The excess and surplus (E&S) lines market is booming. But with that growth comes mounting pressure. For Brian Espie (pictured), chief underwriting officer at Kettle, the sector’s rapid expansion signals both a response to systemic shifts in risk – and a test of the market’s long-term discipline.
“When you look at the growth in the E&S market, it's come on a few fronts, all coalescing together,” Espie said. Among the dominant drivers: surging construction costs, worsening climate events, and an admitted market that’s failing to keep pace. “Global catastrophe losses continue to set records, it seems, almost every year now.”
As state regulators resist rate increases, admitted carriers have been squeezed, pushing overflow into the E&S market. That shift has reached escape velocity. “The trends are accelerating, if anything,” Espie said.
But as opportunity expands, so does the fragility. “The breaking point and where the capacity strain surfaces will be dependent on exactly what he said. How can the E&S market maintain the discipline as capacity comes in?”
Lloyd’s of London remains a key axis in the E&S ecosystem. After years of remediating underperformance, Lloyd’s has started greenlighting broader appetites again. That renewed capacity may be a double-edged sword.
“You're seeing syndicates across the spectrum obtaining approval to take on more business,” Espie said. “Can they do so while maintaining the discipline? That’s one to watch.”
The risk, he warned, is losing the underwriting rigor that made the E&S model successful. With capital flowing back in, the temptation to chase premium looms large.
Much of the fresh capital is coming through MGAs, smaller carriers, and private equity-backed startups. And while tech is making it easier to launch, it’s also making it easier to skip critical risk management steps.
“There’s more technology that I think makes it easier for these new entrants to establish a start,” Espie said. Lower frictional costs and accessible insurance-linked securities (ILS) are lowering the barrier to entry – but not to longevity.
Many new players are heavily reinsurance-dependent, which acts as both a gatekeeper and a disciplinarian. “They are all very reinsurance reliant,” Espie said. “That will help maintain the discipline.”
Reinsurers, increasingly selective, are now the bottleneck. “These new entrants, they're all, in a sense, competing for the same reinsurance capital,” Espie said. The firms winning allocations are doing so with better data, stronger underwriting, and smarter distribution.
That differentiation is not just strategic – it’s existential. In catastrophe-heavy classes, remaining capitalised may soon become a privilege, not a guarantee.
As the E&S sector absorbs business that admitted carriers won’t touch, regulatory inertia is becoming a problem. In California, Espie pointed to stalled efforts to adapt to wildfire risk as emblematic.
“There’s a regulator who, reluctantly, I think, is making some changes being called for by admitted markets... but not at the pace at which they would like.”
That reluctance, Espie said, is not unique to California. “I can see the same issues brewing in states like Texas or even Colorado.” Inconsistent oversight across jurisdictions is adding operational volatility just as the sector scales up.
For now, the E&S market remains one of the few areas with both capital inflow and pricing strength. But that could shift quickly if discipline breaks under pressure.
“I think that factor will continue to increase the share of E&S as a part of the overall market,” Espie said. The real question, he added, is whether the sector can handle the structural weight that’s being placed on it.
The irony is stark. What began as a safety valve is now becoming central infrastructure – and that shift brings new risks.
The E&S sector’s ascent is a product of systemic pressures – but its continued stability will depend on resisting old temptations. If underwriting rigor gives way to growth-at-all-costs, the surge could buckle under its own weight.
