While the excess and surplus lines sector is maintaining good profitability and strong balance sheets, challenges from high-catastrophe exposures and low interest rates remain, says a Moody's Investors Service report.

But the report says that, even with current challenges, E&S insurers are expected to continue to generate top-line growth through product innovation and development. New products launched over the past few years include cyber-liability coverage, environmental liability and renewable-energy liability.

At the same time, low stock valuations will limit mergers-and-acquisition activity, the report says.

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