Premiums written by the U.S. excess and surplus lines marketfell nearly 5 percent to $11.5 billion in the first half of 2010,according to a report prepared by Highline Data exclusively forNational Underwriter.

If a harder insurance market or some economic improvements donot come together to drive E&S premiums up dramatically in thesecond half of this year, the segment will suffer a record-settingfour straight years of premium declines.

According to Highline Data (www.highlinedata.com)–a dataaffiliate of The National Underwriter Company–comparable premiumsfor the U.S. E&S market totaled $12.1 billion for the first sixmonths of 2009.

The single-digit premium decline was slightly less than the 7.5percent full-year drop for E&S carriers reported for 2009.(Seerelated article, see http://bit.ly/cVWsoZ.)

For the six-month period, however, E&S insurers fared worsethan the property and casualty industry overall, which managed flatgrowth, according to the latest figures released jointly byInsurance Services Office, the Insurance Information Institute andthe Property Casualty Insurers Association of America. (Seehttp://bit.ly/aALMEq fordetails.)

The latest E&S numbers do not provide any insight into thecombination of price declines and exposure changes that contributedto the 5 percent tumble.

Highline Data also compiled a list of the top-50 E&S groups,ranked by direct written E&S premiums, revealing that only 18of the 50 managed to record premium growth in the first half ofthis year.

Continuing a trend that was evident based on Highline Data'sprior report for the full-year 2009, published by NU inMay, several Bermuda-based organizations with U.S. E&Soperations vaulted up the ranking with the largest premium jumps,including Bermuda-based Ironshore Group with its $237 million totalpushing the group up from the 25th spot based on first-half 2009premiums.

For all of 2009, Ironshore's U.S. E&S premiums totaled $312million.

Two other Bermuda-based firms–Torus Insurance Group and AspenInsurance Holdings–leapt into the top 50 but landed still well shyof the $120 million mark that separates the top-25 groups from therest of the pack.

On U.S. shores, Cincinnati Financial also moved into the top 50for the first time, with $30 million of E&S direct premiumslanding it in the 49th spot.

Chartis suffered the biggest dollar drop ($387 million), but thegroup–and its Lexington Insurance Company operation–still garneredtop spots on Highline's group and the individual companyrankings.

Chartis (formerly American International Group) and Lloyd's havetraditionally occupied the first and second spots on a separateranking that includes alien insurers published by Oldwick,N.J.-based A.M. Best. Best positioned Lloyd's behind Chartis from2002 to 2009–with Lloyd's taking the top spot in 2000 and 2001 butfalling behind Chartis ever since.

(The analysis excludes Lloyd's, which writes this businessthrough licensed surplus lines brokers rather than U.S.companies.)

Lloyd's did not have U.S. E&S premium tallies available toshare with NU in time for this report. But separately,Lloyd's has indicated that U.S. coverholder business–underwrittenby U.S. managing general agents on behalf of Lloyd's–has become apriority. (See related article in the Sept. 27 edition ofNU's E&S Extra at http://bit.ly/bIu88x.)

Last month, Lloyd's reported that gross premiums writtenglobally for the first six months remained relatively flat–risingjust 0.2 percent over first-half 2009. Lloyd's also indicated that45 percent of the total came from the U.S. and Canadian markets,which was the same percentage reported in 2009.

Since some of this North American premium isreinsurance-related, it remains unclear whether U.S. E&Sinsurance premiums written by Lloyd's in 2010 will eclipse theChartis total.

The A.M. Best analysis–commissioned by the Derek Hughes/NAPSLOEducational Foundation and published last month in advance ofNAPSLO's annual meeting–reported three consecutive years of premiumdeclines for writers of U.S. E&S business in total, excludingLloyd's and other true aliens.

According to historical A.M. Best data dating back to 1988, U.S.E&S premiums haven't dropped for two consecutive years sincethe late 1980s, and the Best figures show no prior three-yearslide.

Historical records for U.S.-domiciled companies going backfurther–to 1971–maintained at National Underwriter (basedon articles authored by NAPSLO members in the late 1990s), indicatethat a three-year slide occurred in 1981, 1982 and 1983, whensurplus lines premiums fell 2.3 percent, 2.6 percent and 3.6percent, respectively.

According to A.M. Best's latest report, the magnitude of themore recent trio of surplus premium drops was much larger, with thenumbers falling 5.9 percent for domestic professionals in 2007,11.1 percent in 2008 and then 7.2 percent in 2009.

(Editor's Note: Highline's indicated full-year premium drop of7.5 percent for 2009 is comparable to the A.M. Best figures fordomestic professionals and domestic specialty companies addedtogether. Best distinguishes between “professionals” and “specialtycompanies” based on the percent of nonadmitted business to thetotal for the company. Those with more than 50 percent are definedas “professional” companies by the rating agency analysts.)

ABOUT THE DATA

Direct written premium data for the rankings accompanying thisarticle is taken from Schedule T of quarterly statutory financialstatements filed with U.S. insurance regulators.

For each individual U.S. insurance company that filed theschedule by mid-September, Highline summed premiums in states wherethe carrier's active status is shown as “E” denoting that a carrieris eligible or approved to write surplus lines or nonadmittedbusiness in the state.

The column labeled “Percent Growth” is an indication of organicpremium growth. In other words, first-half 2010 premiums for allinsurers that were part of a group in first-half 2009 were used tocalculate growth figures (excluding those divested in 2010 andincluding those acquired in 2010).