Best’s Market Segment Report: Competition Moderates US Surplus Lines Premium Growth, But Customization Solidifies Market’s Value

Business Wire

OLDWICK, N.J.--(BUSINESS WIRE)--
The U.S. surplus lines market, including aggregated premiums written by Lloyd’s syndicates and non-Lloyd’s alien insurers, achieved an eighth consecutive year of double-digit growth, although the 10.4% year-over-year (YoY) growth reflected continued premium growth moderation that has been evident in the market over the past three years, according to a new AM Best report.

In addition, U.S. domestic surplus lines insurers generated $105.9 billion in direct premium written of the total surplus lines market premium of $143.2 billion in 2025, representing a YoY increase of 8.9%, according to the Best’s Market Segment Report, titled, “US Surplus Lines Market: Competition Moderates Premium Growth, But Customization Solidifies the Market’s Value,” While this growth level is noteworthy, the increase ended a seven-year run of double digit premium growth for U.S. insurers.

The report also cites the role of tailored coverage in continuing meet the needs of complex, emerging and evolving commercial risks as a growth driver for this specialty lines segment. That factor should help negate any significant exodus toward the standard market driven by pricing pressures.

Despite a moderation in overall growth, a composite of surplus lines tracked by AM Best did manage to increase its net underwriting profit by more than $1 billion in 2025, displaying disciplined underwriting and pricing coupled with expert risk selection. From an operating profit perspective, the surplus lines composite generated a 19.5% increase in pretax operating income for the year. The total surplus lines market’s 10.4% growth in 2025 once again outpaced the modest 5.1% growth for the total U.S. property/casualty (P/C) industry.

According to the report, the surplus lines and specialty commercial market has become highly competitive in the 18-month run-up to mid-2026, with supply outweighing demand. “An abundance of capital and heightened competition among insurers, reinsurers and managing general agents has shifted more of the negotiating power to the buyer’s or policyholder’s side,” said David Blades, associate director, AM Best.

AM Best revised its market segment outlook for the surplus lines market to stable from positive in November 2025, reflecting moderating premium growth and rate softening amid loss cost uncertainty. The outlook also noted capacity had become increasingly more selective on terms and conditions and had raised performance thresholds at renewals.

Among the report’s other takeaways:

The development of new technologies, growth in e-commerce, and the expanding global economy have made robust risk management strategies a necessity, boosting demand for specialized insurance products. These coverages for complex exposures are not readily available through standard market insurers, elevating the need for the specialized solutions that are endemic to the surplus lines market.
With many of the larger surplus lines writers maintaining statutory entities dedicated to both admitted and non-admitted business within their organizations, they are well-positioned to rebalance exposures across these platforms as market conditions evolve.
When it comes to AI exposures, admitted insurers are focused on implementing the best, most absolute AI exclusions and limiting coverage in traditional general liability policies. “The surplus lines market, by contrast, is the primary avenue currently available for obtaining affirmative, specialized coverage options available for AI and Gen AI exposures using its freedom of rate and especially its freedom of form,” Blades said.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=368628.

AM Best will host a complimentary webinar on Wednesday, Sept. 16, 2026, at 11:00 a.m. (EDT), titled, “Inside Today’s Surplus Lines Market.” For more information or to register, please visit the event webpage.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100

countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.