How Shrinking Risk Appetite Is Reshaping the Excess Market

In 2024 and continuing into 2025, many carriers have scaled back their willingness to write specific lines of business, tightened underwriting guidelines, or exited higher-risk classes altogether. According to Brown & Brown’s Q1 2025 market overview, “the appetite of many carriers continues to decrease,” particularly in liability and property markets where exposures have become more volatile. As a result, accounts that might have once secured comprehensive coverage through a single primary policy are now facing reduced limits or no offer at all.

This market shift is bringing excess insurance policies into sharper focus. Rather than acting as an optional safety measure, excess coverage is increasingly filling the space left behind by more cautious primary markets. For many clients, it’s no longer just a matter of "extra" protection; it’s a necessary part of maintaining sufficient limits in today’s constrained insurance environment.

As construction projects become more complex and incorporate innovative designs and materials, the importance of tailored builders' risk insurance has grown significantly.

What’s Driving the Contraction in Risk Appetite?

A perfect storm of market pressures is reshaping risk appetites, one that insurance professionals are watching closely. Between record social inflation, climate-driven losses, and heightened reinsurance costs, the backdrop behind excess insurance demand is changing fast.

Market Forces Behind the Shift

Legal trends and claim severity are placing growing pressure on liability carriers. The rise of nuclear verdicts—jury awards over $10 million—has disrupted expectations across sectors. According to Insurance Journal, in 2023 alone, there were 27 verdicts in the U.S. exceeding $100 million. Combined with escalating social inflation, which is growing at an estimated 7% annually, these developments are pushing carriers to reconsider both pricing and participation in higher-risk classes.

On the financial and environmental side, the climate crisis and the cost of capital are also playing a role. Reinsurance pricing continues to climb as carriers seek new ways to offload risk. Meanwhile, climate-driven losses like the California wildfires, which topped $40 billion, are accelerating regional pullbacks and underwriting restrictions in catastrophe-prone areas.

Classes Most Impacted

These market dynamics aren’t affecting all industries equally. Some business classes are bearing the brunt of shrinking appetites, with carriers either lowering available limits or exiting altogether.

Construction: High project values, subcontractor exposures, and rising accident frequency make this sector a challenging placement, especially for accounts with loss history or large payrolls.
Hospitality & Events: High guest turnover, alcohol service, and crowd-related risks have reduced capacity for hotels, venues, and entertainment providers.
Transportation: Long-haul trucking, delivery fleets, and newer ventures face intense scrutiny, particularly on liability limits and driver safety records.
Habitational: Rental properties, especially in litigation-prone or catastrophe-exposed states, are seeing fewer primary options and more reliance on excess coverage.

For agencies serving clients in these sectors, understanding where primary coverage is limited can help illuminate where excess insurance policies are stepping in to close the gap.

As underwriting standards shift, excess insurance policies are becoming essential to fill the coverage void left by restrictive primary offerings. What was once considered optional or supplemental plays a central role in helping businesses maintain adequate protection in a more cautious and capacity-constrained market.

The New Role of Excess in a Tightening Market

A more cautious approach from primary carriers is reshaping how excess insurance is used in today’s placement strategies. As capacity shrinks and pricing increases, excess policies are taking on a role that is both more deliberate and more essential for client protection.

No Longer Just a Safety Net

Excess policies are increasingly being used proactively to complete placements when primary insurers limit available limits. In some high-risk industries—such as heavy construction or habitational properties—excess coverage may now be the only available way to secure sufficient liability protection.

According to Risk Placement Services’ Q2 2024 report, lead excess capacity for high-hazard classes often requires coordination of two or three carriers to assemble just $5 million in coverage, a clear sign that excess policies are no longer a fallback option.

Structuring Binds with Excess in Mind

Building effective programs now often means thinking in layers—not just in terms of policy structure, but also in how markets are selected and coverage is coordinated. With fewer carriers offering broad limits on primary policies, insurance professionals are often required to assemble excess coverage through multiple sources. This layered approach introduces new logistical and technical considerations that make coordination more critical than ever.

Multi-carrier placement: Agents may now need to work with two or more excess carriers to meet clients’ liability requirements, especially in sectors where even modest coverage limits are hard to secure through a single provider.
Coordination complexity: Navigating attachment points, shared limits, and “follow-form” language can introduce challenges when aligning policies from different carriers. Thorough attention to how terms align is essential to avoid unintentional coverage gaps.
Leveraging specialty markets: Partnering with MGAs and wholesalers can help agents access niche or flexible excess products that aren’t readily available in the standard market, particularly for accounts that fall outside typical underwriting appetites.

As primary markets evolve, excess insurance policies are increasingly serving as foundational components in liability strategies rather than optional extras. The growing complexity and scarcity of primary capacity mean that understanding how to structure excess coverage effectively is becoming more than best practice; it’s necessary in today’s market.

Insurers and developers must collaborate to address the evolving landscape, ensuring that coverage adapts to the unique exposures presented by contemporary construction practices.

Conclusion

As risk appetites continue to contract across many lines of business, excess insurance is taking on a more prominent role—not as a backup plan, but as a strategic part of many commercial insurance programs. With carriers offering reduced limits or exiting certain classes, agents are often faced with building coverage from multiple components rather than relying on a single, comprehensive policy.

While the market continues to shift, having access to dependable excess solutions can make all the difference. That’s why the BTIS Excess Marketplace is built to make those challenges a little easier, offering a broad range of excess options and a commitment to helping agents get what they need, when they need it.

Sara Bankert is a Vice President of Builders & Tradesmen's Insurance Services, Inc., an Amynta Group Company.

Builders & Tradesmen’s Insurance Services Inc.

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