Previously, you said you felt the greatest challenges to surplus lines in 2013 lie in the standard market's ability to enforce discipline in pricing, terms and conditions, but that discipline has not always prevailed. Do you think it has this year? What are the results that you've seen?
The overall insurance market responds to economic and financial conditions. We have seen better discipline as returns on investment income continue to be difficult to achieve and combined ratios have lingered at levels that are higher than most would like. Reserve redundancy is beginning to climb again, however, and the industry remains overcapitalized. Many companies are sitting on cash that needs to be deployed. I think we will see some downward pressure on rates in the coming year. Reinsurance treaty renewals seem to be holding steady or in some cases are coming down. All of these factors speak to carriers' appetites, and that drives what is available in the specialty markets.
What is it that still appeals to you about operating in the surplus lines sector, and what are some of the specific areas of expertise you've developed at your own firm?
The ability to be creative in finding solutions for our clients. The specialty market is creative and works very quickly. Over the years we have developed specialty expertise in Construction, Agricultural business, Transportation, Workers' Comp and Life Sciences to complement our expertise in the Property & Casualty and Professional Executive Liability.
How do you feel the Wholesaler Value Campaign has progressed thus far, and what work still needs to be done in communicating the value wholesalers bring to the table? How do you articulate that message?
When I began my career, the E&S market represented around 3% of the entire commercial insurance marketplace. In the last 30 years we have seen that percentage climb to the low to mid-teens. While that may not sound like a lot, it means that this industry is a $30 billion-plus industry. As a result, firms have become more highly professional, sophisticated and certainly more diverse than ever before. Insureds and their retail brokers are increasingly looking to the Wholesale community to provide innovative coverage and structure as a way to get to the best possible outcome.
While I think the [surplus lines industry has lagged behind in communicating its overall value to the marketplace, we are certainly making good strides. In this era of complete transparency, I feel it is vital to continue to convey that value proposition. NAPSLO has been and will continue to be the voice of advocacy for this market segment and must continue to tell the story.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.