The E&S Boom: How Climate Change and Storm Losses Are Changing Insurance

Growth in E&S lines isn’t slowing anytime soon.

Wood risk has long been difficult to place, said Angelo Ganguzza, vice president and general manager of brokerage operations for Green Tree Risk Partners, a member company of Pennsylvania Lumbermens’ Mutual Insurance Company (PLM), in part because of the nature of the claims. “The niche is a severity-based exposure rather than a frequency one,” he explained.

But difficult doesn’t mean impossible — at least that’s how it was in the past. In recent years, “you could sit down in a room full of reinsurers and talk about insurance and risk and exposures and the minute you mentioned lumber or wood, if you look down and look back up, almost everybody would be gone from the table,” Ganguzza said.

These tough market conditions are familiar to many. Property, liability and other admitted carriers have been tightening capacity in recent years. Much to the delight of Excess and Surplus (E&S) carriers.

In the five years leading up to 2023, the segment experienced a 21% compound annual growth rate, per a December 2024 report from Conning, reaching $104 billion in written premiums. Major losses, rapidly evolving exposures and other factors are pushing insureds into E&S.

“The admitted market is looking to reposition, to remediate their portfolios,” said Matt Dolan, president of North America Specialty, the domestic specialty operation of Liberty Mutual.

“Their ability to do that with appropriate speed, and the terms and conditions or pricing or structural steps that they would have to take are limited so that business migrates out and into the E&S marketplace.”

What’s Driving E&S Growth?

In the past, brokers and insureds have used E&S markets as a last resort when they couldn’t get capacity. “Historically, the notion was I’m going to lean a little harder on a wholesale broker in the harder market and in the softer market, I’m not going to need them or want them as much. I think that narrative is going away a little bit,” said Kevin Doyle, CEO of RPS, Gallagher’s wholesale division.

That traditional pattern holds. More and more are turning to E&S as large losses from natural catastrophes, nuclear verdicts and other claims have caused carriers in the admitted markets to pull back their capacity.

“Property has probably been the biggest growth driver,” said Liz Kramer, president of excess and surplus lines for Munich Re Specialty, North America.

“We’ve seen much more property business go into the E&S segment because of climate change, for example. The exposures have changed a lot.”

“The biggest move we’re seeing right now is in convective storm-related risks,” added Matt Westhoff, president of commercial insurance, QBE North America. “The past two years have been the two largest industry loss years for convective storms.”

But hard markets aren’t the sole driver of contemporary E&S growth: “I think the more contemporary and the more compelling and persistent driver is that the speed and complexity of risk is moving business into the E&S channel because they require a more responsive, contemporary, bespoke type of solution,” Dolan said.

The Advantages of E&S

Insureds are embracing E&S because of its ability to quickly respond to today’s rapidly evolving risk landscape, while still providing the coverage they need. As a non-admitted market, “the E&S market is not subject to rate and form filing restrictions that a standard market has to comply with,” Ganguzza explained.

“So there’s less regulation and it allows the E&S marketplace to react quickly and come up with coverage availability.”

“What you’re going to get with E&S is a very specialist approach,” Westhoff added. “You’re going to have teams that understand your risk, not just on the underwriting side, but also the claim side, which is equally, if not more important.”

Brokers have pivoted as well. “Much like E&S carriers, wholesale brokers had to pivot during the cycle shift. And they did an incredible amount of work to replace lost capacity in the first phase of the hard market,” said Jason Conkin executive vice president, E&S casualty, Arch Insurance.

“During the soft market, the pressure on the wholesale broker was to be competitive and seek the best price alternative for the insured. And while price is still an important factor in the sale of our business, the capacity crunch led them to focus more on replacement of coverage.”

“You’re getting a lot of specialty teams that really know the space, and the brokers are going out and educating their clients,” Westoff added.

“You had folks in the wholesale world that were just focused on property. Now it’s being narrowed down so much that not only are they just a property broker, but they’re just a property broker for builder’s risk, or for ocean marine or inland marine,” Doyle added.

“Retail brokers don’t have the ability to just focus all day, every day, on builders’ risk.”

Can Growth Continue at this Pace?

Experts expect that E&S growth might slow some as some admitted markets soften. Cyber markets aren’t nearly as tough as they were a few years ago. Some E&S carriers may exit as traditional markets take on more risk.

“While the barriers to entry are lower, the barriers for success, long-term success, are quite high,” Dolan said. “It is a fluid, dynamic, high-risk, bespoke ecosystem that requires a lot of expertise.”

Still many, including brokers, are committed to the segment, suggesting that E&S’s current growth trajectory has some staying power. “You’ve got these very large brokers right now that are completely committed to the wholesale market, investing in both technology and expertise,” Kramer said.

