E&S lines in state of “rehabilitation”
After many years of softening, the excess and surplus lines market is now in a state of rehabilitation—but its health remains delicate and some smaller managing general agents have struggled and could ultimately be forced out of the market.
That is the view of Michael Sillat, chief executive of WKFC Underwriting Managers and CivicRisk, both owned by the Ryan Specialty Group. He said that while rates are increasing, they are not exactly “hardening” just yet. The market has pulled back from very soft rates in 2009-10 but new and potential capacity entering the market also makes its full recovery far from certain.
“By around 2009, rates had become very soft,” he said. “They hit a real low point in 2010. Since 2011, there have been steady increases and I predict these should continue but it will be gradual and will vary by line. General liability is looking strong at the moment, for example, meaning its rehabilitation should be a lot quicker.”
The current improvement in the market means there are some opportunities for carriers able and willing to take them.
Sillat does not believe the sector is heading into a true hard market head first—not enough capacity is leaving the market to cause that. Instead, he describes the “slow and steady” dynamic as the “new normal”.
“While upward pressure continues on rates we are also driving changes in terms and conditions,” he says. The sector is in a delicate balance at the moment. He also believes the dynamic could ultimately force smaller managing general agents that lack diversification out of the market. “That is my prediction.”
