“The surplus lines market has outperformed general commercial lines over the past ten years. In fact, through 2006 the surplus lines market ten-year average annual direct premium growth was 19.5 percent versus just 7.6 percent for total commercial lines,” said Clint Harris, analyst at Conning Research & Consulting. “It’s not just about premium growth, however. For the same period, the annual average combined ratio was 104.4 percent on a calendar-year basis for surplus lines and 107.1 percent for total commercial lines.”
The Conning Research study, “Property/casualty Surplus Lines: Profiting from the Right Strategy” identifies the detailed trends in underwriting results by major line of business, comparing peer groups of non-admitted insurers and the admitted market. While focusing on the surplus lines portion of the non-admitted market, the study explores the impacts and potential impacts from changes in regulation, catastrophes, and reinsurance support. The study goes on to examine the influence of emerging risks and new technologically supported processes.
“Surplus lines market share will likely decrease over the next two years due to the impact of soft market underwriting conditions, unless there is an unexpected event to cause standard insurers to withdraw from the general market,” said Stephan Christiansen, director of research at Conning Research. “At the same time, loss ratios are likely to deteriorate more rapidly in surplus lines markets than in the general commercial market.
“Yet our analysis suggests that companies that have established and well maintained surplus lines infrastructure and reinsurer and distribution relationships will be positioned well to outperform again in the next strong market,” added Christiansen.