What’s behind the excess and surplus line growth surge?

The macroeconomic hurdles of 2024 may have dampened success for MGAs/MGUs and retail insurance agencies, but the year was a boon for wholesalers. Despite increased catastrophe events and rising settlement costs driving heightened liability claims and volatility in underwriting performance, the excess and surplus lines (E&S) insurance market surpassed $130 billion in 2024 according to statutory data analyzed by AM Best. The growth surge has been building: over the past five years, the E&S market expanded at an annual growth rate of 21%, surpassing $104 billion in premiums in 2023, according to a Conning report.

"We're definitely in growth mode," said Philadelphia Insurance Companies (PHLY) Assistant Vice President Stephen Decker in an interview with Best's Review. "In the last five years, we've seen double-digit growth in the E&S marketplace year over year."

Traditionally called the "safety valve" of the industry, the E&S market has supplied capacity and creative coverage when standard markets could not. But a growing number of businesses that were once standard market staples are now handled by surplus lines carriers, which have more latitude in how they evaluate risk. During the Best's Review interview, Nationwide Senior Vice President of Contract P&C and Excess Nationwide E&S/Specialty John Anthony noted an influx of coastal-exposed businesses and severe convective storm-exposed businesses moving to surplus lines carriers, as standard carriers continue to exit the market because of the volatility.

Demand for specialized coverage and the exodus of standard carriers are not the only forces behind the E&S growth surge. Over the past two years, advances in InsurTech and artificial intelligence (AI) have shown how quickly the technology is moving, and how quickly it reshapes the way wholesale business gets done. Digital-first entrants have raised concerns about inefficiencies in the value chain, but those concerns have not displaced intermediaries. E&S insurance leaders are doubling down on digital transformation to navigate the sector's cyclical and structural challenges. Here's how Nationwide and PHLY are using AI to capitalize on emerging opportunities and outpace the competition.

Digital transformation is changing how wholesalers engage with and service their retail agent partners. New technology is strengthening those relationships while improving operational efficiency. A service-oriented mindset is one of the ways PHLY sets itself apart from the competition.

"We're a very service-orientated company. We do our best to turn things around quickly, pick up the phone, answer our agents who need us," said Decker.

Self-service portals for retail agents, automated submission status updates and AI-powered technical support tools let wholesalers provide 24/7 assistance while improving response times and service quality.

Technology is also changing how wholesalers connect risks with the right markets, as market access and speed to market become competitive requirements. Automated market search and real-time appetite tracking make placements faster and more accurate, while digital platforms carry submissions and quotes through a single process. These capabilities matter most in specialty and E&S line markets, where market identification and access are decisive.

"Recently, we've seen the emergence of cybersecurity, AI, things such as cannabis, and some products around heavier manufacturing in a new and innovative product manufacturing space. We have the ability to adapt our appetite to take advantage of these opportunities as they're emerging before they may have the industry data around them that standard companies need to feel comfortable writing that business," said Anthony.

Deeper data insight lets wholesalers deliver more value in an industry that still runs on relationships. Advanced analytics give wholesalers a clearer view of market trends, placement success factors and relationship patterns.

"The industry is making tremendous strides in the use of data, analytics, technology, and you're seeing it especially when it comes to modeling," said Decker.

Forward-thinking wholesalers are supplementing traditional insurance data with third-party data to sharpen those insights, identify markets for new products and anticipate claims experiences. AI-powered policy data extraction tools and data lakes, for example, let wholesalers turn unstructured data into a competitive advantage.

"At Nationwide, we believe that our data-advanced analytics and modeling journey is that of collaboration and insight. We're looking to bolster our already superior industry relationships," said Anthony.

Complex and unique risks require specialized expertise. AI cannot substitute for surplus line underwriters; deep knowledge of these exposures is still critical for risk assessment. What AI can do is sharpen that assessment and support more precise coverage. Systems that capture carrier appetites alongside broker feedback on strengths and weaknesses can shorten the search for suitable coverage, improving efficiency and service delivery. That matters most for wholesalers handling specialized or hard-to-place risks, where accuracy in market identification and risk assessment decides the outcome. The judgment behind the decision still belongs to the underwriter.

Wholesale leaders recognize that a process considered effective today, claims processing among them, can be overtaken quickly as better systems reach the market. Modern claims systems are changing how wholesalers manage and facilitate claims interactions between retail agents and carriers. Digital collaboration platforms are streamlining communication and documentation flows, while real-time analytics give clearer visibility into claims status and trends. Wholesalers add measurable value to the claims process while reducing friction and shortening resolution times.

In the back office, automation is changing how wholesalers manage internal operations and compliance requirements. Modern systems streamline policy issuance, premium accounting and document management while supporting regulatory compliance. That lets wholesalers handle larger volumes of business with fewer errors.

Success in this market depends on pairing new technology with specialized expertise while holding strong relationships with both retail agents and carriers. The E&S market is expected to continue its upward trajectory as it keeps writing the risk that has eluded standard lines carriers. As demand for customized insurance products grows, AI adoption will likely drive ongoing progress, reinforcing the market's strength and sustainability. Intermediaries that use AI to strengthen expert judgment rather than replace it can redefine their roles in an increasingly automated market and sustain the growth surge.