I love getting the chance to sit down with people who have truly seen an industry evolve from the inside out. It’s one thing to read reports and look at charts, but it’s another thing entirely to hear the stories from someone who’s lived it.
Recently, I had a fantastic conversation with Scott Bayer, the Senior Vice President for E&S Insurance Solutions at Philadelphia Insurance Companies. Scott’s been in the Excess & Surplus (E&S) space since 1990, and let me tell you, he has a perspective that you just can't get from a textbook.
We talked about how E&S went from this little-known, back-room part of the insurance world to the massive, mainstream player it is today. If you’ve ever wondered why E&S is suddenly everywhere, this is the inside scoop.
From "Who Are You?" to Industry Powerhouse
It’s hard to imagine now, but Scott reminded me that the E&S world used to be tiny.
“When I started in 1990 in the E&S space, it was about a $2.5 billion industry,” he told me. At the time, the entire property and casualty industry was around $200 billion. Today? E&S is pulling in over $100 billion. That’s not just growth; that’s an explosion.
He shared a story from his early days that really stuck with me. He’d walk into an agent's office representing a company owned by one of the largest reinsurers in the world, and he’d still have to explain who they were. The agents had never even heard of them.
Think about that. Today, when he walks in representing Philadelphia Insurance Companies (PHLY), a Tokio Marine company, there’s instant recognition. Agents know the name, they understand the financial strength, and they see PHLY as a serious player. The days of having to justify your existence are long gone.
E&S is no longer the "market of last resort." It used to be the place you went for the really tough risks that nobody else wanted. Now, it covers a full spectrum, from small package business to mind-bogglingly complex risks like pharmaceutical or aeronautical equipment. That old aversion agents had? It’s pretty much vanished.
The Secret Sauce: Why E&S Can Move So Fast
So, what's behind this shift? How does a risk that might have been a standard lines solution end up in E&S?
A big part of it is what Scott calls "freedom of form and rate."
This is the E&S secret weapon. Unlike standard carriers, E&S insurers don't have to get every single rate and form approved by state regulators. This lets them be incredibly nimble. They can create customized solutions and react to new market needs almost instantly.
As Scott put it, “Because we’re not relying on states to get back to us with filings or compliance issues, it makes it significantly easier to work, to move, to fluctuate.”
It’s this very flexibility that has kept him in the E&S space for 35 years. He laughed, recalling what older colleagues told him when he was a 25-year-old just starting out: "Once you start this, you never want to leave." At the time, he didn't get it. Now, he does. It’s the dynamic, ever-changing nature of the work that makes it so exciting.
Are We Losing the "Art" of Underwriting in a Hybrid World?
Of course, we had to talk about the massive changes in how we all work. I was curious to get a veteran’s take on how remote and hybrid work is affecting the next generation of underwriters.
Scott’s perspective was fascinating. He pointed out that when he started, there was no internet. No computers on every desk. You learned by being physically present.
“I was lucky enough to sit on a floor with six or seven other underwriters, many very experienced, and I would listen to phone calls. I would listen to referrals, and I would listen to discussions,” he said. He learned just as much about what not to do as what to do by simply being in the room and absorbing the collective wisdom.
That’s his big concern with the hybrid environment. Are younger underwriters overhearing those crucial conversations? Are they getting that informal, "osmosis" training that was so vital for decades?
But it’s not all doom and gloom. He was quick to point out that formal training has gotten so much better. At PHLY, they provide newer underwriters with incredible technical, financial, and leadership training that just didn't exist back in the day. They’re making sure no one is left on an island.
His take? We might lose a little of that informal, in-person learning, but the gains from structured, formal training could more than make up for it. It’s a trade-off, and the industry is still figuring out the right balance.
The E&S Sandbox: Where New and Gnarly Risks Find a Home
I asked Scott if there are certain types of risks that E&S will just always "own." His answer was a definite yes.
He describes the E&S market as a "petri dish" for new and emerging exposures. Think about cyber insurance. It really got its start in the E&S world because standard carriers didn't have the data to build rates and forms around it. E&S was the testing ground until it became mature enough to move into the admitted market.
But some risks never leave the sandbox.
Things like residential construction, heavy transportation, and certain difficult product liability risks just don't fit the standard market’s comfort level. They’ve been in E&S for decades, and they’re likely to stay there. So, E&S gets the best of both worlds: it incubates the new stuff while retaining the perpetually complex risks.
It's Not Just About Rates Anymore: How Tech Is Changing the Game
You can't talk about insurance today without talking about technology. We touched on how AI is helping carriers become more efficient, but I was more interested in how tech is actively helping clients manage risk.
Scott gave me two great examples from PHLY:
- PHLYSENSE: This is a property monitoring solution that sends real-time alerts for things like water leaks or extreme temperature drops. In a world of freezing pipes and unexpected floods, this is a huge deal for preventing a small problem from becoming a catastrophic loss.
- PHLYTRAC: This is a telematics solution for auto fleets that tracks driver behavior—things like speeding, hard braking, and sudden acceleration. The data helps insureds coach their drivers and improve safety. The results are real: fleets using PHLYTRAC have seen a 19% reduction in loss frequency.
This is what really gets me excited. It’s not just about paying claims after something bad happens. It’s about using technology to prevent the bad thing from happening in the first place.
As Scott said, it sounds a little cliché, but this kind of risk management genuinely improves society. “Property loss or liability loss involves something being damaged or people getting hurt,” he explained. “And if we’re able to slow that down somewhat, it’s making the world a better place.”
A New Era of Partnership
This shift toward proactive risk management has also changed the relationship between different departments. In the old days, risk management and E&S underwriting were in completely separate silos. E&S was all about controlling risk through tough forms and high rates.
Today, it’s a partnership. Risk management teams work hand-in-hand with underwriters, agents, and the insureds themselves to make an account better. The goal isn't just to "rent" the business for a few years until it can go back to the standard market. The goal is to build a long-term relationship and help the client become a better risk over time.
It’s a fundamental change in philosophy, and it’s one of the biggest signs of just how much the E&S world has matured. It’s no longer just a transaction; it’s a collaboration. And that’s a win for everyone.
