By Chris Munro
Feb 5 - (The Insurer) - Premium volume tracked by the stamping offices in the three largest states for surplus lines business continued their upward trajectory in January, with wildfire-hit California recording a giant year on year 43.2 percent increase in the month.
California, Florida and Texas have long recorded the highest volumes of surplus lines business, and as this publication reported in late January, the three states maintained their significant growth in 2024 with a collective 13.1 percent increase in E&S premium last year to $52.7bn.
That growth has been maintained in January.
Figures from the Surplus Lines Association of California (SLACA) show almost $2bn of premium flowed into the state’s surplus lines channel in January, a significant increase on the $1.4bn seen in the prior year period.
While the precise drivers of that growth are not known, the devastating wildfires that have hit the Los Angeles region are likely to have played a major role.
Growth in California’s surplus lines market in recent years has largely been driven by admitted carriers’ pullback from the state over concerns on wildfire exposure, with insurers frustrated at their inability to get regulatory sign-off for the rate rises they feel are needed to turn a profit in the Golden State.
Given that property owners have few options other than seeking the bare bones coverage offered by California’s residual the Fair Plan, buyers have turned to the surplus lines market to get the protection they need.
And the recent wildfires – which some market commentators have suggested could result in insured losses of $50bn – will have seen more property owners forced to buy coverage from the surplus lines space as admitted carriers’ appetite for business dries up further.
Last year, SLACA saw $19.1bn of premium flow through its surplus lines channel, up from $16.6bn in 2023.
FL grows 9% in January
The Florida Surplus Lines Service Office (FSLSO) saw $1.36bn of premium flow through the surplus lines channel in January, growth of 8.6 percent from the prior year period’s $1.25bn.
That growth came alongside a significant 22 percent increase in the number of surplus lines policies issued in Florida last month.
While in January 2023, the $1.25bn of surplus lines premium was spread across 105,088 policies, the $1.36bn of premium in the channel last month came from 127,869 policies.
That means the average surplus lines policy premium was $10,657 in January 2025, a decrease when compared with the $11,854 in the first month of 2024.
“This shift may be driven by higher policy volume, increased market competition, and changing risk distribution,” the FSLSO said.
In January 2025, the largest class of business in Florida’s surplus lines market was commercial property, with premium volume of $443.6mn down 5 percent from the prior year period.
Commercial general liability (GL) was in second place with $251.3mn in January 2025, up 39 percent year on year, while excess commercial GL took third place with $109.2mn, an increase of 44 percent.
“Florida’s commercial property sector reported $443.6mn in written premium for January 2025, with 24,807 policies issued. While policy count rose 39 percent, total premium declined 5 percent, yielding a 32 percent drop in average policy cost compared to January 2024,” the FSLSO said.
The Sunshine State’s stamping office noted that among the top 10 surplus lines coverage lines, all but commercial general liability, excess commercial general liability, and miscellaneous E&O recorded decreases in average policy costs.
“Windstorm and/or hail, ranked eighth in premium volume at $28.8mn across 1,522 policies, saw one of the most notable shifts with a 99 percent increase in policy count but a 3 percent dip in total premium,” FSLSO said.
“A key factor in this shift could be an influx of smaller risks. More than 700 transactions had premiums below $3,000, contributing to a reduced average cost per policy by 51 percent,” it suggested.
Last year, the Sunshine State booked $17.1bn of surplus lines premium volume, growth of 10.8 percent from 2023.
TX expands 34%
Premium volume tracked by the Surplus Lines Stamping Office of Texas (SLTX) totalled $1.48bn in January 2025, growth of 34.0 percent when compared with January 2024’s $1.10bn.
Of the premium tracked by the SLTX in January, 52.6 percent – equal to 33.7 percent - of items was attributable to renewal policies, while 41.6 percent, or 30.5 percent of items, related to new business.
The final 5.8 percent, and 35.8 percent of items, was for non-policy transactions.
As the SLTX noted, non-policy transactions were predominately premium endorsements - 24,048 items or 68.1 percent of the 35.8 percent – and cancellations, 8,896 items or 25.2 percent of the 35.8 percent.
The largest increase was seen in excess/umbrella liability coverage which grew by $97.5mn year on year, equal to 51.6 percent.
Builders’ risk property grew by $58.6mn, or 473.2 percent, while commercial fire and allied lines premium increased $56.6mn, or 16.0 percent, from the prior year period.
Commercial auto grew by $39.9mn, or 129.9 percent, from January 2024.
Texas tracked $16.6bn of surplus lines premium volume in 2024, up 13.8 percent from the prior year.