Surplus lines insurers should see underwriting profit in 2013: A.M. Best
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Pummeled by Superstorm Sandy, surplus lines insurers posted one of their worst years overall in recent memory in 2012, but they are on track to earn an underwriting profit this year, said A.M. Best Co. Inc. in a special report Monday.
The underwriting performance of U.S. domestic professional and domestic specialty surplus lines companies fell below that of the total property/casualty industry for the first time in more than a decade, with much of the blame attributable to the Oct. 29, 2012, storm that wreaked havoc on coastal properties, business and infrastructures all along the Northeastern seaboard, according to the report by the Oldwick, N.J.-based rating agency.
The report says that while it is unclear how much of the estimated insured loss of nearly $25 million the surplus lines market will absorb, the fourth-quarter loss ratio of these insurers increased nearly 12 percentage points, to 64.8% from 52.9%, “indicating surplus lines were not spared.”
The segment, however, was still profitable, although net income dropped to $1.57 billion in 2012 from $1.75 billion in 2011, says the report.
“A.M. Best believes that given the recent overall quick uptick in rates, as well as the relative lack of natural catastrophe-related losses recorded in the first half of 2013, the surplus lines market is on track to produce an underwriting profit in 2013,” the report says.
“However, the lingering effects of Sandy and the sustained low-interest-rate environment still present challenges to the industry.