New technologies promise more efficient E&S underwriting, which could potentially fuel growth. “You think about the political climate, the economic climate — it’s changing, daily, weekly, monthly,” said Andy Hendrix, executive vice president, E&S property at Westfield Specialty.

“Our speed to market is better than it’s ever been. The technology and AI tools that we’re now using in our businesses allow us to be efficient and dynamic and evolve quickly. I think that is positioning the E&S market well for the changes that have occurred and whatever changes are coming in the future.”

“Investing in analytics will allow E&S carriers to execute more effective portfolio management and earlier underwriting actions than prior years,” Conkin added.

“The E&S industry can also do a better job in sharing the knowledge they have gained through analytics with the wholesale community, and that will have several benefits, including higher productivity and stronger alignment between broker and underwriter.”

Inflation, nuclear verdicts, the fires in Los Angeles and geopolitical conflict are likely to continue to drive interest in E&S into 2025.

“Economic inflation has a direct negative effect on the amount carriers are paying out on claims, adding additional risk for traditional carriers,” said Christine Schneider senior vice president, casualty claims, Arch Insurance.

“From a claims perspective, I anticipate carriers will continue to see the pressures of social and economic inflation, nuclear verdicts, a rise in litigation funding, and expansion of liability theories.”

Insureds will likely continue to be attracted to E&S because of its stability. “What buyers get fatigued by is a tremendous amount of unpredictability around what their cost of risk will look like,” Dolan said. “We try very much to create stability.”

“The E&S market has been around for a long time. The security of E&S carriers provides consistency and comfort for insureds on our claims paying ability,” Hendrix added. &

Courtney DuChene is a freelance journalist based in Philadelphia. She can be reached at [email protected].

New Jersey Workers’ Compensation Medical Cost Trends in 2024. How to Improve the Trend

Tips for managing costs and outcomes in a state where expenses can track above the national average.

By: Horizon Casualty Services, Inc. | April 1, 2025

In 2024, New Jersey’s workers’ compensation system has been influenced by several key medical trends, including rising medical costs, legislative changes, and evolving treatment protocols. Understanding these developments is crucial for stakeholders navigating the state’s workers’ compensation landscape. Below are just some of the key trends to follow:

Rising Medical Costs

HCS identifies providers with WC and PIP experience and contracts with the services most needed by the injured individual. HCS is contracted with nearly all hospitals and all level 1 and level 2 trauma centers in the State of New Jersey. We identify initial treaters, specialists, physical therapy centers, ambulatory surgical centers, urgent care providers, diagnostic centers and more. Using a proprietary formula, the best providers are highlighted so that clients can rest assured their injured claimants are in the right hands.

Rising medical costs are significantly impacting workers’ compensation systems, with New Jersey (NJ) experiencing notable challenges. Key factors contributing to this trend include:

Absence of a Medical Fee Schedule: Unlike many states, NJ lacks a standardized medical fee schedule for workers’ compensation. Instead, it relies on a “usual and customary” charge system, leading to higher medical expenses. This absence has resulted in NJ having some of the highest workers’ compensation premiums nationwide.
Medical Inflation: Nationally, medical care costs have outpaced general inflation. This trend is driven by increased consumption of medical services, labor shortages, and higher wages for healthcare workers, all of which elevate the costs of services covered by workers’ compensation.
Surgical Costs: NJ reports some of the highest surgical costs in the U.S., averaging 115% more than other states. This is attributed to the lack of fee schedules and the prevalence of out-of-network providers receiving higher payments for services.
Medical Claim Petitions: The practice of medical providers accepting payments and subsequently filing petitions for additional compensation has led to increased payouts and administrative burdens, further driving up costs.

These factors collectively contribute to the rising medical costs in NJ’s workers’ compensation system, posing challenges for employers, insurers, and policymakers in managing and mitigating these expenses.

Legislative Changes

Recent legislative changes in NJ have increased workers’ compensation costs for employers/insurers.

In August of 2024, legislation was enacted to raise the attorney fee cap in workers’ compensation cases from 20% to 25%. This adjustment acknowledges the increased workload of workers’ compensation attorneys since the cap’s establishment in 1927.

NJ’s Division of Workers’ Compensation typically requires employers/insurers to cover 60% of the injured workers’ attorney fees, with the employee responsible for the remaining 40%. With the new 25% cap, employers/insurers costs have risen.

Also, in response to escalating medical costs, NJ has implemented legislative measures aimed at regulating expenses within the workers’ compensation system.

Notably, the state increased the maximum allowable fee for evaluating physicians from $600 to $1,000. This adjustment seeks to ensure that medical experts are fairly compensated for their evaluations, potentially improving the quality of medical assessments in workers’ compensation cases.

