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The stock market isn't the only market that's falling.

With $8.43 billion in non-admitted premium, the U.S. surplus lines market registered a 2.0% decrease in 1997, losing some ground from a restated $8.60 billion in 1996. Although not as dramatic as last week's 512-point plunge of the Dow Jones Industrial Average, the drop in 1997 surplus lines premiums written mirrors the decreases reported in 1994 and 1995, but not the 4.6% increase reported in 1996.

Part of the 2.0% decrease stemmed from Ohio's 69.8% drop in surplus lines premium volume, which is largely attributable to the state Insurance Department's lack of data on tax-exempt business in 1997. Ohio did report that information in previous years. Discounting Ohio, surplus lines premium volume nationwide decreased 0.7%.

The 1997 results may foreshadow further decreases. At midyear renewals this summer, most wholesalers and surplus lines insurers began cutting rates as they struggled for business in a very soft market, which includes competition from many admitted insurers (BI, July 6).

Despite the overall downturn, however, three fewer states reported declines in premium volume: 24 in 1997, compared with 27 in 1996.

Several states made significant gains in surplus lines premiums written. With $32.6 million in premium volume, Delaware posted a 94.3% gain, which state regulators attributed to a large one-time risk. In North Dakota, surplus lines premiums hit $5.4 million, a 21.9% increase, while Oklahoma's premiums rose 20.3% to $86.5 million. Five other states posted double-digit increases: Nevada, up 18.9%; Connecticut, up 17.9%; Virginia, up 16.9%; New Hampshire, up 13.8%; and Minnesota, up 12.0%.

Ten states reported double-digit decreases in surplus lines premiums written. The most significant decline occurred in Ohio, whose 1997 premiums excluded tax-exempt business because the information was not available this year. Other states reporting significant declines were: Hawaii, down 23.4% to $68.7 million; Kansas, down 20.1% to $29.6 million; and Indiana, down 16.4% to $89.1 million. Idaho, Iowa, Michigan, Mississippi, Montana and New Mexico also reported double-digit declines.

California reported the highest 1997 premium volume, at $1.49 billion, up 3.2% from 1996. The states with the next highest premium volume included: Texas, $1.22 billion, down 2.0%; Florida, $796.6 million, down 8.8%; and New York, $571.1 million, down 4.4%.

Many insurance departments restate their prior-year premiums as more accurate information becomes available. In several states, surplus lines figures were provided by the stamping office or the surplus lines association rather than the state insurance department.

Proposals to change surplus lines laws are pending in California, Illinois, Nevada, New Jersey and Pennsylvania. Nine states reported changes to their surplus lines laws last year.

Oregon is the only state that altered its surplus lines tax rate in 1997. The rate fell to 2% from 2.25%.