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Surplus Lines: Business is Booming but Business is a Mixed Bag

Posted By Administration, Tuesday, October 8, 2019

AM Best likes what it sees happening to surplus lines. In a new report titled Surplus Lines Insurers Achieve Impressive Growth, Improve Operating Profitability, Best said business in surplus lines grew 11.2% in 2018. And the ratings firm listed reasons why:

  A healthy U.S. economy

  Emerging risks around new technology

  Operational investments

As just noted, premiums grew enormously but surplus lines insurers saw a fourth straight year of underwriting losses. Weather-related losses and competition are the reason why.

The report also notes that mergers and acquisitions are affecting things in surplus lines. Larger wholesalers are acquiring smaller brokers and intermediaries, and growing their footprint in the markets.

While things are in fluctuation, AM Best says the surplus lines market will keep its stable outlook. “The most successful surplus lines carriers have historically demonstrated an underwriting proficiency that captures the nuances of the market,” the report said. “These carriers do not stray from their deep-rooted philosophies. Their success in underwriting is complemented by the diversity of product offerings as well as significant geographic diversification.”

Here’s a look at what U.S. surplus lines have done in the last decade when compared to P&C insurers:

 

P&C Insurers            

            Direct premium written

Year               ($millions)                   Annual % change          

 

2008               492,881                                 2.6%              

2009               481,410                                 -2.3%

2010               481,120                                 -0.1%

2011               501,555                                 4.2%  

2012               523,360                                 4.3%  

2013               545,760                                 4.3%  

2014               570,187                                 4.5%  

2015               591,186                                 3.7%  

2016               612,906                                 3.7%  

2017               642,127                                 4.8%  

2018               678,029                                 5.6%

Surplus Lines

             Direct premium written

Year               ($millions)                    Annual % change

 

2008               34,365                                    -6.2%

2009               32,952                                    -4.1%

2010               31,716                                    -3.8%

2011               31,140                                    -1.8%

2012               34,808                                    11.8%

2013               37,719                                    8.4%

2014               40,243                                    6.7%

2015               41,259                                    2.5%

2016               42,425                                    2.8%

2017               44,879                                    5.8%

2018               49,890                                    11.2%

 

The Top 15 surplus lines insurers and groups

Most of the premiums in surplus lines are written by the top 25 groups. They manage to do 75% to 80% of them.

                                                         Surplus Lines DPW

Rank           Group name                    ($ thousands)                   Market Share (%)

1.         American International              3,548,994                                   7.1%

2          Markel Corporation                    2,496,504                                   5.0%

3          Berkshire Hathaway Ins            2,198,681                                   4.4%

4          W. R. Berkley Insurance           1,808,925                                   3.6%

5          Nationwide                                  1,802,256                                   3.6%

6          Chubb INA                                  1,474,717                                   3.0%

7          AXA US                                       1,443,759                                   2.9%

8          Fairfax Financial (USA)            1,410,796                                   2.8%

9          Liberty Mutual Insurance          1,259,268                                   2.5%

10        Alleghany Insurance Holdings     889,047                                   1.8%

11        Zurich Financial Services            857,245                                   1.7%

12        Argo                                                 814,328                                   1.6%

13        Tokio Marine US PC                     786,331                                   1.6%

14        QBE Americas                               735,075                                   1.5%

15        Sompo Holdings US Group         717,619                                   1.4%

Total U.S. Surplus Lines Market — $49,890,353

Source link: PropertyCasualty360.com

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