building a diverse workforce that strengthens us across the board and ensuring everyone feels included, McCrorie said. The foundation gives resources to refine the organization’s messaging, both for employees and for future talent. Austenfeld also underscored the value of diversity, viewing it as essential to developing strong teams that bring various perspectives to complex challenges. “I believe diversity of thought is essential for building a strong team and skill set; it fosters various approaches to opportunities and helps firms grow,” she said. “Each of us brings unique strengths to the table, and it’s crucial to recognize these qualities in ourselves and others." As the industry looks to the future, the emphasis on fostering talent, expanding wholesale partnerships, and adapting to shifting market demands remains critical. For brokers and carriers alike, understanding and responding to these developments will shape their ability to thrive in a complex and evolving market. Surplus lines and specialty coverages are well positioned to tackle an increasingly “risky” world, offering essential solutions that meet the demands of sophisticated clients navigating today’s complex risk landscape.

The Wholesale & Specialty Insurance Association is the membership association of professionals and specialty market leaders dedicated to the wholesale distribution system. WSIA represents the interests of its members and the valuable role they play in the insurance market through networking, education, talent recruitment and development, regulatory and legislative advocacy for the wholesale, specialty, and surplus lines industry, and by promoting the value of the wholesale distribution channel.

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Phillip McCrorie has more than 30 years of industry experience. He serves as chief executive officer and chairman of RSUI and has been with the company since 2003. He earned a BS in finance from Auburn University and an MA in finance from the University of Alabama. He also serves on the WSIA Diversity Foundation board. McCrorie currently serves as co-chair on the Events Committee and has served as the co-chair on the WSIA Legislative Committee. He was also the 2013 Dana Roehrig award-winner for outstanding committee service.

RSUI

Phillip McCrorie

Brenda Austenfeld, president of RT Specialty and CEO of the National Property practice, has more than 30 years of industry experience. She is also a member of The Council of Insurance Agents and Brokers’ board of directors. She joined the legacy NAPSLO board of directors in 2016 and the WSIA board of directors in 2017. In 2019, Austenfeld was honored with the Earle Dillard Award. She has served as Education Committee co-chair, Audit & Compliance Committee chair, Events Committee co-chair, and as a member of the Executive Committee since 2021. She served on the WSIA Diversity Foundation board and from its founding in 2020 to 2024.

RT Specialty

Brenda (Ballard) Austenfeld

Brady Kelley is WSIA’s CEO and president and served in the same role with NAPSLO 2011–2017. He is responsible for the overall management of the association’s staff support activities, service to members, and business operations. Prior to joining WSIA, Kelley was the chief financial and business strategy officer for the NAIC. A graduate of the University of Missouri, he received a BS in accountancy from the College of Business and Public Administration, and he earned the Certified Public Accountant designation in 1995.

Wholesale & Specialty Insurance Association (WSIA)

Brady Kelley

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Fighting for the customer

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Heritage Bank

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Fernando Lemos

Beyond Bank

Darren McLeod

Heritage Bank

Stewart Saunders

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Fighting for the customer

The customer owned a bank saw a huge boost after the Hayne Royal Commission. One year on and their market share is growing as customer continue to see their value.

Read on

Stewart Saunders

Heritage Bank

Darren McLeod

Beyond Bank

Fernando Lemos

Bank Australia

Industry experts

Beyond Bank

Darren McLeod

Heritage Bank

Stewart Saunders

Bank Australia

Fernando Lemos

What’s driving growth in E&S coverage?

Published December 2, 2024

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particularly those exposed to catastrophic events, according to Kelley. This decline has opened doors for surplus lines to step in, particularly for homeowners in regions with higher exposures to wildfire or hurricane risks.

For brokers, capitalizing on the growth of surplus lines is increasingly important. Working with wholesalers has become a valuable strategy for brokers looking to develop customized solutions for clients with complex risks. Despite some skepticism among retail agents about the potential cost implications of working with wholesalers, recent research has shown that wholesale distribution can reduce the cost of insurance transactions for end clients. A 2021 Conning analysis found that the wholesale distribution channel lowered costs for insureds by 1.8 percent, challenging the perception that adding a wholesale broker automatically drives up premiums. According to McCrorie, using wholesale brokers can

Leveraging trends in surplus lines – tips for retail agents

streamline the market search process, making it more cost-effective for both retail agents and end clients. “If I’m using a wholesale broker, yes, I pay more commission than I would pay in retail, but that extra commission is my distribution cost. It’s how we market our product,” McCrorie said. “From a retail perspective, instead of spending resources to canvas the market for a quote, they can access a wholesale broker, who can access specialty markets more efficiently.” He said the Conning study confirmed that utilizing wholesalers isn’t more expensive for the end buyer. In fact, it can be more cost-effective, benefiting both the retailer and the wholesaler. Austenfeld added that there’s no cost to retail agents to seek a wholesale quote, yet it can bring real returns when buyers need a competitive, tailored solution.

“Living in a diverse city like Atlanta, I can see that by not reaching out to all communities, we’d be selling ourselves short. There’s an old saying: you can be invited to the dance, but unless you’re dancing, you’re not included”

Phillip McCrorie, RSUI

There’s no doubt that surplus lines and specialty programs

Addressing the talent challenge and fostering inclusivity in surplus lines

Crawford’s Commercial Transportation Unit

Benefits of wholesale insurance

Wide range of coverage options Competitive premiums Flexibility and tailored solutions Access to specialty markets Guidance from experts

Non-standard risks Unusual underwriting characteristics Unique risks Admitted carriers do not offer a filed policy form or rate Capacity risks Insured seeking a higher level of coverage than insurers can provide

risks in surplus lines market