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The surplus lines market grew 5.8% in direct written premiums in 2017, and will remain financially sound for the foreseeable future, says A.M. Best Co. in a report issued Friday.
The sector’s 5.8% premium growth, to $642.1 million in direct written premiums, compares with increases of 2.8% and 2.5% in 2016 and 2015, respectively, according to the report Surplus Lines Push Through Various Headwinds for Higher Growth.
“One key challenge that remains for surplus lines carriers is the ongoing creep into the segment by standard market companies,” said the report.
“Until standard market companies meet their underwriting expectations in their core lines, they will maintain an interest in competing for some surplus lines business, to complement their other operations,” the report says.
The report says, “Consolidation among surplus lines insurers continued to impact market competition in 2017 and “continues to reshape the market.”
“Acquiring insurers continue to use M&A as part of their strategies to carve out a bigger piece on the market,” said the report. “On the wholesaler side, the larger wholesalers have been growing in scale and expanding their profiles by acquiring smaller intermediaries.
“The push to consolidate has led to retailers often doing business with fewer wholesalers, and wholesalers in some cases doing business with fewer insurance companies. A.M. Best does not believe the M&A momentum will slow down over the near term.”
Fitch Ratings Inc. said in a report Thursday that the excess and surplus lines market is poised to generate a significant direct underwriting profit this year, but substantial losses may emerge from Hurricane Florence.
Former Scottsdale Insurance Co. President Mike Miller is forming a rival surplus lines insurer called Ategrity Specialty Insurance Co., he announced Friday.