Competitive pressures are receding for many surplus lines insurers, reversing a four-year decline in the premium produced by domestic professional surplus lines (DPSL) writers, according to A.M. Best.

In 2011, surplus lines insurers reported a 3.2 percent increase in direct premiums written, and DPSL insurers generated 72.5 percent of total surplus lines direct premium written for the year. Lloyd’s maintained its spot as the leading surplus lines writer in terms of direct premium written for 2011, generating just under $5.8 billion, American International Group Inc. was second with $5.3 billion.

In Q1 2012, direct premium written for the surplus lines industry increased approximately 7 percent compared to the same quarter last year, A.M. Best said in a press release, and critical performance measures, such as the margins between surplus lines insurers and the P&C industry, increased slightly in 2011 after narrowing in recent years.

Surplus lines specialists generated considerable operating profits and returns on both revenue and surplus, despite the catastrophic events, low investment yields and competitive pressures. Direct premium written for the top 25 surplus lines insurers increased 1.4 percent, reflecting the subtle trend reversal, and a growing number of standard market insurers are expressing the need to increase rates.

The surplus lines industry reported no financially impaired companies for the eighth consecutive year, compared to 34 disclosed financial impairments in the P/C industry for 2011.

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