Climate-related catastrophes are growing in both frequency and severity. Cybersecurity threats are evolving faster than traditional models can keep up with. And geopolitical tensions are reshaping global supply chains and underwriting risk profiles. These shifts are putting pressure on property and casualty (P&C) insurers to diversify their portfolios and deliver more customized offerings.

According to a recent Deloitte projection, the specialty insurance market is expected to reach $279 billion by 2031, up from $104.7 billion in 2021 — a compound annual growth rate (CAGR) of 10.6% over a ten-year period. For insurers looking to unlock new revenue streams, specialty lines represent a promising path forward.

But success in this space isn’t guaranteed. Expanding into specialty lines brings a host of new challenges — from underwriting complexity and data strategy to talent gaps and regulatory nuances. Before diving in, insurers must carefully consider their strategy, capabilities, and long-term goals.

5 Questions to Ask Before Entering Specialty Lines

Expanding into specialty insurance lines offers P&C insurers a significant opportunity for growth. But unlike traditional lines, specialty products often require more than a tweak to existing underwriting or distribution strategies — they demand an entirely different mindset. Coverage is typically bespoke, pricing models are less predictable, and the underwriting cycle can vary widely across lines. That complexity introduces both risk and reward.

What makes specialty insurance attractive is also what makes it operationally demanding: fast-moving risks, less historical data, more hands-on underwriting, and a heavy reliance on specialized talent or partners. Underwriters must often work manually and closely with brokers or managing general agents (MGAs) to craft coverage, and access to meaningful data can be limited, especially for emerging risks like climate liability or new tech sectors.

In short, success in this space hinges on having the right capabilities — and clarity. Before making the leap, leadership teams need to ask the right strategic questions to ensure they’re building a sustainable, scalable specialty offering. Here are five to start with.

1. Which of your existing products are performing best?

Before moving into specialty lines, it’s essential to assess which of your current products are generating the strongest performance. Frameworks like a SWOT analysis or Porter’s Five Forces (with regulatory concerns added as a sixth force) can help determine which products are succeeding. These insights can guide where to innovate next and help identify whether there are adjacent specialty areas worth exploring. For example, if your commercial auto line is profitable and well-managed, you may be well-positioned to explore a niche product like trucking liability or last-mile delivery coverage — both growing specialty segments.

Just as important is evaluating why those products are succeeding: Is it due to distribution strength, underwriting precision, or operational efficiency? Understanding these drivers helps determine whether you can realistically replicate success in a more complex specialty product. According to Boston Consulting Group, top-quartile P&C insurers generated a return on tangible equity 12 percentage points higher than their peers — driven in part by smart portfolio decisions and product focus. ​

2. What customer needs or external drivers can you address with a specialty line?

Customer expectations are evolving rapidly, particularly among commercial clients who require customized solutions to address modern threats, including cybersecurity, intellectual property, and sustainability-related risks. Specialty lines offer a way to meet these demands more directly. In fact, there’s a growing demand for tailored coverage in areas like environmental liability, professional indemnity, and supply chain disruption — driven by evolving regulations, climate change, and global economic uncertainty.

This is also a strategic moment to listen to your distribution partners and gather voice of the customer feedback. Brokers often spot emerging risks before they’re widely understood, and they’re increasingly vocal about gaps in current offerings. By working with brokers or MGAs to identify niche needs — say, for cannabis businesses, drone operators, or renewable energy firms — you can craft offerings that don’t just meet the moment but create durable competitive advantage.

3. What does compliance look like? How can you maintain necessary forms or compliance measures as the specialty product grows?

Specialty lines often fall under multiple regulatory jurisdictions, and new risks tend to attract new oversight. It’s no longer enough to build a product and manage compliance reactively — insurers must build compliance operations into their launch strategy from the start. According to a Mercer study cited by EY, 61% of insurers identified evolving regulatory requirements as their biggest operational challenge over the next year.

Emerging sectors bring even more complexity. The NAIC, for example, has formed dedicated working groups and guidance on cannabis and artificial intelligence, aiming to help regulators and insurers build safe, compliant frameworks in these specialty areas.

4. How will you measure success for any new lines of business?

Establishing clear success metrics is critical before launching a new specialty product. While traditional KPIs, such as premium growth, loss ratios, and combined ratios, still apply, specialty lines often require a more nuanced approach to measurement. These products may have longer tails, lower initial volumes, and more volatile risk profiles, so leadership teams should balance short-term profitability with long-term strategic value.

For instance, tracking underwriting accuracy, policy retention, broker satisfaction, and claims resolution time can offer a more complete picture of how a specialty line is performing. Technology adoption can also be a proxy for efficiency gains, especially in lines where manual underwriting has historically slowed time to market.

5. Will your team need additional capabilities or partners to support the specialty product?

Specialty lines often stretch beyond the capabilities of traditional underwriting teams or distribution models. They may require deeper domain expertise, specialized claims handling, or access to niche customer segments. As a result, many insurers turn to partnerships with MGAs, reinsurers, or insurtech platforms to accelerate speed to market and bring in expertise they don’t currently have in house.

According to AM Best, direct premiums written through MGAs surged for the third year in a row in 2023, with MGAs now accounting for a growing share of new specialty business, particularly in cyber, construction, and E&S property. These partners offer more than just distribution; they bring underwriting talent, operational systems, and, often, the agility that larger carriers struggle to maintain. Before expanding, insurers should evaluate whether to build, buy, or partner — especially when entering high-growth or high-risk lines where experience is non-negotiable.

Ready to Enter the Specialty Lines Market?

As risks become more fragmented, globalized, and tech-driven, the specialty insurance market will continue to be a focal point for growth. But success won’t just depend on spotting emerging trends — it will depend on building the operational muscle to underwrite them effectively, serve niche customer needs, and stay compliant in a rapidly evolving regulatory landscape.

Whether you’re exploring new products in cyber, environmental liability, or professional indemnity, the move into specialty lines requires more than product innovation. It calls for a well-defined strategy, the right technology infrastructure, and the right partners to fill in critical capability gaps.

To learn more about how specialty insurers are driving success in this market, read our case study Tokio Marine HCC – CPLG Creates World-Class Digital Distribution.