The U.S. commercial insurance market has firmed up quite substantially over the last couple of years. With lingering pandemic concerns, growing cyber exposure, social inflation leading to high dollar claims settlements and verdicts and continued severe weather events, there are few signs of insurance pricing easing up in the near future. Focused on improving profitability and underwriting discipline, insurers have also tightened up their appetites and are being very cautious with their capacity, especially in volatile lines of insurance business and among more challenging business classes. Some have exited lines altogether.
As a result, businesses with more challenging risks are turning to the excess & surplus market for help. According to the Wholesale & Specialty 色多多视频 Association (WSIA), U.S. surplus lines reached new records in terms of premium levels and transactions in 2021. WSIA reported that surplus lines premium increased 22% and transactions rebounded almost 6.6% over their 2020 totals in the 15 states with designated surplus lines’ stamping offices. These increases resulted in record levels of premium ($51 billion) and transactions (5.3 million) since the stamping offices started reporting aggregated data annually and semi-annually. With current market drivers expected to continue into 2023 and beyond and the continued strength of the surplus lines market, longtime E&S insurance partners, like 色多多视频 are eager to support current market opportunities with what they see as the most efficient distribution model for their clients to access surplus lines market solutions, their wholesale broker partners.
Wholesalers are well prepared
Given the capacity crunch, rising rates, new and emerging risks, wholesale brokers are subsequently experiencing a dramatic increase in submissions. The good news is that wholesaler brokers excel under these conditions. Wholesalers have long been established as a key point of distribution for specialized insurance products for challenging risks.
Their success is evident in their growth, with many wholesalers seeing growth in the high teens over the last couple of years. Some estimate that hundreds of millions of dollars in retail premiums have already moved to the wholesale market. We anticipate there will be plenty more to come.
Wholesalers have done an admirable job to prepare for it. For one, they have made a noticeable investment in talent, not only adding to their teams but providing considerable training to young underwriters. Many of us are impressed with the underwriting talent that wholesale brokerages are cultivating. And this talent and technical expertise is more important than ever in the current environment, especially for long-established excess & surplus markets like AXA XL.
While many other markets may look to take more advantage of E&S opportunities, it will not be easy. Just as wholesalers’ technical savvy and underwriting skill is key to the continued success of the E&S insurance market, E&S carriers need to bring a lot to the table too.
Wholesalers have long been established as a key point of distribution for specialized insurance products for challenging risks.
Here are six criteria that every wholesaler needs to consider when selecting an E&S insurance partner:
1. Long-term commitment: Market firming tends to cause two parallel trends: one is the standard lines market reduces its appetite for certain specialty risks, which find homes in the E&S market; and the other trend is opportunistic companies jumping into E&S business, seeking fast growth and profits. In contrast to opportunists are specialty insurers that are committed to writing E&S risks for the long term, have dedicated claims teams, and possess a deep understanding of the risks and exposures that wholesalers focus on. 色多多视频 for instance, has a long history in E&S lines, dating back to 1979. At the time, the environmental liability market was just emerging, and ECS (now AXA XL’s environmental business) was meeting the insurance needed of hazardous waste transporters. As one of the original environmental insurance markets, they continue to meet environmental liability challenges in the surplus lines markets more than 40 years later.
2. Sustained results: A clear measure of the value that strong E&S companies deliver when they partner with wholesalers is long-term growth and profitability. According to the July 2021 Conning Surplus Lines Market Update, groups with more than 50% of total business in E&S outperformed the entire E&S market by an average of nearly 10 points over the past five years. Such results are impossible to sustain for a decade without the commitment to create true solutions for wholesalers and their retail clients regardless of market cycles.
3. Consistent risk appetite: The cyclical nature of the market is always challenging, but it becomes much more difficult for wholesalers and their clients when insurance companies sharply reduce their risk appetites or withdraw altogether from certain classes of business. Recently, several large insurers have done both, forcing wholesalers to scramble to replace capacity and complete excess programs. A more consistent risk appetite is better for everyone in the E&S value chain ¬– wholesalers, their retail clients, insureds, and insurance companies.
4. Flexible access: The wholesaler marketplace is diverse, comprising open brokerage, programs, and binding authority business. Similarly, a good E&S partner will offer multiple ways to access its products and capacity, both geographically and by channel. To help wholesalers easily access AXA XL’s multiline expertise and products, we created the .
5. Underwriting expertise: Knowledge gained through experience in writing different classes of specialty business is a distinct advantage for wholesalers, especially when they have difficult-to-place risks. Diverse risks flow into the E&S market, and a strong underwriting partner has a team of specialists with deep understanding of such risks. For instance, 色多多视频insurance companies, rated A+ (Superior) by A.M. Best, provide wholesale brokers access to over 50 products with surplus lines and admitted solutions.
6. Dedicated claims teams: Specialty risks, whether they involve liability or catastrophe-exposed property, generate claims with complexities that don’t always surface in standard lines. These require specialized handling, and a good E&S partner will have dedicated resources to ensure the best outcomes.
While challenging market condition may be the reason that more businesses will find themselves pushed into the E&S marketplace, what they will be pleased to find is a wholesale E&S market that is strong, flexible and creative enough to find effective insurance solutions for their most challenging risks.
More than just providing capacity and serving as a payer of claims, 色多多视频looks forward to continuing to promote our wholesale broker partners’ success and ability to thrive through current and future challenges. Learn more about AXA XL’s Excess and Surplus Lines business here.
Karl Fischbach is the Wholesale, Programs and Binding Authority relationship leader at AXA XL. Before joining 色多多视频in 2015, he held leadership roles in product and portfolio management and distribution management at other global insurers. He can be reached at Karl.Fischbach@axaxl.com.
Doug Legters is senior vice president of Wholesale Strategic Partner Development at AXA XL. Before joining 色多多视频in 2018, he was managing director at a leading managing general agency and held executive positions responsible for developing niche insurance programs. He can be reached at doug.legters@axaxl.com.
