Four key trends impacting insurance organisations in today’s E&S market

The E&S market has been on an upward trajectory for the past several years. In fact, premiums increased more than 14 percent in 2023, according to WSIA. And those increases occurred across a variety of lines, including commercial liability, commercial property and personal property.

There are no signs that the growth is slowing. AM Best has given the E&S market a positive outlook. And risk factors such as the severity and frequency of catastrophic weather events, social and economic inflation and evolving cyber risk are pushing more business into the non-admitted space.

Here are four trends that insurance organisations are focused on as they expand their positions in the E&S space.

1. The market is evolving, and carriers need to be able to adapt quickly. E&S has traditionally been dominated by commercial coverage. But that’s changing and today’s market includes more personal lines. The rising number of catastrophic events and the continuing exodus of insurers from higher risk states – such as California, Louisiana and Florida – are causing more consumers to turn to specialty markets. For example, during its fourth quarter earnings call, Chubb explained that its personal E&S portfolio is growing at a rapid clip, and it anticipates this will continue.

Changes to the National Flood Insurance Program have also made it difficult for some properties to get insured and these entities are also turning to the private flood market and E&S space to get adequate coverage. These kinds of changes require carriers to consistently reinvent themselves, ensuring they’re ready to underwrite new business and tackle competitive markets. With the ever-evolving risks driving the market growth, there’s high demand for innovative products and more customised coverage. To succeed, insurers are delivering increasingly complex coverage solutions.

2. Technology innovation is critical at every level of insurance operations. Successful organisations will adopt technology developer mindsets, always thinking about what’s next. Processes continuously need to be improved. This is particularly true for core operations like underwriting and claims. For example, what was considered effective underwriting in 2023 will not be the same in 2025. Consider robotic process automation. A few years ago, this was more of a nuanced technology with insurers experimenting with its use. Now it is table stakes.

For many, generative AI is the next big thing. Insurance organisations are focused on leveraging AI to improve their speed and response times for new policies. They’re using agile processes, so that they can quickly analyse new markets and stand up new programs. These same solutions are also enabling them to rapidly analyse their own market performance and consider changes – such as adjusting underwriting appetite and pricing – to impact their results.

E&S insurers, long thought to be at the tail end of the technology curve, are becoming more digitised. Solutions for rate-quote-bind with the push of a button, mobile applications for agents and end users, processing of digital payments and fully automated claims platforms are becoming the norm, rather than the exception.

In today’s E&S market, a focus on technology innovation, combined with continuous process improvement, is helping insurers increase efficiency and accuracy – especially in key areas that impact business the most such as claims and underwriting – to drive value and sustain innovation.

3. The talent pool is shrinking as market grows. While market growth is good for E&S insurers, they’re facing a mounting problem – a shrinking talent pool. With an ageing employee base, the E&S space is having trouble replacing the talent that is retiring. One of the key obstacles to overcome is reputation. Many think of insurance as old school, sitting at a desk pushing paper. In reality, it is a business built on relationships. The E&S market in particular is focused on new ideas, creativity and imagination. At its core, the segment brings new insurance products to market based on changes in risk and business and consumer needs. This messaging can be very motivational to members of Generation Z.

Insurance organisations are working to overcome the negative images people have about the industry and bust some of these myths and misconceptions. Partnering with universities and educating students about the importance of insurance to society can help the next generation of talent realise the opportunities and benefits of an insurance career.

4. AI opens a new product frontier. In less than two years, generative AI has had drastic impact on all industries. But it has also come with a myriad of new risks such as copyright or trademark infringement, data privacy concerns, hallucinations or incorrect information, and bias. On top of that, generative AI gives cyber criminals a new tool in their toolbelt to create more effective phishing scams and ransomware attacks. In a recent example, a Hong Kong-based multinational lost $25mn when cyber criminals used deepfake technology to impersonate the company’s CFO on a video call and instructed an employee to wire funds to a fraudulent account.

The E&S market has already been the go-to source for cyber coverage, accounting for more than 60 percent of direct cyber premiums written, according to AM Best. Insurers can expect this trend to continue as they create more specialised coverage attuned to AI-fuelled cyber risks.

As leaders of innovative coverage solutions, E&S insurers are capitalising on new exposures created from generative AI technologies and looking for ways to protect businesses as they incorporate this technology into their operations.

As business continues to flow into the E&S space, keeping these trends in mind can help insurance organisations identify growth opportunity and crate more efficient ways to process increased submissions.

By Sachin Kulkarni, EVP – head of commercial & specialty insurance and MGA, Americas, Xceedance