According to the new study, the surplus lines market in the U.S. is booming, with E&S premium growth being driven by firming insurance rates and an outflow of business from admitted insurers into non-admitted insurers.
The report notes that the rate firming being witnesses in commercial lines of business that started in 2018 is the strongest since the previous hard market of 2002-2003, and it’s expected that this trend will persist through 2020. The firm explains that the continued outflow of business from admitted to non-admitted insurers is “typical of the “tidal flow” accompanying firming or hard markets”.
According to Jerry Theodorou, a Vice President, Insurance Research at Conning, a number of forces have combined to drive growth in the E&S marketplace.
“Admitted insurers are cutting back on the capacity they offer, non-renewing their complex specialty accounts, and readjusting their underwriting appetite to more standard accounts. Additionally, Lloyd’s syndicates have responded to poor underwriting results by withdrawing capacity for the U.S. E&S market,” said Theodorou.
Conning’s report finds that wholesalers feeding the E&S space are witnessing a substantially higher submission flow, while new insurance companies with “near-perfect” timing have been established in an effort to capitalise on the opportunities that manifest as a result of the resurgence in surplus lines business.
Ultimately, Conning feels that those insurers that are well placed to take advantage of current market dynamics stand to benefit from these operating conditions.
Steve Webersen, Head of Insurance Research at Conning, said: “Now is the moment for which E&S insurers have been waiting. The U.S. E&S market is expanding at a mid-teens rate, with growth in both liability and property lines.
“Solid profitability should follow this growth, benefitting those insurance groups where E&S comprises a major portion of their business. While large multi-line groups control the largest E&S insurers, the market also has dozens of stand-alone specialists. The big question is how long will this boom last?”