E&S casualty market has 'sustained runway' as wholesale channel inflow remains strong

By David Bull

June 30 - (The Insurer) - Casualty business will continue to be a strong driver of growth in the E&S market amid strong submission flow through wholesalers, as underwriters continue to maintain discipline around limit management to navigate escalating loss cost trends.

• Drivers of growth in E&S casualty market remain in place

• Strong submission flow into the wholesale channel expected to continue

• No sign of change in limit management discipline at carriers as underwriters navigate loss cost trends

• E&S market viewed as well positioned to provide solutions for emerging risks in casualty

• Volume of SME business coming into E&S market continues to grow as sub-segment also faces effects of social inflation and legal system abuse

• Tech and AI expected to play greater role in underwriting and risk selection as well as managing submission flow – especially for SME business

These were some of the views being expressed at the E&S Insurer Conference 2025 in New York late last month by senior industry executives brought together to discuss the state of the market.

In keynote addresses, Ryan Specialty CEO Tim Turner and Markel’s president of U.S. wholesale and specialty Wendy Houser both highlighted the continued surge of business into the wholesale channel to E&S carriers, including in casualty.

Houser identified mounting loss cost trends in the casualty space driven by social inflation, particularly in excess casualty, that are leading admitted carriers to non-renew business, creating opportunities for the E&S sector.

Amid submission volume that has increased “tremendously”, the casualty business flowing into the E&S market has surged by 55% since 2021, she noted.

Turner identified casualty market dynamics as one of the factors that will continue driving business into the wholesale channel as he predicted that the roughly 25% non-admitted market share of the overall P&C industry will go to 30% and beyond in the coming years.

On a casualty-focused panel at the event, Dellwood Insurance Group’s founding CEO Michael Price said: “We do think there’s sustained runway in the casualty market. You still have to understand your book and you still have to differentiate risk. But we should see an extensive period of rate increase over the couple of years, we think, as the market is still trying to find his footing.”

REUNDERWRITING CONTINUES

The executive said that even after many of the corrective actions of recent years by casualty underwriters, there is still a lot of “reunderwriting” taking place at some carriers, who are putting business back into the marketplace.

Looking at historic behaviour that had contributed to current dynamics in the casualty marketplace, Price noted that midway through the last decade there was a period of favourable development on casualty portfolios.

This was not because frequency was being missed, but because inflation was less than what actuaries at insurers had been pegging it at.

Loss cost trends then “snuck up” on the industry to take even some of the best-managed carriers by surprise.

Price noted that in the aggregate the P&C industry typically doesn’t cover its cost of capital over the cycle. But within that aggregate performance, there are some well-managed companies that “excel”, and others don’t.

“The differentiation is cycle management; it is getting on trends early; it is really understanding not what’s in the rearview mirror, but what’s out of the windshield in terms of what’s next, and then positioning your portfolio accordingly,” he suggested.

Moderating the panel, CRC’s national casualty director Kristyn Smallcombe, highlighted some of the challenges and opportunities driving change and innovation in the casualty E&S market.

“We have economic and regulatory uncertainty; litigation continues to evolve, and not particularly in a good way; and we have an ever-growing demand … for specialisation and flexible underwriting solutions,” she commented.

Smallcombe said that casualty business is estimated to account for 45% to 50% of the $135 billion premium E&S market and represents a major growth driver for the segment.

“(But) it hasn’t been without its growing pains. We’ve had questions over rate and reserving adequacy, those still persist. Social inflation looms and submission volumes increase, and that’s putting a strain on our talent and workflow systems.

“The good news is … E&S is best poised to rise to the challenge and create solutions around this,” she suggested.

OPTIMISM OVER OUTLOOK

Jason Conkin, executive vice president for E&S casualty at Arch, said US casualty remains a “wonderful opportunity” as he reflected some of the more optimistic views on the segment’s outlook.

Revisiting some of the past cycles in the business line, he noted the expansion of limit deployment that had taken place in the last soft market, with many carriers deploying $25 million or more on lead and higher excess layers on casualty placements.

This had led carriers to amass “billions and billions of limit risk on their portfolio with a relatively small gross written premium”, leaving them in a situation where a single claim could severely impact or destroy a loss ratio in any given year.

The hard market that emerged in 2019 and 2020 saw a dramatic shift as carriers across the board not only pushed for large rate increases but also slashed their line size.

“So what happened, as you know, is limit management, and that’s one of the best things that could occur for casualty lines, where today we have decreased the billions of dollars on our portfolio and are getting a much more substantial amount of premium to absorb that loss,” said Conkin.

Everest Evolution president Stephen Buonpane also highlighted the positive effect of limits management, which has brought a lot more control around volatility for underwriters.

But he pointed to other areas that have evolved as the industry attempts to manage the impact of frequency of severity, especially in excess casualty.

He described a shift in underwriting mentality over the last 12 to 24 month.

“Certainly tech and AI has an impact in some of this, and it’s definitely related. But take, for example, jurisdictional differences. There’s such heightened focus on what’s happening from jurisdiction to jurisdiction … it’s at a level now where it’s so prevalent that we’re asking the ‘where’ before the ‘what’,” he said.

Buonpane added that on the positive side for underwriters is access to new information and data that can be utilised in the underwriting process.

“It goes beyond the normal course of submission data … whether it’s publicly available information, or just even information that exists within the operations of an insured that has been digitised over time, and the ability to share that information.

“We’re seeing actual correlations in loss performance and the utilisation of that data now in the underwriting process,” said the Everest Evolution executive.

SME SURGE

Smallcombe also asked panelists about the opportunity presented by SME business, which has been a more recent driver of submissions flow into the wholesale channel.

Price said the small account business entering the sector has not been insulated from the effects of social inflation on loss cost trends.

“The ability to respond there, I think, is also a challenge for the market, for our brokers, for our competitors. I think that’s an area that does require an investment in speed and technology in order to make sure you’re still underwriting that business responsibility,” he added.