Evolving Treatment Protocols

Dave Cucinotta, Director of Finance Strategy and Administration, Horizon Casualty Services, Inc.

The integration of advanced medical treatments and technologies has also influenced workers’ compensation medical trends in the Garden State.

“While these innovations can enhance patient outcomes, they often come with higher costs. The challenge lies in balancing the adoption of these advanced treatments with the need to manage expenses effectively,” said Dave Cucinotta, Director of Finance Strategy and Administration for Horizon Casualty Services, Inc.

The increasing prevalence of workplace-related mental injuries has prompted discussions about compensability and appropriate treatment protocols. Addressing mental health issues requires comprehensive approaches, including counseling and therapy, which can contribute to higher overall medical costs.

Comparative Analysis with Other States

When compared to other states, NJ’s workers’ compensation medical costs are higher than average. Studies by the Workers Compensation Research Institute (WCRI) indicate that medical payments per claim in NJ are notably higher, than in other states.

This comparison highlights the need for continued evaluation of cost-containment strategies to align NJ’s expenses with national benchmarks.

Impact on Stakeholders

The rising medical costs within NJ’s workers’ compensation system have significant implications for various stakeholders:

Employers: Increased medical expenses will lead to higher insurance premiums, affecting business operating costs.
Employees: While access to advanced medical treatment is beneficial, there is a concern that escalating costs could influence the approval and provision of necessary care.
Insurers: Insurance carriers may face challenges in underwriting policies and managing claims effectively considering rising medical costs.

Future Considerations

To address these challenges, stakeholders might consider the following strategies:

Promoting Preventive Care: Encouraging workplace safety and preventive health measures can reduce the incidence of injuries, thereby decreasing overall medical expenses.
Enhancing Loss Control Services: Evaluating workplaces with the intention of preventing injuries before they happen is worth the investment.
Enhancing Case Management: Improving coordination of care and case management can ensure that injured workers receive appropriate and timely treatment, potentially reducing prolonged medical costs.

How to Improve the Trend

With NJ’s workers’ compensation facing significant challenges due to rising medical costs, legislative changes, and evolving treatment protocols, there is a need for improvement.

Addressing these issues requires a collaborative approach among policymakers, employers, insurers, and healthcare providers to ensure that the system remains sustainable and continues to serve the needs of injured workers effectively.

“The most significant way to improve medical cost trends in NJ workers’ compensation is to evaluate who is pricing the claims,” said Cucinotta.

Horizon Casualty Services, Inc. (HCS) has been providing PPO network services to NJ clients since 1994

HCS plays a pivotal role in improving medical cost trends through its extensive provider network and innovative, data-driven strategies to achieve superior medical outcomes at the lowest cost. Through its Outcomes Focused Network Strategy, HCS ensures that injured workers receive care from top-tier providers who prioritize quality, adhere to evidence-based practices, and take a conservative approach to costly interventions like surgery and prescriptions. By contracting with a broad network of premier providers and securing highly competitive rates, HCS significantly reduces costs while maintaining exceptional care standards. Additionally, through proactive dispute management, precise data integrity, and an extensive network, HCS ensures a seamless, efficient process that significantly reduces administrative costs.

Cucinotta adds that, “These innovative approaches positions HCS as a leader in controlling medical costs and driving positive results in the NJ workers’ compensation landscape.”

For More Information

For more information, email Jed Hoban, HCS Business Development Executive, at [email protected] or visit https://www.horizonblue.com/horizoncasualty/.

About Horizon Casualty Services, Inc.

HCS, in business since 1994, is a leading PPO in New Jersey WC and PIP. HCS has a 100% direct-contracted provider network that includes almost all New Jersey acute care hospitals. The network delivers significant overall savings and, with its deep focus on precision, an extremely low appeals rate. Its PPO results, combined with its Healthcare Value Strategy and Outcomes Focused Network, enable insurers to be the best at delivering quality medical care to claimants at the right cost — clearly a win-win for all. HCS is an independent licensee of the Blue Cross and Blue Shield Association.

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Horizon Casualty Services, Inc. The editorial staff of Risk & Insurance had no role in its preparation.

Horizon Casualty Services Inc., an affiliate of Horizon Blue Cross Blue Shield of New Jersey, in business since 1994, is a leading PPO in New Jersey workers' compensation and personal injury protection. The company's 100% direct-contracted provider network includes almost all New Jersey acute care hospitals, significant overall WC savings and, with its deep focus on precision, an extremely low WC appeals rate of 0.2%. Its PPO results, combined with its WC healthcare value and OFN strategy, enables insurers to be the best at delivering quality medical care to claimants at the right cost — clearly a win-win for all.