The excess and surplus insurance market grew through the first nine months of 2025, according to AM Best, even as increasing competition in certain risk classes softened premium growth. The trend has continued into 2026, industry experts say, as admitted carriers keep retreating from placements they can't confidently price.
That retreat is the throughline behind this year's E&S growth. Severe weather, cyber exposure and newer technologies such as artificial intelligence are pushing standard insurers to pull back from high-risk placements, and surplus lines are absorbing the difference.
"The best way I can describe the market right now is it is very dynamic," said Thomas Goodwin, a field underwriting consultant with GuideOne Insurance. "There's not a one-size-fits-all approach to the stuff coming through surplus lines."
Much of the pull-back comes down to data. Admitted carriers are stepping back from placements where they lack credible historical loss information, face rising claims volatility, or run into regulatory constraints on pricing, Goodwin said, and that gap continues to push business toward the surplus lines market.
Inflation, reinsurance costs and severe weather remain the major pricing drivers behind E&S growth this year, according to the 2026 Market Trends Report from insurance broker Brown & Brown. Capacity is still available, the report notes, but it's becoming more selective, particularly for wildfire-prone geographies, coastal hurricane zones and properties with elevated flood exposure.
"With underwriting scrutiny elevated across the E&S market, customers should anticipate a more rigorous review of property conditions, mitigation efforts and portfolio complexity when structuring their programs," the report states.
Specialty wholesale distributor Amwins, in a report issued late last year, said the E&S homeowner market is continuing to grow as insurers shift from an admitted approach to a more hybrid, tailored one.
"We are seeing insureds coming into the E&S market due to obvious reasons such as loss history or risk characteristics, but even more so from less obvious reasons like regulatory environment," Amwins said in its State of the Market 2026 Outlook: Small Business and Personal Lines.
That added demand is affecting supply and demand across the market, according to Amwins, which said it is "certainly having a dampening effect on the general softening seen in the market."
Generative AI has emerged as one of the clearest examples of a risk that belongs in surplus lines rather than the admitted market, said David Blades, an associate director at AM Best.
"I think all the liability that surrounds artificial intelligence usage, I think those exposures are the kinds of risks, the kind of complex risk, and it belongs in the surplus lines market because of the freedom of rate and the flexibility that surplus lines have," Blades said, adding that most E&S market participants he's spoken with view generative AI as one of the industry's biggest risks to date.
Cannabis remains another example. The drug's status as a Schedule I substance continues to complicate placement, since it keeps cannabis businesses locked out of traditional banking. Blades said a federal rescheduling to Schedule III would open the door to conventional banking and likely ease carrier concerns, but for now, admitted insurers are staying away.
"Admitted insurance companies are still going to be reticent to step out there," he said.
As other emerging risks continue to surface, including generative AI, specialty drugs and commercial drones used in construction, agriculture and real estate, Blades said he expects surplus lines to remain "a major player" in absorbing them.
That growth, though, depends on carriers holding up their end of the underwriting relationship. Blades said the most common complaint he hears from brokers is that carriers need to engage earlier and more clearly on what additional underwriting information they need.
"I think they want open and clear communication," he said.
