"AM Best has revised its outlook on the U.S. excess & surplus (E&S) market to stable as premium growth slows and rate momentum eases. Discover what this shift means for captive insurance strategies, risk retention, and high-performing middle-market and corporate buyers."
AM Best Shifts E&S Market Outlook—Strategic Implications for Captives
AM Best has revised its outlook for the U.S. excess and surplus (E&S) lines segment to stable from positive, signaling that rate momentum is easing in select classes like commercial property while premium growth moderates. Underwriting profitability remains strong, and specialized E&S coverage for moderate-to-high hazard risks continues to drive steady demand.
Premium growth in the first half of 2025 reached 13.2%—solid but slower than prior years, reflecting a cooling from the double-digit surge the segment has enjoyed in recent cycles. Rate softening is emerging in commercial property and select classes, while capacity is becoming more selective as carriers raise performance thresholds and tighten terms at renewal. Admitted carriers continue to push more business into E&S, including commercial auto, D&O, cyber liability, cannabis-related risks, and catastrophe-driven homeowners' coverage.
"Early rate softening in select classes such as commercial property, slowing premium growth and more-selective capacity deployment are dynamics that now warrant a stable outlook," noted AM Best, underscoring that tailwinds remain but are now more measured.
Captive Opportunities in a Normalizing Market
Rate Softening Strengthens the Captive Case
As E&S rates begin to ease from peak levels, the economic logic of captive ownership often becomes more compelling for high-performing insureds with predictable loss experience. Instead of ceding underwriting profit back to the commercial market as conditions improve, businesses can retain premium dollars and capture long-term returns through a captive structure aligned with their risk profile.
Selective Capacity Drives Risk Retention
More-selective E&S capacity means some accounts will encounter tightening terms, higher attachment points, or coverage gaps even as headline rates soften. Sophisticated buyers facing these constraints can use captive reinsurance and fronted programs to secure continuity, maintain broader or more tailored terms, and directly participate in underwriting results rather than accepting one-size-fits-all market solutions.
Emerging Lines Align with Captive Strengths
The continued migration of commercial auto, cyber, D&O, cannabis, and catastrophe-exposed property into the E&S space aligns closely with lines where captives already outperform the traditional market. These risks require customized coverage, data-driven underwriting, and active risk management—areas where well-designed captive programs deliver measurable value and long-term cost stability.
Fronting Complexity Demands Expertise
Collateral requirements, data reporting, and regulatory oversight for fronted programs and global reinsurance partnerships—particularly at Lloyd’s and in the UK—are tightening, raising the operational bar for captive owners and program sponsors. Experienced captive consulting and underwriting partners help navigate these demands while preserving the economics of risk retention and maintaining access to AM Best rated paper where needed.
The Takeaway for Captive Buyers
The U.S. E&S market remains healthy, but the story is shifting from aggressive expansion to disciplined, more selective growth with moderating tailwinds. For organizations that consistently outperform their peers on risk, this environment is a strategic inflection point where captives can turn changing market conditions into a durable competitive advantage.
Well-structured captive programs allow businesses to maximize control, retain premium and profit, and smooth the impact of market cycles—whether E&S rates are hardening, flattening, or beginning to soften. The companies that move now to formalize or expand captive strategies will be better positioned for whatever the next phase of the E&S cycle delivers.
Contact Captives.Insure to schedule a strategic review of your current program and long-term risk retention goals and discover if a captive may enhance your overall risk financing strategy.
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