Texas is becoming a key player in the excess and surplus (E&S) insurance market as the U.S. faces an increase in catastrophic events. According to Chris Davis, writing for Insurance Business, the E&S market in the U.S. saw a significant growth of 19.2% in 2022, reaching $98.5 billion in direct premiums. Texas stands out as one of the largest contributors to this growth.
Gordy Bunch, CEO of The Woodlands Financial Group (TWFG), highlighted that recent disasters, including the severe California wildfires of 2025 and various hurricanes and tornadoes, are driving Texas’s reliance on the E&S market. Texas faces a unique combination of risks from wildfires, hurricanes, floods, tornadoes, and even earthquakes, making it imperative for the state to adapt its insurance strategies.
Bunch noted that the definition of areas prone to catastrophic events is expanding. It’s no longer just coastal regions that are affected; areas vulnerable to wildfires and severe storms are also becoming more common. This shift is prompting traditional insurers to reconsider their risk exposure and move into the E&S market.
As larger national insurance companies reassess their positions, regional and state-backed insurers are stepping in to fill the gaps. Bunch explained that the E&S market has historically served as a secondary option when national players withdraw due to concerns over pricing and risk management.
TWFG is taking advantage of this trend by enhancing its E&S offerings and third-party administration (TPA) services. The company acts as a managing general agent (MGA) for carriers, helping them access E&S markets and develop new capacity in challenging environments.
With traditional insurers pulling back, the E&S market is seeing more opportunities. Bunch emphasized the importance of balancing competitive pricing with sustainable coverage in a volatile market. He pointed out that when national markets retreat, regional carriers and state-backed programs often take their place.
Bunch anticipates a growing trend towards wholesale E&S coverage due to its flexibility. Unlike traditional insurance, E&S insurers can quickly adjust rates and policy forms without lengthy regulatory delays. This adaptability is crucial for maintaining capacity in a rapidly changing environment.
While areas prone to catastrophes are seeing the most activity, Bunch also noted that there are other evolving trends within the E&S space. For example, in Texas, the Texas Windstorm Insurance Association provides affordable coverage for coastal areas, making it a preferred choice over traditional markets.
Bunch warned that if insurers fail to adjust their rates, the market of last resort could become the primary option for many. As the landscape of insurance continues to shift, Texas is poised to play a significant role in the evolving E&S market.