The Excess & Surplus Market: An Untapped Book of Business
According to the Bureau of Labor Statistics, there were 386,320 independent sales agents in the United States as of May 2017.* That’s a significant number of people vying for the same piece of the insurance “pie.” But how well is the insurance industry serving insurance agents and brokers? Ask any insurance professional and they will tell you the industry has seen better days.
A.M. Best — the U.S.-based rating agency that focuses on the insurance industry — reported the U.S. property/casualty industry recorded a net underwriting loss of $23.5 billion for year-end 2017. The loss was primarily due to an estimated $52.9 billion paid out for catastrophes** such as Hurricane Harvey and Hurricane Maria — adding up to more than double what property and casualty insurers handled in 2016.
Marketplace changes also affected the ability to write business, with limitations, exclusions and gaps becoming more stringent. Companies such as Scottish American Capital and Zurich with too much capital are not making money, canceling policies and closing markets. Mergers and acquisitions also tainted risk “appetite,” pricing and availability.
How, then, does the future look for the insurance agent or broker? In an increasingly challenged, ever-competitive industry, they would be wise to mine hard-to-place, specialty business — an untapped resource for increasing book for business. Says Rick J. Lindsey, Broker for Evolution Insurance Brokers, LC— a leading excess and surplus lines insurance brokerage with Lloyd’s capacity that specializes in providing solutions for specialty and declined risks — “Specialty business is a niche that will differentiate the independent agent and provide more options for solutions.”
E&S Delivers for Agents and Brokers.
Instead of kicking hard-to-place risks to the curb, the excess and surplus (E&S) lines market provides specialty markets the ability to handle risks that have been declined, non-renewed, or have unique underwriting characteristics. Simply put, reaching out to the excess and surplus lines markets who say “yes” when standard, admitted insurance carriers cannot or will not provide coverage —enabling agents and brokers to expand their capabilities and book of business.
Typical types of risks written in E&S lines include those that:
Are high risk, such as explosive manufacturing, firearms makers, hazardous haulers
Do not fit standard market underwriting, such as bars and taverns with dance floors, vacant properties, taxi cabs
Require higher limits than offered by standard markets, such as $10,000,000 + liability umbrellas or $5,000,000 + property limits
Require specialty coverage, such as special events, concerts, hole-in-one contests, and unique situations
Have excessive or otherwise unacceptable loss history
Fact is, without the E&S market, clients would be forced to go uninsured or self-insure their risk exposure, which means they’re on their own if an incident, claim or lawsuit occurs.
Mining Specialty Business Starts with Current Book of Business.
In many cases, specialty services provide security and coverage that clients didn’t know they needed or wanted but should have. Producers can uncover these untapped specialty opportunities by evaluating their prospects and current book of business. Do they have dogs or exotic pets? Do they own firearms? Do they train, mentor or provide care for others? Rent or own recreation devices? Serve on Board of Directors? Volunteer or coach? By evaluating their prospects and clients, agents and brokers may very well find they haven’t addressed these risks or perhaps, they didn’t know how to place these risks.
Lindsey offers these guidelines: Put the clean risks with the traditional market; put the very hard-to-place, difficult risks that take time and other resources with a specialty excess and surplus lines carrier who will help provide a solution for these risks.
Building Your Specialty Book of Business.
It’s important to have a full understanding of the excess and surplus lines market vs. a competitive marketplace. Coverage can be offered on all or part of the risk, and can be completely tailored to specific needs of the insured.
Evolution Insurance Brokers, LC offers options and solutions for hard-to-place risks in many classes including commercial and garage liability, personal lines, commercial auto (not available in all states), specialty and professional liability. Evolution Insurance Brokers, LC has formed relationships with “A” rated carriers including Lloyd’s of London.
Bottom line — the E&S market is viable and growing. In 2017 alone, excess and surplus lines premiums in the U.S. totaled $28.1 billion, up 6.4% from 2016. Several states saw record-breaking premium totals, including California with $6.55 billion.*** Producers can grow their capacity and revenue, and capture more of the insurance “pie,” while fulfilling an important customer need.