U.S. Surplus Lines Market Growth and NJ Workers’ Compensation Medical Cost Trends in 2024
The U.S. surplus lines insurance market continues to experience substantial premium growth, driven primarily by challenges in traditional property and casualty (P&C) insurance lines. AM Best reports that surplus lines premiums grew by 12.1% year-over-year in 2024 and have increased by 28.8% over three years. Key states such as California, Florida, Texas, and New York generated over 75% of surplus lines premiums, reflecting their dominant share in the broader P&C market.
California exemplifies market strain with admitted insurers retracting capacity in difficult property coverage segments due to elevated weather-related losses, notably wildfires. This has caused more business to shift to surplus lines insurers, a pattern previously noted in Florida and Louisiana. Surplus lines carriers benefit from flexibility in rate and form, allowing them to provide coverage where standard insurers pull back.
The surplus lines market shows significant growth in both personal and commercial property insurance segments. Homeowners surplus lines premiums more than doubled from 2018 to 2023, although this segment remains a smaller portion of the total market. General liability and commercial property coverages constitute almost 70% of surplus lines premiums and are primary drivers of growth, highlighting the market's responsiveness to troubled risk classes.
Despite underwriting challenges and unfavorable results in homeowners, commercial auto, and property catastrophe lines across the broader industry, surplus lines insurers have maintained superior underwriting performance by adapting strategies and innovating coverage options. This resilience positions them well to manage emerging risks as businesses adopt technologies like generative AI and encounter novel exposures.
Separately, New Jersey's workers' compensation system is under pressure from rising medical costs, legislative changes, and evolving treatment protocols. In 2024, the state raised attorney fee caps, increasing the financial burden on employers and insurers. Medical payments per claim in New Jersey surpass the national average, driven by higher costs associated with advanced treatments and the growing incidence of workplace-related mental health claims.
Horizon Casualty Services (HCS), a leading PPO in New Jersey for workers' compensation and PIP, employs a proprietary provider network and outcome-focused strategies to manage these costs. By contracting with high-quality providers and implementing evidence-based care protocols, HCS aims to reduce administrative and medical expenses while maintaining care quality.
This comprehensive approach addresses a key factor impacting medical cost trends—provider pricing and network management. Stakeholders in New Jersey's workers' compensation market are encouraged to consider data-driven provider strategies and collaborative cost containment to improve system sustainability.
Together, the growth of surplus lines insurance amid market volatility and New Jersey's ongoing workers' compensation medical cost challenges illustrate broader trends in U.S. insurance: adaptability in underwriting and network management are critical to navigating evolving risk landscapes and regulatory environments.