While benefiting from an 11.2% increase in premium growth last year, the excess and surplus lines market is now facing the combined challenge of COVID-19’s impact and the current hurricane season, executives say.

Lloyd’s of London has been “very actively trying to get the correct balance” in achieving increases in gross written premium and a “sustained underwriting profit,” said Peter Barrett, London-based global head of specialty insurance at Hamilton Managing General Agency Ltd.

He spoke during a panel on the state of the surplus lines market during the Kansas City, Missouri-based Wholesale & Specialty Insurance Association’s virtual conference Friday.

With COVID-19 “a lot of things became harder to predict and there was much more uncertainty in the market,” but coverage availability, terms and conditions, and rates “will continue to be positive and expand,” Mr. Barrett said.

Joel Cavaness, president of Rolling Meadows, Illinois-based Risk Placement Services Inc., a unit of Arthur J. Gallagher & Co., said the surplus lines market expands and contracts based on what Is happening in the standard lines market.

The biggest impact of last year’s changing market has been the shortening of limits, with “carriers no longer interested in putting out” large limits, Mr. Cavaness said.  While filling a program with only four or five pieces is “pretty easy to do,” he said, “we now have to take the puzzle” with up to 40 different pieces, which is more difficult, he said.

But the segment continues to grow and become more creative, Mr. Cavaness said.

Richard Schmitzer, president and CEO of Richmond, Virginia based- James River Insurance Co., said the sector is seeing more business from the standard markets, with limit compression creating more opportunities for placement in the E&S sector.  This year, growth will be “even higher than it was in 2019, and will extend into 2021 as well,” he said.

Danielle Wade, president and CEO of E&S lines broker Jackson Sumner & Associates P.C., based in Boone, North Carolina, said that while the economy is not doing as well as it had been, and the market is not seeing increased exposures, growth will come from other areas.

“Everybody out there” is creatively searching for how to make money, she said. More people “are moving into our segment of the industry” and hopefully the economy will bounce back soon, she said.

Participants also expressed concern about catastrophes, pointing to Hurricane Laura,  as well as the active tornado season, the California wildfires and the Midwest derecho, August’s severe weather event. There is “70% of the hurricane season to go,” Mr. Schmitzer noted.

“Laura, like any large natural catastrophe, underpins the need for the type of coverage that the (surplus) marketplace is supplying,” Mr. Barrett said.

COVID-19 has changed the market’s needs, becoming “a huge exposure,” as people have begun to work remotely, “without the same level of password protection and firewalls,” Mr. Cavaness said.

The session was moderated by WSIA Executive Director Brady Kelley.