Surplus lines see 11.2% premium growth in 2019: A.M. BestPosted On: Sep. 11, 2020 1:25 PM CST
The surplus lines market posted an 11.2% increase in premium growth in 2019 to $39.06 billion, the equivalent of 2018, but business this year could be hampered by COVID-19’s impact, says A.M. Best Co., in its annual report on the sector issued Thursday.
“Market-firming finally took hold in 2019, after what many observers characterized as a relatively tepid response, in terms of prevailing rates, to heavy natural catastrophe losses and worsening loss trends in casualty lines,” the report said.
Rate increases for most commercial lines rose from 2-3% in early 2019 to 10-11% from the second quarter through the end of the year “and maintained that momentum into 2020,” said the report, Expanding Opportunities Bolster Surplus Lines Growth and Operating Results.
Oldwick, New Jersey-based A.M. Best, however, revised its market segment outlook on the segment to negative from stable in April because of COVID-19’s impact and the resulting economic contraction and instability, the report said.
“As the third quarter of 2020 began, positive testing results in numerous states continued to rise, which could lead to further business closures - and somewhat diminish the amount of insurance those businesses need,” the report said.
The pandemic’s financial impact on different industries “could be offset somewhat by governments and public authorities pushing more spending on infrastructure projects, which would be a boon to the construction industry.”
But while a contraction in exposures offers “some positives,” shrinking underwriting cash flow, potential claims frequency and severity increases and challenging investment market conditions “will leave some insurers fighting an uphill battle,” and both standard and surplus lines insurers “could be subject to coverage creep, which state legislatures are already attempting to address with regard to business interruption claims,” the report said.
More insurance and risk management news on the coronavirus crisis here.