30 September 2019Insurance

E&S lines premium growth accelerates in response to 'underwhelming' underwriting results: Fitch

According to a new report by Fitch Ratings, the excess and surplus (E&S) lines market in the US grew 15 percent in the first half of 2019 - a trend it says will continue in the near future.

The direct written premiums in the US E&S market for 2018 grew at the greatest rate since 2012, increasing by 11 percent. In H1 2019, the rate nearly doubled the overall property/casualty market's growth rate.

The rating agency noted that weaker underwriting results and catastrophe losses from Hurricanes and California wildfires have contributed to this accelerating top line growth.

"Underwhelming underwriting results have accelerated premium rate increases, particularly in the commercial property and auto segments," said Doug Pawlowski, senior director, insurance. "The specialised nature of E&S attracts more challenging property and liability business, which generates more volatile loss experience over time. In the last two years, unusual catastrophe losses took their toll on market results."

The E&S market reported a 107 percent direct statutory combined ratio, significantly higher than the 92 percent ratio average over the prior five years. Catastrophe losses from Hurricanes Michael and Florence, as well as the California wildfires contributed to this result, despite being lower than 2017 losses from Hurricanes Harvey, Irma and Maria.

Fitch anticipates that further premium rate hardening and movement of underwriting exposures toward non-admitted markets will support above average E&S market premium growth in the near term.

Efforts to improve profits by leading E&S market participants, including Lloyd's and American International Group, via changes in policy limits and risk appetite are also significantly affecting underwriting conditions.

According to Fitch, mergers and acquisitions (M&A) activity is having less influence on market share shifts in the E&S market. Transactions that included significant E&S business in 2018 and 2019 were AIG's acquisition of Validus Holdings and Hartford Financial Services Group purchase of The Navigators Group.

From an organic growth standpoint, Berkshire Hathaway's expansion continues to stand out. BRK is now the fourth largest E&S writer, with market leading five-year average direct premium growth of 31 percent, Fitch noted.

Get all the latest re/insurance industry news with our daily newsletter -  sign up here.

​​​Swiss insurer Helvetia enters aviation insurance market

Typhoon Mitag prompts weather warnings in China and Japan

Insured losses for Typhoon Faxai losses are in $5-$9 bn range : RMS

HDI Global looks to AIG for new chief underwriting officer in Switzerland

Miller bolsters professional risks unit to navigate a 'difficult market'

AXIS Capital appoints Martin McCarty to global treasurer role

Feature:  10 ways insurers are using insurtech to drive new business

Already registered?

Login to your account

To request a FREE 2-week trial subscription, please signup.
NOTE - this can take up to 48hrs to be approved.

Two Weeks Free Trial

For multi-user price options, or to check if your company has an existing subscription that we can add you to for FREE, please email Elliot Field at efield@newtonmedia.co.uk or Adrian Tapping at atapping@newtonmedia.co.uk


More on this story

Insurance
11 September 2019   The rating environment is more positive than it has been for some time, Brian Schneider, senior director, insurance, Fitch Ratings, told Monte Carlo Today.
Insurance
10 September 2019   Fitch Ratings does not expect the UK’s departure from the EU to have an immediate impact on ratings, Graham Coutts, senior director, insurance ratings at Fitch, said at the Fitch Ratings Reinsurance Briefing 2019.
Insurance
8 October 2019   Fitch Ratings has warned that UK motor and home insurers could see a drop in profits next year as the regulator, the Financial Conduct Authority (FCA), moves to end high prices for customers who do not shop around for a better deal.