Wholesaler B&W highlights renewed carrier appetite for E&S sector

Wholesale broker Burns & Wilcox has commented that excess and surplus lines property casualty capacity remains intact, with start-ups having an impact alongside expanded appetite from existing carriers such as Zurich.

In a US property casualty market overview, Burns & Wilcox said that, “not dissimilar to 2021”, capacity remains intact with no shortages other than in very targeted areas such as commercial property and personal lines in specific coastal and other catastrophe-prone areas.

“Importantly, our personal lines aggregate capacity is generally more than previous years, however [it is] finite and reserved for preferred clients and risks that warrant same. Commercial property aggregate is similarly finite with carriers managing capacity carefully,” the broker said.

Burns & Wilcox said to expect “sharply increased rate” for both of these areas coupled with explicit changes to deductible and coinsurance clauses to meet the demand.

It continued that liability capacity remains plentiful, despite shorter limits on excess placements requiring more participants to fulfil limit requirements.

Most other lines of business have sufficient capacity to meet demand regardless of first- or third-party exposure, it added.

Burns & Wilcox highlighted the impact of start-ups and expanded appetite among existing carriers.

One example it gave is specialty niche insurer ProSight significantly changing its strategic direction following a 2021 change in ownership and leadership. The insurer was taken private in August last year when its $586mn acquisition by private equity firms TowerBrook and Further Global Capital closed.

“In short, they are shifting direction in the development of what is best described as a traditional E&S/specialty insurer focusing on brokerage property, casualty, professional as well as development of a delegated/binding authority initiative,” Burns & Wilcox stated, adding it welcomes this change.

The broker said the pace of start-up carriers being formed slowed in the later part of last year after a flurry in late 2020 and early 2021.

“The momentum, however, seems to have shifted to opportunistic equity, backing the development of MGA/MGU insurtech organisations. This shift signals the continued demand for specialised underwriting utilising third-party data and cutting-edge technology to augment traditional generalised underwriting,” Burns & Wilcox said.

Zurich increasing presence; AIG and Liberty maintain positions

The broker added that, similarly, traditional insurers are “hoping to enter, or in some instances re-enter, the now lucrative US E&S sector, many of which considering delegated authority to trusted partners”.

“Namely, Zurich, the large global powerhouse, is increasing its presence within this space from both a brokerage and delegated authority perspective,” it said. “Others, including AIG and Liberty Mutual, are maintaining their position of E&S product distribution via wholesale and specialty only brokers and MGAs – a welcome change from the disjointed model of several years ago.”

Assessing commercial P&C, Burns & Wilcox said it “was made abundantly clear” during the Wholesale & Specialty Insurance Association summit in November that “carrier bandwidth is stretched regarding submission flow”.

“The sharp increase of business being competitively marketed as well as the continued flow from the admitted or standard market has never been greater,” it said. “This coupled with insurers continuing to be quite selective accepting risks through diligent underwriting, often followed by deployment of less limit than in the past, has resulted in no greater time to engage a specialist broker with deep relationships.”

Burns & Wilcox expects a continuation of rate increases and tightening of capacity. But the broker added it anticipates outcomes with incumbent insurers to be less impactful based on earlier rate increases, “while new insurers will not have that luxury”.

Buyers should anticipate general liability rate increases, Burns & Wilcox suggested, but they will fluctuate greatly depending on industry, geography and loss history.

It said the excess liability marketplace also remains “quite challenging” with an emphasis on the attachment points of underlying policies and breadth of coverage, both of which will impact rate and participating insurers in building a tower.

On the property side, the increase in the number of billion-dollar-plus natural catastrophes is expected to result in continued significant rate increase across most accounts.

Burns & Wilcox said the confluence of increased cats, improved modelling technology and significant treaty reinsurance rate hikes at 1 January “is resulting in careful distribution of aggregate with sharp increases and modified terms, particularly on deductible/coinsurance clauses”.