First-Half 2010 E&S Premiums Decline

For the six-month period, however, E&S insurers fared worse than the property and casualty industry overall, which managed flat growth, according to the latest figures released jointly by Insurance Services Office, the Insurance Information Institute and the Property Casualty Insurers Association of America (http://www.property-casualty.com/Issues/2010/September-20-2010/Pages/Net-Investment-Gains-Spur-105B-Jump-In-PC-Profits.aspx).

While the latest E&S numbers do not provide any insight into that combination of price declines and exposure changes that contributed to the 5 percent tumble, if a harder insurance market or some economic improvements do not come together to drive E&S premiums up dramatically in the second half of this year, the segment will suffer a record-setting four straight years of premium declines.

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

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

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

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

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

Direct written premium data for the rankings accompanying this article is taken from Schedule T of quarterly statutory financial statements filed with U.S. insurance regulators.

For each individual U.S. insurance company that filed the schedule by mid-September, Highline summed premiums in states where the carrier's active status is shown as "E," denoting that a carrier is eligible or approved to write surplus lines or non-admitted business in the state.

The column labeled "Percent Growth" is an indication of organic premium growth. In other words, first-half 2010 premiums for all insurers that were part of a group in first-half 2009 were used to calculate growth figures (excluding those divested in 2010 and including those acquired in 2010).

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

Chartis suffered the biggest dollar drop–$387 million–but the group, and its Lexington Insurance Company operation, still garnered top spots on Highline's group and the individual company rankings.

Chartis (formerly American International Group) and Lloyd's have traditionally occupied the first and second spots on a separate ranking that includes alien insurers published by Oldwick, N.J.-based A.M. Best. Best positioned Lloyd's behind Chartis from 2002-2008–with Lloyd's taking the top spot in 2000 and 2001, but falling behind Chartis in Best's latest published ranking based on 2008 U.S. E&S premiums of $6.1 billion. (Editor's Note: A.M. Best is scheduled to publish an updated report this week.)

Lloyd's did not have U.S. E&S premium tallies available to share with NU in time for this report. But separately, Lloyd's has indicated that U.S. coverholder business–underwritten by U.S. managing general agents on behalf of Lloyd's–has become a priority. (See related article in this edition.)

Earlier this year, Lloyd's reported a 22 percent increase in gross premiums written globally for all of 2009–also indicating that 45 percent of the total came from the U.S. and Canadian markets, up from 40 percent in 2008. Since some of this North American premium is reinsurance premium, it remains unclear whether U.S. E&S insurance premiums written by Lloyd's in 2009 or 2010 will eclipse the Chartis total.

The A.M. Best report–commissioned by the Derek Hughes/NAPSLO Educational Foundation and published in September 2009 in advance of the annual meeting of the National Association of Professional Surplus Lines Offices, Ltd.–reported two consecutive years of premium declines for writers of U.S. E&S business in total, excluding Lloyd's and other true aliens.

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