Moody's: Risks Beginning to Move Back to E&S Space

NU Online News Service, March 22, 1:15 p.m. EST

As a further sign the insurance-pricing cycle is beginning to shift, Moody’s Investors Service says some companies are reporting strong growth in excess and surplus lines business, generally a sign that standard-market carriers are tightening underwriting and shedding business.

Moody’s makes the observation in a Special Comment released today that reports 2011 U.S. property and casualty net income for Moody’s-rated companies was down 33 percent compared to 2010, due largely to catastrophes.

Regarding activity in the E&S space pointing to a market turn, at the National Association of Professional Surplus Lines Offices 2011 annual conference held this past October in San Diego, some E&S executives, commenting to NU Online News Service about the state of the pricing cycle, said they would need to see standard carriers entering traditional E&S markets before they would say a hard market is approaching. 

“That, to me, is really what we need to see before I’ll say it looks like a hard market’s coming,” Judy Patterson, a property underwriter at specialty-insurer Beazley, said at the time. “It’s nice to get some rate increases, but it’s not a hard market until we have that influx of new-business opportunities, and we haven’t seen that.”

Linc Trimble, senior vice president, head of Excess Casualty (U.S.) for Bermuda-based Torus Insurance Holdings Ltd., agreed in October, and said as the economy improves, there should be enough premium and profit in standard carriers’ traditional markets and they would begin to pull back.

With several reports now showing improvement in the economy, and with Moody’s latest observations about business moving back to the E&S space, evidence beyond rate increases seems to be building toward a market turn.

Rates have continued to increase as well, according to Moody’s. In its Special Comment, the ratings agency says, “Rate increases continue to gain traction, broadening to include nearly all lines of business, with even professional liability beginning to turn.”

Moody’s adds that pricing surveys and conference calls show that pricing as “passed an inflection point,” and most commercial-lines insurers are reporting rate increases “that they believe to be in excess of their loss trends.”

Moody’s says it expects rate increases to continue in 2012, boosting industry-premium growth.

Regarding the industry’s 2011 results, Moody’s says the combined ratio for its rated companies jumped to 103 from 99 compared to 2010. The industry saw $32 billion inU.S.catastrophe losses for the year, the most since 2005, which produced $63 billion in insured losses. Thirty events caused losses of $25 million or more, the ratings agency adds, with 40 out of the 50 states reporting at least one catastrophic event.

“Besides cats...results were also influenced by lower reserve releases overall...lower investment earnings, and moderately lower underwriting margins (excluding cats) as earned-price increases did not make up for underlying loss-cost increases,” according to Moody’s.


Resource Center

View All »

Contractors General Liability Coverage 102

What is a prior work exclusion? Which option is right for my client? Why do...

Guide: 5 Steps to Selling Cyber

Cyber risk and data security is on the agenda of every business owner and executive....

Citation Correlation

Do rigger and signalperson qualifications correlate with the cause of crane and rigging accidents? ...

Complete Guide to Electronic Signatures in Property & Casualty Insurance...

In property and casualty insurance, closing new business quickly is key. Learn how to leverage...

INSTANT ACCESS: Complimentary Sales Closer Questionnaires

Help property owners or managers compare your commercial residential property insurance coverage vs. the competition....

Determining Vacant Property Perils and Valuations

Are your clients fully covered for Vacant Properties? In this economic climate, your insureds may...

Risk Management for Law Firms

This package of 3 concise risk management articles offers straightforward content and practical suggestions law...

Guide: Top 15 E&O Risks-And How To Avoid Them

Accidents happen. But when it's an errors and omissions oversight, that accident can open your...

We'll Show You How to Reach Your Sales Goals

Whether you work alone or have a team of agents working for you, we can...

Get The Most From Your Book Of Business

Turn your existing book into an exclusive program or roll your book. Learn about the...

Workers' Comp Watch eNewsletter

Receive critical business insights into issues related to worker's comp insurance. Sign Up Now!

Advertisement. Closing in 15 seconds.