Overview

California's excess and surplus (E&S) lines market is undergoing a significant transformation, evolving from a niche for high-risk properties to a primary source of coverage for ordinary homeowners. Recent data indicates that the number of surplus lines homeowners policies has reached unprecedented levels, raising questions about the future of property insurance in the state.

Key details

  • The E&S market has traditionally served high-risk properties, such as skydiving schools and cannabis dispensaries.
  • In California, surplus lines homeowners policies exceeded 300,000 in 2025, marking a historic high.
  • This shift began as a rebound from pandemic disruptions but solidified into a structural change in 2024.
  • By 2026, this change has evolved into a comprehensive realignment of California's property insurance market.
  • Initially, the surge in E&S coverage was attributed to insurers leaving fire-prone areas.
  • However, recent analysis shows that the wildfire exposure in California's E&S homeowners book has sharply declined.
  • The average assessed value of newly written surplus lines homes fell from $900,000 in 2024 to $800,000 in 2025.
  • Average premiums for these policies also decreased by 14.5% during this period.
  • Urban properties now make up about 90% of all E&S placements in California.
  • Major cities like Los Angeles and San Diego account for nearly 11% of E&S homeowners' placements statewide.
  • Surplus lines policies in cities like Bakersfield and San Jose have increased dramatically, by more than 2,500% and 1,500%, respectively.
  • The increase in E&S activity is attributed to coverage scarcity rather than worsening hazard conditions.

Context

This transformation in California's insurance landscape can be traced back to a 1988 ballot initiative, the long-term effects of which have contributed to the current state of the market.

What happens next

The future of property insurance in California may hinge on how the E&S market continues to adapt to the needs of homeowners and whether traditional insurers can re-enter the market.

What we don't know yet

Details regarding the specific impacts of the 1988 ballot initiative and the long-term sustainability of the E&S market are not confirmed.