THE SURPLUS-LINES market, once thought of primarily as the home of unwanted insurance risks, has prospered in the current hard phase of the insurance cycle. If one compares the $2.2 billion in direct written premium placed in the E&S market in 1981 with the $25.6 billion written in 2002, the strength and vitality of this marketplace clearly becomes evident. Not only has the premium base of the surplus-lines market grown, but its combined ratio also has consistently outperformed the admitted markets'-by nearly 15% in 2003, according to A.M. Best's annual report on the excess & surplus lines market, and the gap continues to widen each year.

In the past, retail agents and brokers might have looked upon the E&S marketplace as the market of last resort, to be considered only if all else fails. However, thanks to a consistent application of underwriting discipline in niche lines of business, an entrepreneurial accountability for results, and a relentless commitment to professional development, the E&S marketplace is now home to many programs and classes of business that were once written mainly by admitted insurers.

Furthermore, in today's competitive market, where insurance buyers are looking for security as well as innovative solutions, the composite A (Excellent) rating A.M. Best has assigned to the professional surplus lines market compares well with the industry's composite A- rating. Why have retail agents, so wary of this market just a few years ago, turned to it as the answer to many of their problems and, further, a means to growth? One reason may be that many large, standard insurance carriers, prompted by market changes, low interest rates, reinsurance problems and reserve issues, have reallocated resources back to core business over the past five years, abandoning many small retail agents, programs and territories. Gone are the days when insurance companies were desperately trying to be all things to all people.