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Surplus lines insurers continued to report profitable results in 2014, helped by a combination of product diversification, underwriting discipline and advantageous market conditions, A.M. Best Co. Inc. said in its latest report on the sector.
Oldwick, New Jersey-based Best reported that surplus line specialists reported a 91.4% combined ratio for 2014, compared with a 97.2% for the property/casualty insurance industry overall. Direct written premiums increased 6.7% in 2014, to $40.23 billion, according to the report, which is dated Aug. 27 but was released Tuesday.
The largest surplus lines insurers in the U.S. market based on direct premiums written were Lloyd's of London syndicates, which claimed a 20.3% share of the market with $8.16 billion in direct premiums written. It was followed by New York-based American International Group Inc., primarily through its Lexington Insurance Co. unit, which had an 11.6% share with $4.68 billion in direct premiums written.
Best said its outlook on the surplus lines insurance market remains stable, with the overall macroeconomic environment conducive to increased merger and acquisition activity.
“With persistent low interest rates providing only marginal investment returns, underwriting performance remains as the leading driver of operating performance,” said the report. “Total investment income from both traditional and higher yielding asset classes are needed to provide additional support to income and surplus.”
Hamilton, Bermuda-based James River Group Holdings Ltd., the parent company of excess and surplus lines insurer James River Insurance Co., raised about $231 million in its initial public offering Friday.