AM Best has revised its market segment outlook on the U.S. E&S industry to stable from negative due to its ongoing ability to successfully navigate the COVID-19 pandemic. The Best’s Market Segment Report, “Market Segment Outlook: U.S. Excess & Surplus Lines,” notes that despite the ongoing widespread impact of COVID-19 on the U.S. economy, and uncertainty as to how long the pandemic will last, the E&S segment’s continued profitability and premium growth signal persistent opportunities for surplus lines carriers to successfully operate.

Since the inception of the pandemic, surplus lines carriers have generated consistent underwriting cash flow, experienced stability in claims activity and successfully managed the challenges of the investment market conditions. These factors have moderated concerns about the cohesion of the surplus lines market.

Additionally, market participant growth provides an encouraging sign for the segment. Newcomers, along with a recommitment from existing participants, portray a healthy interest in the specialty commercial market. Consequently, capacity will remain stable and could even expand in the short term. Potential headwinds that the surplus lines market may face include the impact of social inflation on casualty claim trends and the potential for a sudden increase in market capacity to disrupt the  market.