Issues & Answers Special Advertising Section:
September 2021
Davis Moore
Vice Chairman, Brokerage, Amwins
President, WSIA
“The wholesale and specialty market is healthy, vibrant and growing, and will continue to provide value to our trading partners.”
The wholesale specialty and surplus line segment is performing really well, and indicators are good for continued growth after challenging years in 2017 and ’18. In 2019, our insurance carriers began taking corrective rate actions, and that gained traction into 2020. A 2021 major update from the 15 states with stamping offices reports the total surplus lines premium reported for those offices during the first half of the year was $24 billion, which is an increase of nearly 22% over the first half of the prior year. That total was comprised of 2.6 million total filings, which is also up 7.2% over the same period last year. Our market is at a record level of premium. AM Best’s 2020 Special Report found that surplus lines insurers’ market share has more than doubled in the last 20 years. Now it’s 7.8% of total property and casualty premiums, and surplus line accounts for just over 16% of commercial lines premium currently. We experienced growth of 12.8% surplus lines premium in 2019 that totaled $56.3 billion in surplus lines premium.
How do emerging risks impact the specialty and surplus lines industry?Emerging and complex risks are often not well covered or eligible for the standard market, making them good opportunities for WSIA members. The wholesale specialty and specialty market serves as an innovator for new and emerging risks, and our members are well trained to be creative and adaptive. The world is changing and becoming more risky as a result of trends we’re seeing from increased frequency and severity of weather events and other factors such as social inflation, and nuclear verdicts. Cyberrisk is an excellent real-time example. Expertise is absolutely critical, and specialty coverage is necessary for cyber coverage. Now, with a significant increase in cyber and ransomware threats resulting in surging claims, it’s a very challenging line of business that WSIA members are well positioned to manage. The E&S market will continue to be responsive and provide much needed capacity and specialty coverage for these types of exposures.
What value does wholesale distribution deliver to the retail agent and the insured?
We provide tremendous value. Retail agents and insureds can look to WSIA member wholesale brokers for our expertise, access to markets, capacity that our carriers provide, and relationships that we’ve spent developing and maintaining over the past several years. We’re able to provide creative solutions for virtually all types of complex risks, and perhaps as importantly, we’re often able to tailor or customize coverage that’s not otherwise available to our customers in the standard market. Also, like many other industries, expectations have risen. Our retail trading partners want us not just to assist with a transaction, but also to provide market intelligence well in advance of a transaction so that they can better manage the expectations of their clients. That’s particularly important in a transitional market like the one we’re operating in today. I think it’s important to point out that there’s no additional cost associated with seeking a wholesale quote. A 2016 Conning Inc. analysis concluded that wholesale distribution does not increase the cost of a transaction to the insured.