Growing capacity will limit rate hikes and promote persistent competition in the excess and surplus lines market, Fitch Ratings said in a report earlier this week.

The U.S. E&S market, which reversed a four-year consecutive slide in direct written premiums in 2011, has seen continued growth through the first nine months of 2013, according to report.

Higher premiums were driven by rising rates in various lines, increased exposure related to the economic recovery and a reduced appetite from standard carriers to write nonstandard risks, Fitch said. But rate hikes slowed in the second and third quarters of 2013 and the absence of large catastrophe events during the second half of the year will lead to moderating rates in catastrophe-prone areas in 2014, Fitch predicts.

Commenting on the entrance of Berkshire Hathaway into the E&S market, Fitch said that it has not significantly altered the market through third-quarter 2013, adding, however, that “Fitch expects pricing implications related to its expansion to materialize in coming quarters.”

Fitch’s analysis of statutory premium and aggregate underwriting performance of U.S. E&S insurers reveals that E&S underwriters’ direct combined ratio outperformed the P/C industry by an average of 11 points from 2008-2012.

The full report is available on the Fitch web site at ‘’ under ‘Insurance’ and ‘Research.’

Source: Fitch Ratings