As the commercial property insurance market grows increasingly competitive, with insurers deploying more capital into the sector, some of the most acute competition is in excess and surplus lines.

Amid the heightened competition, particularly for catastrophe coverage, sources differ on whether the market is following the past pattern of rate softening and nonadmitted business moving back to the admitted market, or whether E&S insurers are holding on to the business.

“This is the first market cycle that we’ve seen in recent years where property rates have started to go down, the submission flow has continued to go up, and we don’t really see tons of that business migrating back into the admitted market,” said Tim Whisler, Boston-based head of wholesale solutions in the Americas for Axa XL.

In softening market conditions, admitted placements often are less expensive and have fewer fees.

During the early 2020s, when admitted markets were firming, business flowed into surplus lines, said Nick Garside, Bermuda-based chief underwriting officer, property, for global risk solutions North America at Liberty Mutual.

Now there is more movement from one E&S insurer to another amid fierce competition as property rates have moderated across both admitted and nonadmitted lines, Mr. Garside said.

The property market is “softening right now,” said Judy Bianco, Chicago-based U.S. head of open market property for Aspen Insurance.

“We started seeing a softening sometime at the end of last year,” with rate declines of roughly 10%, Ms. Bianco said.

Despite that, “I’m not really seeing a ton of the standard lines markets coming back in,” she said. “Where we’re seeing more competition is from our peers, but we will continue to be guided by price adequacy.”

Surplus lines markets have grown significantly in the past five to six years, said Gregory Mann, Atlanta-based U.S. property placement leader at Marsh.

“They don’t want to give that back. They want to continue to grow as well, so their appetite has grown as far as what they will write,” he said.

E&S insurers are cutting rates significantly, sometimes more aggressively than admitted rivals.

“Business continues to flow into the E&S, nonadmitted world, even though there’s rate moderation on both sides,” said Andy Hendrix, Alpharetta, Georgia-based executive vice president and head of property at Westfield Specialty. “Even though rates are coming down on both sides, the E&S rates are coming down faster.”

In the surplus lines property markets, rate reductions are running 20% or more in some cases, according to Christa Nadler, Chicago-based executive vice president at Risk Placement Services, the wholesale unit of Arthur J. Gallagher & Co.

“In general, double-digit rate reductions are being achieved in the E&S marketplace. That will vary depending on class of business, and then it’ll vary quite a bit depending on loss history,” she said.

A trend of double-digit rate reductions has been “fairly consistent” since the third quarter of 2024, Mr. Garside said.

Some say admitted insurers are stepping up their competition.

“The admitted markets are certainly getting a little bit more aggressive and trying to gain some more market share back,” Ms. Nadler said.

Standard and London markets are taking back business with heavy rate decreases and large limits, said Brett Brownell, New York-based head of wholesale property for Navigators, a unit of The Hartford.

“Admitted markets are more competitive in medium- to lower-hazard areas, but the E&S marketplace is still a significant player in critical catastrophe-prone areas,” he said.

Policyholders, such as public entity buyers, that are seeing premium savings from rate decreases are looking into buying additional limits, Mr. Hendrix said.

“Insureds are starting to look to buy bigger limits when they get big cost savings,” said Chris Lee, New York-based head of excess and surplus property for Axa XL. “It’s happening more in the cat space. They can start buying larger limits and still have a price reduction.”

Policyholders say they will use some of their savings to buy better or more or enhanced coverage 50% of the time, Ms. Nadler said.

“We are seeing higher limits being purchased, especially for flood, quake, wind,” as markets have eased and pricing has become more competitive, Ms. Bianco said.

“With pricing becoming more competitive, especially in the surplus market, some customers may be able to double their catastrophe coverage limits from what they were able to afford previously,” Mr. Brownell said.

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California wildfires drive more policyholders into nonadmitted market

Substantial first-quarter wildfire losses in California have roiled property insurance markets, as affected insurers raise rates to recoup losses or abandon the market altogether.

Some policyholders, including homeowners, are turning to excess and surplus lines insurers.

“In California, we continue to see admitted markets reunderwriting and changing their appetite,” said Andy Hendrix, executive vice president and head of property at Westfield Specialty. “In California, it’s not just homeowners. There’s a lot of commercial business that’s now flowing out of the admitted world into the E&S world.”

Many admitted insurers have exited the market in areas of the western United States with significant wildfire risk and southern states that are wrestling with increased flooding and windstorms, said Brett Brownell, New York-based head of wholesale property for Navigators, a unit of The Hartford. 

“As a result, the E&S marketplace has stepped in to provide coverage,” including Navigators, Mr. Brownell said.

In some cases, homeowners seeking capacity, who have traditionally bought admitted coverage, have looked into the surplus lines markets.

“We don’t write the high-value homeowners, but we have seen them in the marketplace,” said Judy Bianco, Chicago-based head of U.S. property for Aspen Insurance.

With admitted insurers pulling back, “You’re starting to see some large homes come into our space,” said Chris Lee, New York-based head of excess and surplus property for Axa XL.

Homeowners are “running out of options, and surplus lines is an attractive spot for them to have a solution,” Mr. Lee said.

“Different E&S carriers have different appetite about commercial versus homeowner business, but there’s certainly been a significant growth in homeowners business in the E&S market as a whole, and some of it is flowing into the wholesale channel,” said Tim Whisler, Boston-based head of wholesale solutions in the Americas for Axa XL.