Special Report U.S. Surplus Lines

NAPSLO and the Derek Hughes/NAPSLO Educational Foundation are pleased to provide you an electronic copy of the 2014 Special Report U.S. Surplus Lines – Segment Review, which is produced by the A.M. Best Company with a grant from the Foundation. We received the final report from A.M. Best today and NAPSLO members are the first to receive a copy with special permission from A.M. Best.

This is the 21st annual report produced through the cooperation of A.M. Best with the support of the Foundation, and it is one of our most important tools in promoting and illustrating the industry’s strength and stability. “A great addition to this year’s report is the 20-year retrospective on the surplus lines segment since the A.M. Best study was first published in 1994,” said Joseph Timmons, President of the Derek Hughes/NAPSLO Educational Foundation. “The initial report confirmed that surplus lines insurers were as financially sound, if not more, than the admitted market and this report illustrates our industry has sustained this achievement.”

The report notes:

  • Growth of 8.4% in surplus lines direct premium written in 2013, reversing the five-year decline from 2007 to 2011.
  • Domestic professional surplus lines insurers generated a 5.2% increase in direct premium written.
  • For the tenth year in a row, the surplus lines industry reported no financially impaired companies, in contrast to the admitted property/casualty industry’s 14 disclosed financial impairments in 2013.
  • Domestic professional surplus lines insurers continue to maintain a higher proportion of secure ratings than the overall property/casualty industry. Through midyear 2014, 100% of surplus lines companies maintained secure A.M. Best ratings.
  • Despite the challenges A.M. Best noted over the 21 years of the study, the surplus lines market more than doubled from 3.3% of total property/casualty direct premiums written in 1993, to approximately 6.9% by the end of 2013. And we are pleased to see that surplus lines has grown as a percentage of commercial lines direct written premium from 6.1% to 13.7%.

The report continues to provide A.M. Best’s perspective on the state of the market and the relative positions of carriers in the market. It examines the surplus lines sector’s financial condition and ratings distribution, market trends, regulatory and legislative developments, distribution issues, and impairment trends. The report also includes the results of A.M. Best’s survey of surplus lines insurers measuring the proportion of surplus lines premium derived from various distribution channels. A.M. Best’s survey results indicated the largest distributors of surplus lines products continue to be wholesale agents and brokers without binding authority.

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