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The excess and surplus (E&S) insurance market in the US is a hive of excitement and activity. Innovation is rife across multiple industry sectors, creating cause for specialty insurers to lick their lips at the prospect of new business.
The phrase ‘out with the old, in with the new’ rings true in the specialty insurance markets. As some product lines attract interest from the standard markets and become highly commoditized, others are deemed too risky, prompting standard market departure and opening doors for E&S players.
“I find the E&S market very interesting. It’s competitive; there’s no doubt about it,” said John Edack, senior executive vice president, E&S Casualty, Arch Insurance. “Certain products and segments are very commoditized, but at the same time there are lots of opportunities as standard markets continue to evaluate their risk appetite for various classes of business. In doing so, the pendulum swings and it opens up opportunities in the E&S space.”
Specific areas standard markets are starting to move away from include: construction (especially New York construction), entertainment, amusement parks, bars and taverns, and habitational risks. The broad market of transportation also gets the attention of the E&S market, Edack noted.
“The lead umbrella and high excess transportation market - including personal auto, trucking, livery, busses and so on – can be very challenging,” he said. “There’s new technology in the transportation space which is both good and bad in that it helps in the underwriting process to assess the insurability of given risks, but at the same time this new technology is being used to generate nuclear verdicts by very savvy plaintiff attorneys.”
Opportunities for new business in the E&S markets are coming at a time when pricing is relatively healthy. Overall there has been positive rate change in 2018, but “it’s spotty” and not in every product by primary lead excess, Edack explained. There was some speculation in the industry that rate increases would spill over from property into casualty lines after significant catastrophe losses in 2017, but that hasn’t really been the case.
