The US excess and surplus (E&S) casualty market has enjoyed record growth in recent years. According to AM Best, it surpassed $100 billion in direct premium written in 2023, marking the sixth consecutive year of double-digit growth.
The liability environment, marked by social inflation and so-called “nuclear verdicts” – jury awards exceeding $10 million, often well beyond economic damages – has accelerated this expansion. However, the same force is also testing carriers’ resilience and reshaping the long-term outlook for the industry.
Richard Wagner (pictured), head of US excess casualty at Aspen, believes the growth momentum is sustainable, but only if carriers can withstand the pressure of outsized jury awards.
“A high-profile default in the E&S space could cause insureds to retreat to the admitted market,” he said.
Despite steady inflows of capital into E&S casualty, Wagner describes capacity as a patchwork. Auto-heavy businesses, real estate habitation exposures, and certain high-risk products are finding it increasingly difficult to secure layers, as carriers reduce limits and de-risk their portfolios.
“In the aggregate, capacity in the excess casualty market seems to be adequate, but on many individual risks, capacity can be scarce,” he said.
That retrenchment reflects not just claims frequency, but the unpredictable severity of payouts. Nuclear verdicts have escalated in frequency and severity. A 2024 report by the US Chamber of Commerce’s Institute for Legal Reform found the median nuclear verdict jumped to $36 million, more than triple the level of a decade earlier.
For Wagner, runaway settlements are the most pressing challenge. “Those injured by the wrongdoing or negligence of others are certainly entitled to fair compensation,” he said.
“However, the system is not sustainable if every loss is viewed as an opportunity to enrich the injured to the extent that it is completely disproportionate to their true harm or loss, and every verdict becomes an opportunity to seek not only compensation, but to punish the unintentionally negligent party.”
Plaintiffs’ attorneys, armed with litigation funding and increasingly sophisticated jury research, have been adept at framing cases in ways that encourage outsized awards.
In response, insurance carriers have tightened terms, hiked retentions, and intensified scrutiny in the underwriting process. However, these measures only partially address the system challenge.
There may be glimmers of relief. Wagner pointed to recent tort reform legislation in Florida and Georgia as evidence that policymakers are beginning to recognize the strain on insurers, businesses, and consumers. Florida’s HB 837, passed in 2023, shortened the statute of limitations for negligence claims and changed comparative fault rules, while Georgia advanced limits on “phantom damages” for medical expenses.
“I’m hopeful we are reaching a tipping point where the general public and policymakers are beginning to demand reforms that will help keep the value of claims reasonable and commensurate with actual harm,” Wagner said.
Still, he argued the insurance industry must do more to educate the public about the hidden costs of nuclear verdicts.
“Late-night TV is full of ads for the plaintiff’s bar,” said Wagner, “but there are no ads from our industry explaining how nuclear verdicts that are untethered from the true value of the plaintiff’s loss are adversely impacting their household budgets, from auto insurance and rent to the cost of most goods and services.”
Despite the challenges, Wagner remains optimistic about the opportunities in the casualty sector.
Emerging risks, including renewable energy projects, chip manufacturing, specialized equipment, and those tied to the boom in artificial intelligence (AI), such as the construction of data centers, will require new capacity that will likely come from E&S. He also highlighted residential construction as a growth driver, as the US continues to face a housing shortage.
E&S casualty has cemented its role as a vital outlet for risks that the admitted market has increasingly struggled to accommodate. Looking ahead two to three years, Wagner expects E&S casualty to become increasingly mainstream. This normalization will draw in insureds who previously would not have considered the E&S space, further expanding its role in the insurance ecosystem.
“As more insureds turn to the E&S market for solutions, unadmitted coverage will increasingly become the norm in many segments,” he said.
