WSIA ’23: with greater power comes greater responsibility
Record numbers of official delegates descended on San Diego for the WSIA Annual Marketplace last week, and reports from ratings agencies and other commentators highlighted the continued strong growth trajectory of a sector that is also broadly delivering bottom line performance.
In its annual report on the US surplus lines market earlier this month, AM Best noted that there had been a fifth straight year of double-digit growth, taking direct premiums written (DPW) in 2022 to a record $98.5bn.
That may be shy of the $100bn+ some had predicted, but the strong growth trajectory reported by state surplus lines stamping offices in the first eight months of 2023 means that the sector is on course to top the $115bn mark this year, and maybe even push beyond $120bn.
Its share of the overall P&C market also continues to rise. In a separate report earlier this month, Fitch published figures showing that the E&S market represented nearly nine percent of the total US P&C market last year, compared to just five percent only five years ago.
As a percentage of US commercial lines, the E&S market topped 20 percent for the first time in 2022, according data collated by AM Best.
It is not just top-line growth that E&S carriers are delivering, however.
The US domestic E&S market combined ratio of 91.1 percent beat the broader P&C combined ratio of 102.7 percent last year, again based on AM Best-compiled data.
And Fitch forecasts that the E&S market will once again post an underwriting profit for 2023 and 2024.
A big driver of growth, of course, has been the continued pullback in certain areas of the P&C sector by admitted carriers. This year the trend has reached mainstream news, with the widespread retrenchment from cat-exposed property in certain states such as California by a large number of household names. This has created a coverage crisis that is likely to turn increasingly political ahead of an election year.
Responsibility to deliver solutions
The E&S market’s role has long been to take advantage of freedom of rate and form – along with the creativity that freedom provides – to bring solutions to distribution partners and ultimately to insureds that admitted carriers can’t.
With property arguably the hottest and most challenged area of the broader insurance market, it is incumbent upon wholesale brokers and E&S carriers to rise to the challenge and deliver for their retail clients.
Another area of responsibility for the sector is to ensure it maintains its standards and – in the bigger picture – does not attract unwarranted regulatory attention that could in any way diminish the flexibility and creativity it currently enjoys.
Vesttoo is the latest in this year’s trio of quite public missteps involving collateral or counterparty credit and security issues in the MGA and E&S sector that have consequences for the reputation of parties impacted, along with their due diligence and other controls.
The reaction has been positive in the main, but the focus on addressing any residual concerns must remain strong.
Industry practitioners such as RT Specialty CEO Tim Turner are confident that there is a long runway of growth remaining for the E&S sector as it continues to benefit from the shift of business away from admitted carriers.
That means for another likely bullish atmosphere in the halls of the San Diego hotels hosting this year’s event.
It is imperative that complacency doesn’t set in, and that the E&S market and the wholesale distributors that feed it ensure their focus is on responsible growth and staying true to the sector’s raison d'être.
At E&S Insurer, we visited these themes and several others we expect to feature in conversations during the WSIA Annual Marketplace.
That article can be found in full here.