Phoenix--The surplus lines industry, on the whole, is showing solid growth, but the trend is uneven geographically, the president of a national surplus lines organization said yesterday.

"It's a mixed signal, the whole industry is growing north of $30 billion, but in some states it's trending down," explained Lawrence "Mac" Wesson Jr., president of the National Association of Professional Surplus Lines Ltd., holding its mid-year meeting here.

Mr. Wesson, president and chief operating officer with U.S. Risk Insurance Group in Dallas, said in areas where there is a downward trend for surplus lines, some of that may be explained by business migrating to admitted market carriers that are more competitive. This is due to relaxation of regulatory constraints on such things as rate changes.

The strength of the non-admitted surplus lines market, he noted, is that with less regulation it is able to offer a place for continuing innovation.

"The surplus lines market has always been a laboratory for new products in the property-casualty business," he observed.

Mr. Wesson also noted the migration of business to the surplus sector when there is price hardening and vice versa.

Currently property insurance rates are not softening in wind-prone areas, while in the casualty market larger loss-free accounts are seeing a softening.

If there are larger trends, Mr. Wesson said they generally "start on both coasts and meet in the middle."

Looking ahead at what surplus lines faces in the coming years, Mr. Wesson said experience has taught NAPSLO that at any given time surplus operations face threats to their freedom from rate and form regulation.

"It is rare for there not to be something brewing at the state level that constitutes some sort of infringement," he noted.

He added that NAPSLO currently has concerns about Louisiana, West Virginia and California because of ongoing litigation or regulatory activity that could infringe upon surplus operations.

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