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Eight of the 10 largest U.S. surplus lines insurers gained ground in direct premiums written in 2013, according to the latest Business Insurance ranking.
Ace Westchester Surplus Lines Insurance Co., which saw premiums grow 8.9% to $532.17 million, posted growth that was near the average of the top 10.
Bruce Kessler, Alpharetta, Georgia-based division president of Ace West-chester, attributes the insurer's uptick in part to its efforts to broaden and diversify its product portfolio.
“We've brought some new products into the (excess and surplus lines) market that we have not had before,” Mr. Kessler said. “One was for energy. Another was for railroads. We've also started a product recall business.”
Mr. Kessler also said the insurer's efforts to use data and analytics to improve underwriting performance has paid dividends.
“We've spent a lot of time in the last few years analyzing data and building predictive models to help drive underwriting decisions,” he said. “There are not a lot of companies that have dedicated the resources to do that right now. We view it as a long-term divider of who will be successful in this business.”
Collectively, the top 10 surplus lines insurers had $12.75 billion in direct written premiums in 2013.
The largest percentage gain was 15.3%, posted by Scottsdale Insurance Co., which increased its 2013 direct written premiums to $3.43 billion.
Once again, Boston-based Lexington Insurance Co. is the top surplus lines insurer, with $4.02 billion in 2013 direct written premiums, a 6.5% decline over 2012.
Paul Newsome, managing director of equity research at financial adviser Sandler O'Neill & Partners L.P. in Chicago, said he wasn't concerned with Lexington's drop in direct written premiums, noting its lead in market share is commanding and that Lexington periodically adjusts its business in response to market conditions.
“They are in a pretty unique situation, so sometimes they will shrink what they write a bit in order to improve profitability,” Mr. Newsome said.
Mr. Newsome said it is too early to tell if the defection of several top executives to upstart Berkshire Hathaway Specialty Insurance Group, which entered the E&S market in 2013, would have any lasting effect on Lexington.
“They are writing business, but it's a still a gearing up process,” said James Auden, Chicago-based managing director at Fitch Ratings Inc. “Berkshire is so big that they can absorb a good part of the market really quickly if they wanted to, but it seems to be a measured growth approach they are taking.”
“Berkshire hired a lot very good people and are very smart underwriters,” said Jett Abramson, Redondo Beach, Calif.-based senior vice president and director of complex casualty at Bliss & Glennon Inc. “They are opportunistic. If they like an account, they will pursue it aggressively; if they don't like it, they won't quote it. They have definitely made an impact on the market.”
Elsewhere, Danny Kaufman, Chicago-based corporate vice president of the Kaufman Financial Group and managing director of Burns & Wilcox Ltd., said standard lines carriers have begun writing business that traditionally would find coverage in the E&S market, which he said is cyclical and largely confined to the property side of the business.
“It's more prevalent in the Midwest than in the catastrophe-exposed areas on the coasts,” Mr. Kaufman said.
Flat insurance rates in the excess and surplus lines market are drawing competition from the standard admitted market amid abundant capacity. Despite last month's Napa, California, earthquake, most experts say property catastrophe rates remain soft, while casualty and general liability rates are increasing somewhat.