Insurance is transitioning from standard markets to the excess and surplus market

California’s homeowners’ insurance market witnessed a significant transformation in 2024, primarily in the realm of excess and surplus insurance coverage, according to a recent report by IB+. The departure of major admitted carriers like Farmers, Allstate, and State Farm from the market and their cancellation of existing policies triggered a shift towards surplus lines insurance. Traditionally earmarked for specialized or high-risk placements, surplus lines insurers are now catering to standard residential risks at an unprecedented rate.

Michael Caturegli, the Chief Analysis and Technology Officer at the Surplus Lines Association of California, noted the unprecedented surge in surplus lines insurers issuing homeowners’ policies. The declining availability of homeowners’ insurance due to leading admitted insurers halting new policies and discontinuing existing ones has restricted coverage options to a narrower group of insurers.

The data presented in the IB+ report delves into various aspects of the California surplus lines market, such as market trends, premium trends, insurer-specific premiums, leading brokerages by premiums, leading carriers by premiums, and sector-wise surplus premiums, providing comprehensive insights into the market landscape.

The exponential growth in personal lines premiums and transactions in 2024 was primarily fueled by an uptick in homeowners’ policies. The surplus lines sector witnessed a remarkable increase in premiums, soaring from $16.6 billion in 2023 to $19.1 billion in 2024. Homeowners’ policies, falling under the personal lines subsector, significantly contributed to this surge with a 330 percent increase in policy transactions and a 169 percent spike in premiums recorded through the third quarter of 2024.

California’s vulnerability to natural disasters, particularly wildfires and severe weather events like floods, has heightened the complexity of underwriting residential properties, substantiating the growing demand for homeowners’ insurance. The escalating risks associated with natural catastrophes have posed challenges for homeowners, prompting many to explore alternatives like the California FAIR Plan, the state’s insurer of last resort, which is also experiencing strain due to increased demand.

This paradigm shift towards non-admitted and last-resort insurance options underscores the current market instability. While surplus lines were originally intended for specialized or high-risk placements, they are now handling the overflow from mainstream homeowners seeking coverage amid dwindling options from admitted insurers. The trend indicates that as admitted carriers continue to exit the market, the surplus lines sector is assuming the responsibility of stabilizing the homeowners’ insurance landscape in California.

For a detailed analysis of this evolving trend and a comprehensive overview of the California surplus lines market, readers are encouraged to explore the California Surplus Lines Market Outlook report, shedding light on the transformations and challenges facing the homeowners’ insurance sector in the state.