Nationwide E&S sees PL rates rise more than 50%

Nationwide E&S is seeing big price increases in almost every line of business, the company’s president Tom Clark said on Friday, but he warned the new capital poised to enter the market could have a softening effect.

Clark (pictured) said the PL segment is where the most pronounced pricing increases have been taking place.

“From a professional liability standpoint, we’re seeing price increases north of 50 percent,” he said during a webinar hosted by wholesaler Burns & Wilcox.

Nationwide E&S acquired liability insurance program manager E-Risk Services in January last year. Clark said E-Risk is currently seeing its strongest ever growth, both in terms of new business opportunities and rates. E-Risk first opened for business back in 1998.

Catastrophe-exposed property is another sector seeing “dramatic” rate increases, Clark said.

The current increased pricing trend began in September or October of last year, Clark said, specifically due to a tightening in the availability of capacity in the excess casualty and property segments.

“That tightening of capacity has continued, which has allowed the industry to up price on almost every line of business out there,” he said.

“We believe [the rate increases] will continue. We just don’t know for how long,” stated Clark.

The Nationwide E&S executive said one concern for the business was the private equity money flowing into the industry.

“Although it’s not positioned yet to actually start writing business, the amount of capital being generated and ultimately deployed through those new ventures I think could have, God forbid, a softening effect on the market,” he said.

Tom Clark, Nationwide E&S discusses new capital coming into the market

As this publication has previously reported, the E&S market is generating considerable interest at present. The revamped StarStone US and the nascent proposed business involving Dinos Iordanou and Greg Hendrick are set to bring close-to $2bn of new capital to the E&S sector this year.

Clark said the easiest way for the PE money to be deployed in the broader industry would be in the reinsurance market, but it remains to be seen where it finds a home.

“We’ll see how that ultimately changes the dynamic as we move into the third or fourth quarter because I think it’ll take that long before we really have a line of sight on what’s going on there,” said Clark on the capital entering the industry.

Momentum continues

Last year, Nationwide E&S set itself the target of generating $1bn of E&S brokerage business by 2023. Clark said the business had seen “really strong momentum coming out of 2019 and going into 2020”.

Much of that momentum, Clark explained, was due to rate increases, and the executive said the Covid-19 outbreak has not done much to check Nationwide E&S’ growth. If anything, Clark said he was surprised by the volume of submissions that have come through, a situation he said was due to wholesalers’ confidence in what his company can deliver.

“[We have had] no real surprises other than our top line has remained stronger than we thought it would given the unemployment rate and how this has all had such a devastating impact on businesses,” Clark said.

“We did see May results drop off pretty sharply,” Clark conceded, but added that submission activity is starting to rebound again.

In its small contract binding business, Clark said there has been some cancellation activity and requests for returned premium, but that this is not much of a surprise because these entities have been hit hardest by the Covid-19 lockdown.

But in the individual risk brokered space, Clark said Nationwide E&S is seeing “strong” submission activity in the casualty and excess casualty space, as well as in the shared and layered property segment.

He added that the company is “very bullish” that the pricing and growth trends will continue, although he conceded he was not sure for how long.

Covid-19 has impacted the number of claims submissions that Nationwide E&S has received, Clark said.

In almost every line of business, Clark said the company has seen “a sharp reduction in the number of claims” of some 20 percent.

“That’s good news for us,” he said, although he admitted that the reduction could be due to claims not having yet been reported due to the lockdown.

One area that has not seen a reduction in claims is property, said Clark, due to the catastrophe events that hit the south-east and Midwest US earlier this year.

“Our property claims are probably flat year over year, but if you were to take out the impact of those cats, they too would be down about 20 percent,” Clark said.

Limited Covid-19 exposure

As it stands, Nationwide E&S does not have much exposure to Covid-19-related losses, said Clark.

“We obviously feel for the small business owners – they’re our bread and butter,” said Clark, but explained that pandemic is excluded on the majority of Nationwide E&S’ policies.

“We have a handful of policies on our shared and layered property business that have pandemic written into the contract, but it’s a very small exposure there,” said Clark.

Nationwide E&S also has some exposure to event cancellation claims, but as Clark explained, much of that will be resolved by rescheduling of the events.

“I don’t think you’re going to see any surprises coming from us where we’ll have some big announcement that we’re going to take a big prior year development hit due to our pandemic exposure,” Clark added.

Commercial insurance