As the industry gathers for the Wholesale & Specialty Insurance Association’s Annual Marketplace in San Diego, it seems evident that E&S has made significant permanent gains in market share and solidified its position as a legitimate parallel commercial lines market, despite premium growth slowing from 2021-22 peaks.
The increasing complexity of risks, technological advances and climate challenges all seem tailor-made for bespoke E&S solutions.
That said, as this publication has written, after a Golden Age of Specialty helped lift almost all boats, an operating environment is developing that will divide carriers more clearly into winners and losers.
From here, franchise quality will play a bigger role in determining success, with less opportunity to ride the market wave.
Risk will also rise, with scope for sub-segments within specialty and individual companies to misfire.
Meanwhile, the insurance industry has also seen carriers building out their own E&S arms and brands.
Recently, Insurance Insider US reported that Axa XL is building out a wholesale E&S vertical that will be further delineated from the retail arm of the business, which will operate under dedicated leadership and potentially write on separate paper to the retail business.
Among other P&C peers that took similar approaches are CNA, which launched the Cardinal E&S brand in June, and Everest, which started Evolution last year.
The trend towards much clearer delineation of retail and wholesale operations, including the creation of wholesale-only plays, was AIG’s revamp of Lexington in 2018, as initially revealed by Insurance Insider.
Insurance Insider US considers four key questions attendees at this year’s conference should consider on the boats and marinas of San Diego’s harborside.
1. How will the E&S market continue to grow in a softening property market?
After years of a hard market, many insurers say they’re still maintaining rate adequacy, despite rates coming down significantly since Q4 2024.
Shared and layered property pricing is currently down 20%-30%, with the heaviest rate reductions concentrated in the areas where E&S insurers love to play, such as coastal cat.
Profitability is still good as rates overshot so heavily on the high side – particularly with reinsurance costs falling. But trying to grow into a market in a sharp downturn feels dangerous given the degree of course correction that it will necessitate later.
As more capacity enters the property E&S market, insurers are fighting for market share, and the field of MGAs is getting increasingly crowded. But even as rates fall, the expectation is still for E&S to make up a growing share of the property market.
While much can depend on what happens during the rest of wind season, all signs indicate that, barring a $100bn event or more loss, rates will continue to decline throughout the rest of the year.
So, it remains to be seen if E&S will continue to grow its share of the overall property market.
2. Is the challenged casualty space an opportunity for E&S carriers to continue growing?
Submissions in E&S casualty seem stronger than ever before and rates have increased for the seventh consecutive year, an unusually long run for a segment where hard markets typically last for three to four years.
Limits that were slashed to $5mn-$10mn from what was once $25mn or even $50mn remain compressed – a sign of discipline that is backed by underwriters’ concern around liability loss trends.
Until this fear is addressed, limit compression will unlikely reverse course and US casualty will remain a challenged market. Therefore, it’s reasonable to expect that US casualty will contribute to the growth of E&S carriers going forward. Many insurers, even retailers, have spotted this opportunity, hiring executives on the E&S casualty front.
However, there are already signs in US casualty indicating that insurers are feeling better about their current books and slightly more comfortable about their rates and limits after a multi-year correction period.
Hence some sources have indicated that competition might tick up in the remainder of the year, potentially easing up capacity in a market that has been challenged for years.
But it is also worth noting that the underlying trend that hardened the market – an aggressive plaintiffs bar, sympathetic juries and widespread anti-corporate sentiment which the P&C industry summarized into the term social inflation – is undoubtedly intact and possibly getting worse.
Nuclear verdicts were once believed to be reserved for “Fortune 500” companies. That is no longer the case, P&C sources say, as outsized verdicts and settlements are happening across the board, regardless of company size.
Some lines of casualty are more challenged than others – commercial auto and habitational being on top of the list. In summary, even if the hard market in broad US casualty is moderating, there would still be pockets within where there’s more E&S opportunities than others.
3. How is the landscape of the wholesale broking market changing?
Activity in the specialty distribution sector – which includes wholesale brokers and MGAs – has also shown signs of deceleration this year.
According to MarshBerry, there have been 47 announced specialty distributor M&A transactions in the US, with 28 transactions announced in Q2, down from 49 deals in H1 2024.
Specialty transactions comprised approximately 15% of total dealmaking in H1 2025, up slightly from 14% a year ago.
These levels are still well below the 17%-22% range of specialty transactions from 2020 through 2023, underscoring the relatively greater availability of sellers in the retail broker segment when compared to specialty intermediaries.
MarshBerry noted that activity continues to be driven by PE-backed organizations, which totaled 30 transactions this year.
The boutique bank added that publicly traded brokers continue to take advantage of their rising valuations in the public markets, with nine completed transactions through June 2025 compared to four through June 2024.
The question is how wholesale brokers will respond to any slowdown in the wider E&S space – and how big a part M&A will play in that strategy.
4. Will we see more regulation of the E&S space?
With its flexibility of rate and form, the E&S space has been well positioned to seize the opportunity arising from complex risk and changing risk profiles – not least the challenges around more extreme weather patterns.
But as traditional admitted lines like homeowners’ and auto increasingly shift into the surplus lines market, states want their share of premium taxes, leading to disputes and complexities
With the E&S space burgeoning rapidly, how long can it continue to benefit from its relative lack of regulatory constraints?
After the pandemic, data calls – or directives from regulatory bodies towards companies to provide data – shot up, as reported by Insurance Insider US. While many of these calls ultimately might not have tangible consequences, it’s not uncommon for carriers to deal with state fines or lines of questioning regarding eligibility.
In more stringent states like New York, investigation letters have routinely been sent to broker clients asking to justify why the business was placed in the surplus lines market.
Meanwhile, regulators’ approaches are now diverging on their application of the diligent effort rule, which mandates that before placing insurance through the surplus lines market, brokers must first canvass the admitted market to find coverage.
Some states seem more eager to allow a flow of business into the surplus lines market, whereas others have a higher bar of “diligence”. For example, Florida has taken a significant step toward deregulation by eliminating this requirement, making it the fifth state to do so.
What would it mean for the space if there was suddenly a push for more regulation? Could more regulation curb future growth opportunities in the E&S space? Would there be less flexibility in specialty offerings if there were stricter regulatory standards?
These are just some of the questions we plan to ask at the conference. The Insurance Insider US team looks forward to seeing you at WSIA’s 2025 Annual Marketplace.
View all coverage of the event at our WSIA hub.
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