U.S. Excess & Surplus Insurers Set for Strong Rebound After Poor 2020

Market performance for U.S. excess and surplus (E&S) insurers is anticipated to significantly improve in 2021 following a difficult 2020, according to a new Fitch Ratings report.

Source: Fitch Ratings | Published on September 3, 2021

Fitch Ratings on reinsurers 2024

U.S. property & casualty (P/C) insurers that specialize in the E&S market are seeing better growth and profit opportunities as premium rates rise in many segments. Growth did not bring profitability in 2020, however, as E&S materially underperformed the broader P/C industry in 2020 with a 107% direct combined ratio. Specifically, the E&S market generated substantial natural catastrophe and pandemic related incurred losses, and lacked the benefit of favorable standard lines personal auto results.

“Excess & surplus business interruption and contingent business interruption losses from pandemic-related events were likely due to broader coverage terms and fewer instances of virus exclusions,” said Senior Director Douglas Pawlowski.

The E&S market reported double-digit growth in direct written premiums for the third consecutive year in 2020, with expectations for this trend to continue as rates and exposure showed strong growth in 1H’21. Tailwinds from admitted carriers shedding unprofitable and more volatile business and continued premium rate increases drove near-term revenue growth in nearly all E&S P/C product segments. “Continued material rate increases and tighter underwriting conditions will move direct underwriting results towards break-even or better levels with headwinds linked to pandemic-related losses greatly reduced,” said Pawlowski.

Fitch’s report includes a review of direct premium growth and underwriting performance of the top 25 E&S writers, excluding the largest writer Lloyd’s of London, that in aggregate generated more than one-half of all industry E&S direct written premium.