Help

BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.

To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.

To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.

Login Register Subscribe

Insurers, wholesalers target growth sectors

Niche areas provide opportunities despite overall softening market

Reprints

Growth among the largest surplus lines insurers was driven by a variety of factors as insurers targeted market sectors with new opportunities despite softening rates in many areas.

Some of the largest wholesalers also saw significant growth rates as some areas of the economy, in particular the construction industry, saw increased activity.

The U.S. excess and surplus lines market is roughly 5% of the overall U.S statutory property/casualty market, said Gerry Glombicki, a director at Fitch Ratings Ltd. in Chicago.

Competition in the admitted markets has spilled over into the surplus lines, said Mr. Glombicki, as admitted insurers, pressured by soft prices, look at a wider range of risks to grow and remain competitive.

“Most of the carriers rated by S&P that derive a large proportion of their business in the surplus lines market continue to produce strong underwriting results,” said John Iten, a director at Standard & Poor's Insurance Ratings in New York. And insurers writing E&S “continue to produce strong underwriting results both in absolute terms and relative to the overall (property/casualty) industry.”

The top 10 surplus lines insurers had a collective $11.40 billion in nonadmitted direct written premiums in 2014, up from $10.36 billion in 2013 and the decade low of $9.23 billion in 2012. Still, that improvement falls short of the decade high of $15.14 billion in 2007 (see chart, page 18).

Among the 2014 winners was Indian Harbor Insurance Co., which is part of XL/Catlin Group and No. 7 among the largest U.S.-based surplus lines insurers. Indian Harbor posted the largest percentage gain of the top 10, a 17.4% jump that took the Stamford, Connecticut, insurer's total to $727.9 million in 2014.

Joe Tocco, New York-based CEO of the Americas at XL Catlin, said several factors drove the gain.

“We launched a primary auto insurance division and experienced significant regional growth, especially in California, Pennsylvania and New York,” Mr. Tocco said of the new commercial business. Construction, cyber and auto liability present opportunities, he said.

Ironshore Specialty Insurance Co., No. 4 among the top 10 surplus insurers, was No. 2 in percentage gain with a 9.9% increase that boosted 2014 nonadmitted direct written premiums to $901.2 million.

“We have three areas in which we have strong growth,” health care, environmental and high-value homeowners programs, said Mitch Blaser, Bermuda chief operating officer of parent Ironshore Inc. and CEO of the company's Bermuda business unit.

“Directionally, we have had good growth” in 2014, said Lisa Fontanetta, Bermuda head of strategic operations at Ironshore. This year likely will end up being more difficult, she said.

“The rate impact in the property market is pretty consistently down double-digits,” Mr. Blaser said.

However, growth in the high-net worth individual business is somewhat offsetting that, Ms. Fontanetta said.

While it was an up year for the largest surplus lines insurers, the top property/casualty wholesalers' collective premiums dropped to $22.6 billion in 2014 (see chart, page 22).

Among the property/casualty wholesalers, Brown & Riding was tops in percentage gain with a 35.2% jump that brought premiums to $481.3 million last year. The Los Angeles-based wholesaler could not be reached for comment.

Brown & Riding merged with Chicago-based wholesaler Travis-Pedersen & Associates in 2013.

All Risks Ltd. registered the second-largest rise among wholesalers, a 16.8% increase that brought its wholesale property/ casualty premiums to $1.25 billion.

That organic growth rate “was in keeping with our historic average annual growth since 1991,” All Risks CEO Nick Cortezi said in an email.

While he said market conditions are slightly less favorable this year, especially property, All Risks continues to expand.

“Over the past 12 months, we have added a sports and entertainment division and built out our energy practice,” Mr. Cortezi said.

AmWINS Group Inc., still No. 1 among wholesalers, had a 10.4% gain in premiums, “driven by a combination of organic growth and acquisition growth,” said Scott Purviance, Charlotte, North Carolina-based chief operating officer and chief financial officer.

“Continued moderate economic expansion, a strong construction market and the addition of several new underwriting programs also helped drive premium and revenue increases,” he said.

Among wholesalers, Ryan Specialty Group, No. 3 overall, had a 10.8% bump in 2014 premiums.

“There are a lot of firm pockets in the market,” said Tim Turner, president and CEO of R-T Specialty in Chicago, a division of Ryan Specialty.

“There are segments of the business which require a lot of expertise and specialization, such as New York construction, cyber liability, transportation and residential construction. That part of the market is up considerably, and we're in those segments,” said Mr. Turner.

The cyber liability market, he said, has had some major claims. “That sends the standard markets reeling and they shrink their capacity in that area, because it's a loss leader, and that business flows into the surplus lines market,” said Mr. Turner.

But property catastrophe business remains “a huge headwind for all brokers” with “dramatic” rate reductions, he said.

Among the MGA/underwriting managers that wrote a collective $12.09 billion in business last year (see chart, page 20), Burns & Wilcox Ltd. had the greatest percentage gain of 15.9% with $1.28 billion in 2014 premiums.

Despite continued soft prices for property, Danny Kaufman, Chicago-based managing director of Burns & Wilcox and corporate vice president of parent H.W. Kaufman Financial Group, said opportunities exist in cyber coverage as well as health care and property/casualty coverage.

Read Next

  • Excess and surplus lines seeing boom times

    An improving economy, new regulations and new businesses are helping to drive dollars into the excess and surplus lines market and the 14 stamping offices nationwide.