I’m thrilled to sit down with Simon Glairy, a leading authority in insurance and Insurtech, whose deep expertise in risk management and AI-driven risk assessment offers a unique lens on the evolving landscape of surplus lines. Today, we’re diving into the dynamic shifts in Illinois’s surplus lines market, where innovative carriers are reshaping the competitive field. Our conversation explores the dramatic growth of key players, the impact of regulatory reforms, and the underlying trends driving premium surges in specialized segments. Join us as Simon unpacks the strategies and challenges behind this booming market.
Can you walk us through the major changes you’ve observed in Illinois’s surplus lines market over the past decade?
Absolutely, Olivia. Over the last ten years, Illinois’s surplus lines market has undergone a remarkable transformation. It used to be seen as a last resort for risks that didn’t fit into the standard admitted market, but now it’s become a proactive strategy for many insurers. The market has matured significantly, growing from a relatively modest $200 million in premiums in 1999 to a staggering $4.4 billion in 2024. A big part of this shift is due to regulatory reforms, like the streamlining of the “diligent search” rule, which has made placements more efficient. Additionally, the increasing complexity of risks—think cybersecurity or specialty healthcare—has pushed more businesses to seek tailored coverage that only the surplus market can provide.
What do you believe has been the biggest driver behind this evolution from a niche option to a key strategy?
I’d say it’s a combination of necessity and opportunity. The admitted market has faced capacity constraints in certain lines, especially in high-risk areas like commercial auto or property. At the same time, surplus lines carriers have stepped up with the flexibility to customize coverage—freedom of rate and form, as it’s often called. This allows them to adapt quickly to economic conditions and client needs, something the standard market often struggles with due to stricter regulations. Add to that the rising litigation pressures in Illinois, and you’ve got a perfect storm pushing more business into the non-admitted space.
Turning to specific players, Great American Insurance saw a staggering 198% premium increase in just one year. What’s fueling this rapid climb in the rankings?
Great American’s growth is a standout story. Their jump from 93rd to 49th in Illinois’s rankings reflects a very deliberate focus on underserved segments of the market. They’ve likely honed in on lines where admitted carriers are pulling back, offering innovative solutions with competitive pricing. It’s not just about volume; it’s about strategic positioning. They’re leveraging data and analytics to identify gaps faster than many competitors, allowing them to scale quickly in areas with high demand.
How do you see their approach differing from more established players like legacy giants in the market?
Legacy players often rely on their longstanding relationships and sheer market volume to maintain dominance. They’ve got deep roots and a broad portfolio, but that can sometimes make them slower to adapt. Great American, on the other hand, seems to be playing a more agile game—focusing on speed and specialization. They’re not trying to be everything to everyone; instead, they’re targeting specific niches where they can deliver value quickly, which is a stark contrast to the more traditional, broad-brush approach of some of the older names.
Swiss Re also posted an impressive 96% premium surge, reaching nearly $60 million. What factors are behind their success in Illinois?
Swiss Re’s growth is tied to their strong focus on the excess property space, where demand has been soaring. They’ve capitalized on the market’s need for coverage that can handle large, complex property risks—think high-value commercial buildings or industrial assets. Their ability to offer customized solutions, thanks to the flexibility in the excess market, has been a game-changer. They’re meeting clients where they are, adjusting coverage to match both budget constraints and specific risk profiles, which has clearly resonated in Illinois.
Can you elaborate on how this flexibility in rate and form helps meet client needs in the excess market?
Sure, Olivia. In the excess market, carriers aren’t bound by the same rigid pricing and policy structures as in the admitted space. This means they can tailor coverage to fit a client’s unique situation—whether that’s adjusting premiums based on economic conditions or designing policies that address very specific exposures. For instance, a business facing fluctuating property values can get a policy that reflects current market realities rather than a one-size-fits-all rate. It’s about precision, and that kind of adaptability builds trust and drives demand.
Looking at other fast-growing carriers like MS Transverse, Accelerant, and Hudson Excess, what’s propelling their double-digit growth?
These carriers are thriving because they’re filling critical gaps in the market. As admitted capacity shrinks in certain lines—due to higher risks or tighter underwriting standards—these newer players are stepping in with solutions. They’re often more willing to take on complex or emerging risks that larger, more conservative insurers might shy away from. Their growth reflects a market hungry for alternatives, especially in commercial sectors where standard coverage just isn’t cutting it anymore.
How do their strategies differ from those of bigger, more established insurers?
The difference often comes down to risk appetite and operational agility. Larger insurers tend to have stricter underwriting guidelines and a focus on preserving capital, which can limit their exposure to volatile lines. These smaller, fast-growing carriers, however, are more nimble. They’re willing to experiment with innovative products and pricing models, and they can pivot quickly to seize opportunities. It’s a classic David-versus-Goliath dynamic—speed and specialization versus scale and stability.
The data shows premiums per transaction are up 3.4% year-over-year. What does this indicate about the types of risks being underwritten in Illinois?
This uptick suggests that the risks being covered are becoming more severe or complex. It’s not just about writing more policies; it’s about the underlying exposures requiring higher premiums to offset potential losses. We’re seeing this particularly in areas like liquor liability and medical malpractice, where litigation costs and claim severity are climbing. It points to a market where insurers are pricing in greater uncertainty, likely driven by Illinois’s challenging legal environment and evolving risk landscapes.
Speaking of specific segments, premiums in dental malpractice more than tripled, and surplus fire insurance jumped 112%. What’s driving these dramatic increases?
In dental malpractice, the spike is likely tied to a combination of higher claim payouts and increased litigation. Dental procedures are becoming more complex, and when something goes wrong, the financial and legal consequences can be significant. As for fire insurance, the 112% surge probably reflects broader trends in property risks—think aging infrastructure, climate-related concerns, or specific events like urban fires that have heightened awareness. Insurers are adjusting premiums to account for these elevated loss potentials, and in the surplus market, they’ve got the leeway to do so quickly.
Finally, what is your forecast for the future of Illinois’s surplus lines market over the next few years?
I’m optimistic, Olivia. Illinois has positioned itself as a leader in surplus lines regulation, and with pending legislation in Springfield, we could see even more efficiency and growth. I expect the market to continue expanding as risks become more specialized and admitted capacity remains tight in certain lines. Carriers that can innovate—whether through technology like AI for risk assessment or by targeting emerging exposures—will likely lead the pack. But it won’t be without challenges; litigation pressures and economic fluctuations will keep everyone on their toes. I think we’re looking at a market that’s not just growing, but fundamentally redefining how risk is managed.
