Steel prices have been anything but steady in recent years. With renewed discussions around tariffs and trade restrictions, another wave of volatility may be on the horizon.
While much attention is paid to how rising material costs impact builders and developers, there’s another, often overlooked ripple effect: insurance. Particularly, California’s surplus lines market may be especially sensitive to swings in steel prices.
Steel is more than just a building material; it’s also a barometer of construction costs. From commercial high-rises to critical infrastructure, steel is a cornerstone of many large-scale projects. When prices climb, so do total project costs, which in turn raise insured values. Insurers respond accordingly.
In the surplus lines market, where flexibility meets higher risk, premiums tend to rise in parallel to reflect that increased exposure.
Historical data from 2015 to 2024 shows a compelling trend: As steel prices rose, so did surplus lines premiums in the California construction sector. Figure 1 highlights this upward movement, while Figure 2 adds another layer: a rise in the number of surplus line transactions. The implication? High material costs may be nudging more projects toward surplus lines, especially when they exceed coverage thresholds or carry pricing volatility that standard markets avoid.
