Swiss Re Institute published sigma insights 02/2026: A new phase for the US surplus lines insurance market in early 2026, dating the inflection in US excess and surplus growth to late 2024.

Through 2015 to 2023, US surplus lines direct written premium compounded at roughly 20 percent a year, more than five times the admitted market. By the end of 2024 that spread had collapsed to single digits for the first time in a decade. sigma reads it as structural reversion, not a soft patch.

~20%
U.S. surplus lines DPW CAGR 2015–2023 per A.M. Best and WSIA stamping data
-32%
Cyber non-proportional reinsurance risk-adjusted rate at April 1, 2026 (Gallagher Re)
-20%
North America property catastrophe reinsurance risk-adjusted rate at April 1, 2026

Key Takeaways

  • From roughly 20 percent to high single digits. A.M. Best's 2026 special report puts 2025 national E&S DPW at $130 billion to $135 billion, the slowest growth since 2016.
  • Q1 2026 ran 6 percent above Q1 2025, against Q1 2025 at 11 percent over Q1 2024 and Q1 2024 in the high teens. Premium still grows on rate; submission volume does not.
  • Professional liability DPW was flat in dollars against 3 to 6 percent rate increases, which means exposure moved back to admitted paper rather than holding.
  • Minus 20 percent on North America property cat at the April 1 reinsurance renewal. That is the same capital that funds admitted carriers taking submission flow back.
  • Hit ratios ran 8 to 12 percent on specialty books in 2022 and 2023 against an oversupplied pipeline. They compress a further 100 to 300 basis points as the good risks leave first.

What the 2025 Data Shows

sigma's argument is that three forces drove the decade of expansion and each has now partially reversed: admitted rate inadequacy on catastrophe-exposed and litigation-driven lines, regulatory drag on admitted filings in California and Florida, and a capital vacuum in specialty that drew in managing general agents and surplus lines paper.

The aggregate confirms the deceleration. WSIA quarterly data from the 15 reporting stamping states puts Q1 2026 DPW roughly 6 percent above Q1 2025, against Q1 2025 running about 11 percent above Q1 2024 and Q1 2024 in the high teens over Q1 2023.

The line-level picture is where the structural reading earns its keep. Surplus lines cyber grew in the low single digits in 2025, down from 20 percent plus every year from 2019 to 2022, with admitted cyber filings clearing in 17 states where admitted forms had been withdrawn during the ransomware hard market. Commercial auto decelerated to mid single digits from the high teens in 2022 and 2023 as admitted rate caught up to loss trend on trucking and livery.

Professional liability is the cleanest signal. Best reports surplus lines DPW in Other Liability Occurrence and Claims-Made combined roughly flat on 2024 in dollar terms. Against rate increases of 3 to 6 percent, flat dollars means exposure declined, which is risks moving back rather than a book holding steady.

The exception runs the other way. Florida, Louisiana and California wildfire-exposed property continues to grow in surplus lines on admitted non-renewals still working through, as does mid-market habitational in peak cat zones. It is not enough volume to offset reversion in the other lines.

One Capital Pulse, Two Readings

The April 1 reinsurance renewal is the other half of the same story rather than a separate market event.

Gallagher Re's First View printed North America property catastrophe down roughly 20 percent risk-adjusted and cyber non-proportional down 32 percent, with Guy Carpenter at minus 14 on US property cat, Aon between them at minus 15 to 18, and Japan at minus 16, as covered in the Gallagher Re April 2026 First View analysis.

Abundant, cheap reinsurance is what lets an admitted carrier with stable rate adequacy accept more exposure at an acceptable net combined ratio. Scarce, expensive reinsurance is what makes it retrench and leaves surplus lines to backstop the gap. The decade of 20 percent E&S growth ran parallel to a reinsurance capital squeeze that peaked at 1/1 2023 and has been unwinding since 1/1 2024.

For a binding authority book, the consequence is adverse selection on the residual. Hit ratios on specialty books ran 8 to 12 percent in 2022 and 2023 because underwriters were quoting selectively from an oversupplied pipeline. As submission flow compresses, hit ratios at the same underwriting footprint compress a further 100 to 300 basis points rather than expanding, because admitted takes the good risks back first and what arrives at wholesale is what admitted declined.

That breaks the rate measurement. A 5 percent renewal price increase on a book whose underlying mix has shifted toward residual segments is not 5 percent of rate adequacy improvement, and a loss load anchored to the book's own recent performance is anchored to a different book. Accident year 2026 is being written into that shift, so its development will not follow the AY 2023 or AY 2024 pattern on what looks like the same program.

Three Signals, One Shock

The modeling error the sigma thesis invites is treating its three outputs as independent evidence.

The E&S slowdown, the April renewal softening, and admitted carrier capital deployment are all readings of the same capital abundance. A group writing admitted specialty, surplus lines program business, and ceding to reinsurance that rolls up all three as separate sources of relief has counted one shock three times. Stress testing has the mirror problem: if capital abundance reverses, it reverses across all three at once, so a correlated shock is the honest test and independent sensitivities are not.

The reversal case is concrete rather than hypothetical. A landfalling Atlantic hurricane producing insured losses above $75 billion would reset the reinsurance narrative, force admitted retrenchment on coastal exposure, and push submission flow back to wholesale, undoing the 2025 mix shift in one season. The CSU April 2026 outlook forecasts below average, which still carries the tail. Economic capital models whose correlation between primary specialty hit ratio and reinsurance price movement is calibrated to the 2015 to 2021 baseline rather than the 2022 to 2023 shock will not show it.

Regulators set the speed. Florida's diversion metric, the share of commercial property submissions declining admitted in favor of E&S, peaked near 15 percent in 2022 and has been reversing since 2024, with admitted commercial property net new business growing again outside coastal and concentrated-value zip codes. Wind-exposed coastal risk still behaves as the Florida Cat Fund 45 percent floor analysis describes.

California's Sustainable Insurance Strategy points the same way, and admitted commercial D&O capacity there rebuilt through 2025 as filings cleared against loss trend. Where regulators actively facilitate admitted reentry through filing throughput and rate adequacy acceptance, the reversion runs faster than sigma's multi-year framing implies. Where they do not, it stalls. That makes the pace of the thesis a regulatory variable rather than a market one, which is not how a pricing plan usually models it.

Further Reading

Sources