For more than a decade the property-casualty surplus lines insurance market has outperformed the primary commercial p-c lines market in both premium growth and underwriting profit, according to a consulting firm's study.
Clint Harris, an analyst at Hartford, Conn.-based Conning Research and Consulting Inc., which prepared the analysis, said through 2006 the surplus lines market ten-year average annual direct premium growth was 19.5 percent versus just 7.6 percent for total commercial lines.
"It's not just about premium growth, however. For the same period, the annual average combined ratio was 104.4 percent on a calendar-year basis for surplus lines and 107.1 percent for total commercial lines," he noted.
The Conning study, "Property-Casualty Surplus Lines: Profiting from the Right Strategy," identifies the detailed trends in underwriting results by major line of business, comparing peer groups of nonadmitted insurers and the admitted market.
While focusing on the surplus lines portion of the nonadmitted market, the report explores the impacts and potential impacts from changes in regulation, catastrophes and reinsurance support. It goes on to examine the influence of emerging risks and new technologically supported processes.
"Surplus lines market share will likely decrease over the next two years due to the impact of soft market underwriting conditions, unless there is an unexpected event to cause standard insurers to withdraw from the general market," said Stephan Christiansen, Conning research director.
He added, "At the same time, loss ratios are likely to deteriorate more rapidly in surplus lines markets than in the general commercial market. Yet, our analysis suggests that companies that have established and well-maintained surplus lines infrastructure and reinsurer and distribution relationships will be positioned well to outperform again in the next strong market."
The study is available by calling 888-707-1177 or visiting the company's Web site at www.conningresearch.com.
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