What do you do when a client can’t find adequate or affordable insurance in the standard market? You turn to the excess and surplus market. The excess and surplus market is booming, and if you don’t help clients access it, you’ll lose them to another agent who can.
What Is the E&S Market?
The excess and surplus market, or the E&S market, consists of non-admitted insurers. These insurers are not licensed by the state’s Department of Insurance where they do business, and as such, they are not subject to the same regulations. This gives them flexibility to cover risks that admitted insurance carriers in the standard insurance market won’t cover. As a result, they are able to take on high-risk accounts.
The E&S Market Boom
S&P Global says the E&S lines market reached peak growth in 2021, when direct premium written increased by 32.3% year-over-year. In 2022, growth fell to 20.1%, and in 2023, it fell again to 14.5%. Despite the moderation in growth, the E&S market is still thriving, and in 2023, it accounted for 9.2% of total direct premiums written, up from 5.2% in 2018.
The hard insurance market has played a large role in this growth. According to the Insurance Information Institute, E&S market growth has been strongest in Florida, California and Louisiana, and it’s no coincidence that these are also the states experiencing surging risk. E&S carriers have also gained market share in high-risk lines, including liability, fire, earthquake, flood and ocean marine insurance.
Why Agents Need to Access E&S Carriers
The E&S market has become a staple of commercial insurance. Nearly one in 10 premium dollars is now written in the E&S market, and even though growth has slowed, it’s still in the double digits.
There’s no reason to think the E&S market is going to lose market share, either. Insurers are grappling with social inflation, nuclear verdicts and third-party litigation funding, as well as rising natural disaster losses. Although insurance premium increases have been moderating, insurers are still concerned with managing their risks, and some accounts are simply too risky for them. The E&S market is filling in the gaps.
If you don’t offer your clients E&S options, you’ll miss out on big chunk of business. We’re not just talking about the occasional isolated lost sale, either. One lost sale can have a domino effect on your business. Consider these two scenarios:
- Brad is an insurance broker who doesn’t offer E&S insurance. One of his clients is facing non-renewal, and no other standard carrier will cover the risk. The client needs to go to another agent to secure coverage with a non-admitted carrier. This client doesn’t just move the one policy in question, either. He takes all of his business with him because it’s easier to work with a single agent. He also recommends this new agent to other business owners who are having trouble finding insurance solutions. In the end, Brad doesn’t just lose the one policy. He loses a good client as well as the opportunity to gain future clients.
- Janet is an insurance broker who does offer E&S insurance. One of her clients is facing non-renewal, and other standard carriers reject the application. It’s no problem for her. She simply moves her client to the E&S market. This requires some client education, but in the end, the client is grateful to have a workable insurance solution. In addition to keeping all of his business with Janet, he recommends her to other business owners, and some of them recommend her to even more people. Janet earns a stellar reputation as the go-to agent for hard-to-place risks, and her book of business grows.
How to Access the E&S Market
To sell E&S insurance, you need to meet your state’s property and casualty license requirements, and there may be additional licensing requirements specific to E&S lines.
You also need access to E&S carriers. Independent insurance agents typically secure this access by working with insurance wholesalers or networks.
Are you offering your clients the insurance solutions they need to manage their risks? Heffernan Network can help. We offer access to top carriers, as well as specialty carriers and exclusive appointments that are not available to all independent insurance agents. This diverse market access gives you an edge over you competition so you can win and retain more business. We also negotiate premium thresholds, eliminating issues with volume-based restrictions. Learn more.
