As the hard market shows signs of easing, many independent insurance agents wonder whether the business that shifted to the Excess and Surplus (E&S) market will return to standard lines or remain where it is. The E&S market has grown rapidly over the past few years, driven by the need for flexible coverage during the hard market. But will this trend reverse?
Understanding the E&S Surge
During the hardest phases of the market, many standard carriers reduced their capacity for higher-risk categories such as catastrophe-prone properties and complex liabilities. Agents, facing limited options, turned to E&S carriers for their ability to handle these unique risks. This flexibility fueled rapid growth in the E&S market, with premiums in 2023 estimated to have exceeded $100 billion.
With market conditions beginning to stabilize, many agencies are now asking; will business return to standard carriers as they regain capacity, or will certain risks remain within the E&S space? The answer will likely vary depending on the type of coverage and client needs.
What Agencies Should Consider Now
As conditions change, agents should monitor which business may shift back to standard markets and which should stay with E&S carriers. High-risk and complex coverages—such as cyber insurance, professional liability, and high-value coastal properties—are more likely to remain in the E&S market because these risks require the flexibility and quick adaptation that surplus carriers provide.
Additionally, E&S carriers excel in covering emerging risks like AI, cannabis, and environmental liabilities, which are more challenging for standard markets to underwrite due to regulatory constraints. For many of these risks, E&S may continue to be the preferred option even if standard carriers regain ground.
Adapting to Client Needs
For many clients, especially those with complex risks, E&S carriers have provided tailored solutions that met their needs in ways standard markets couldn’t. Now, as pricing and capacity improve in standard markets, agents will need to weigh the potential benefits of moving business back. However, for clients who require quick responses and customized coverage, E&S carriers may still offer better value.
Agents should be proactive in advising clients on the best fit for their unique risk profiles. While some clients may prioritize savings by returning to standard markets, others will value the flexible options and specialized coverage that E&S carriers continue to provide.
To remain competitive and well-prepared, independent insurance agencies that invest in strong relationships with both E&S and standard carriers will hold an advantage. Being able to pivot between these markets as client needs and market conditions change will be key. As the market softens, agents should ensure they stay informed about trends in both spaces and remain flexible enough to offer the most appropriate coverage options.
By positioning themselves as trusted advisors and understanding the intricacies of each market, agents can confidently guide their clients through this evolving landscape, ensuring long-term success regardless of where the market shifts.