Why It Matters
As traditional insurers retreat from areas vulnerable to natural disasters and other costly risks, more homeowners are turning to an alternative insurance market that can provide coverage but may offer fewer protections.
Surplus lines personal-property insurance premiums grew 20.2% in the first half of the year as state-licensed insurers pulled back from high-risk areas, raising concerns about the relatively less regulated nature of this alternative market, according to a new Congressional Research Service (CRS) report. Surplus lines homeowners premiums reached approximately $4.15 billion in 2025, when surplus lines accounted for 2.2% of the total homeowners insurance market.
The report describes surplus lines insurers as a "safety valve" for consumers who cannot obtain coverage from state-licensed admitted insurers but cautions that such policies "may offer fewer consumer protections or less coverage."
The Big Picture
The surplus lines share of the homeowners insurance market more than doubled from 0.8% in 2015 to 2.2% in 2025, according to A.M. Best data cited in the report. Homeowners premiums in the surplus lines market more than quintupled over the decade, increasing approximately 5.3-fold.
The report traces earlier growth surges to specific market disruptions: a 61.7% increase in 2002 following the Sept. 11 terrorist attacks, a 16.3% increase in 2006 after Hurricane Katrina and other storms, and double-digit annual increases from 2018 through 2025 following Hurricane Harvey, rising wildfire and smaller storm losses, and the COVID-19 pandemic. These figures describe growth in the broader surplus lines market, not solely homeowners coverage.
Unlike admitted insurers, surplus lines insurers operate without a license in the state where they sell coverage and are therefore generally not subject to that state's licensing-based rules on policy content or rates. They also do not participate in state insurance guaranty funds, which can protect policyholders when admitted insurers become insolvent.
Surplus lines insurers nevertheless remain subject to certain regulatory requirements, including financial reporting, solvency oversight by their domiciliary regulators and applicable antifraud laws. Regulation of surplus lines transactions also focuses on brokers, who must generally conduct a diligent search, typically documented by three to five declinations from licensed insurers, before placing coverage in the surplus lines market. States may impose insurer eligibility standards and require disclosures about the differences in consumer protections.
The existing federal framework includes the Nonadmitted and Reinsurance Reform Act of 2010, enacted as Title V, Subtitle B of the Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203), which harmonizes aspects of surplus lines regulation and taxation across states. The law gives the insured's home state sole authority to tax a surplus lines transaction and preempts certain state eligibility requirements that conflict with the National Association of Insurance Commissioners' model standards.
The Bottom Line
Growth in surplus lines insurance, which may offer fewer consumer protections than coverage from state-licensed admitted insurers, has raised concerns about the market's relatively light regulation. The Dodd-Frank Act, signed into law July 21, 2010, established the principal federal framework discussed in the report. As more homeowners rely on surplus lines coverage, the distinction between access to insurance and the protections that come with it will remain an important issue for policymakers.
Access the Legis1 platform for comprehensive political news, data, and insights
Spot something wrong? Report an issue with this article
