NU Online News Service, Oct. 18, 9:46 a.m.EDT

There are “little signs” that the surplus-lines marketplace isturning, says Mario Vitale of Aspen U.S. Insurance.

The creation of a “buffer layer” is one of those signs, saysVitale, president of the specialty unit of Aspen Insurance Holdingsin an interview at the National Association of Professional SurplusLines Offices (NAPSLO) convention in San Diego last week.

“You have to be really astute to recognize some of the littlesigns,” says Vitale just days before his promotion to co-chief executive officer of Aspen U.S. “I think thebuffer-layer market that has been created recently is one of thosesigns.”

One reaction to current market conditions is increasedattachment points with standard lines because they are loweringlimits at renewals in response to heavy catastrophe-related losses.This widens the buffer layer—residing between the primary andexcess layers of an insurance program.

For example, the excess coverage doesn't kick in until $5million on a policy that had an attachment point of $2 million theprior year.

The surplus-lines industry can step in to cover the gaps ininsurance, Vitale says.

“It's one of the things our industry can respond to quickly,” hesays. “But it also points to changing trends in risk appetite.”

The coverage hasn't been needed because no one has been turningaway risk.

Vitale was not the only insurance executive at the conference topoint out the trend. When NU asked NAPSLO's board ofdirectors to come up with opportunities in the market, AmWINSBrokerage President James Drinkwater mentioned buffer liability coverage.

Catastrophe losses, low investment income, new versions ofhurricane models and the depletion of loss reserves have takentheir toll on primary carriers. This has led to a 15 percentincrease in business in the E&S market, Vitale says, andstandard insurers are exiting.

“I believe the market is self-correcting now,” he adds.“Submissions are up. You're seeing some double-digitincreases.”

He adds, “The guys who have jumped into surplus—underwritingdifficult risks—are getting burned. That's the first signal, whenthey're turned back.”

He says the next couple of catastrophes will “really take abite” out of capital, creating an inflection point that will trulymark an end to what he terms the “cheating stage.”

The New York-area native says he's happy to be back home withAspen. Hired in March from Zurich Financial Services, where he wasCEO of global corporate, Vitale says he's had the “most funbuilding a first-class specialty insurance operation.”

With admitted and nonadmitted capabilities, Aspen U.S. islicensed in 47 states and expects to get licenses in the 3remaining states by the end of the year, Vitale says. With asignificant investment from its parent, Vitale says Aspen U.S. hasexpanded offices, staff, and policy issuance and claimstechnology.

Moving forward, Vitale says he likes E&S casualty business(products and manufacturers), inland and ocean marine, professionalliability (architects and lawyers errors and omissions) and programbusiness (Aspen started one for brownstones).

“We'll always look at that value proposition were we can make adifference,” Vitale says.