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November/December 2021  Volume 32, Number 6        
 

This Just In ...

The surplus lines market — the place insurance brokers go to find insurance for clients when standard insurance carriers don’t want to provide it — has grown 20 percent in the last year, according to a report from A.M. Best.

While premiums are up, profitability, with a combined ratio of 99.7 percent overall, has been “elusive in recent years due to losses driven by secondary perils such as wildfires and convective storms.”

What’s interesting is that while total premiums are up in surplus lines, sales and payrolls have been down because of pandemic closures, lockdowns and quarantines. The A.M. Best report gives three reasons why premiums have grown nevertheless:

  • “Market dislocation” which in this situation refers to how investors have been identifying surplus lines (or wholesale) insurance companies as attractive businesses to invest in, thus creating more capacity to write this type of business.
  • “Insurers maintaining rate adequacy discipline.” In other words, higher rates.
  • “Renewal carriers [who] looked to get out of the business or risk class entirely.” So, these would be standard insurance companies that decided they no longer wanted to write insurance for, say, churches or day camps, which have become less popular categories lately.

“A decline in capacity owing to changes in company risk appetites, along with hardening rates for many commercial lines of coverage, creates an environment with an acute need for creative market and product-oriented solutions — the hallmarks of the surplus lines carriers,” said AM Best.

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In this issue:

This Just In...

COVID-19 How Reviver Laws Turn Back the Clock

The Future of Insurance Underwriting

The Long-Term Effects of Covid-19 on Insurance

The Fine Line Between Public and Private Data

 

 


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