The Personal Lines Insurance marketplace as we know it is evolving and changing every day.  What used to be a constant in the high net worth admitted space has now been replaced with Ace acquisitions and question marks.  As our insurance landscape continues to change, the way in which products are distributed has to change with it.  And it is.

Cliff notes version:  There is an increasing level of diversity within the consumer market and one channel will not meet the evolving expectations.  According to Conning’s third annual overview of personal lines insurance, changes in the consumer base are being driven by technological, economic and cultural forces; as well as changing behavior patterns of the U.S. consumer

[i].  Enter Surplus Lines Insurance…

High class couple onboard a yacht

The surplus lines industry broke records in 2014, growing direct premium written in 2014 to $40.2 billion – yielding a 6.7% growth rate – the highest point in history, reports A.M. Best’s “2014 Special Report U.S. Surplus Lines Segment Review.”  Interestingly enough, A.M. Best also reports that for the 11th year in a row, the surplus lines industry reported no financially impaired companies (in contrast to the admitted property/casualty industry’s 12 known financial impairments in 2014).[ii]

AIG (Lexington) and Nationwide (Scottsdale) are certainly ahead of the curve on this trend, being the top two writers of U.S excess and surplus lines business.[iii]  Auto Owners is the latest insurance carrier to follow this trend by acquiring Atlantic Casualty Insurance to expand their E&S capabilities.  Who will be next?  Will Chubb/Ace capitalize on this marketplace opportunity and expand into the Surplus Lines market?

The high net worth personal lines industry is now limited to fewer underwriting strategies and less competition.  Admitted carriers are not interested in – or are non-renewing – profitable, good business because it doesn’t fit their conservative guidelines (i.e. unprotected risks, limited claims history, rental dwellings, coastal properties with wind, course of construction risks, vacant risks, etc.).  The good news is that the Lloyd’s, Scottsdale’s, Ironshore’s and Lexington’s of the world are armed and ready to write that business and offer the coverage needed to properly protect your clients.

There still remains a stigma about “E&S” business and this perception that it’s a bad policy or bad coverage.  Humor me on a little demonstration.  Let’s take our Lloyd’s of London high-value homeowners facility for example.  We can include any of the following coverage’s on a policy:  up to $100,000 Water Back-up; up to $50,000 Loss Assessment; up to 200% Extended Replacement Cost; Workers’ Compensation coverage for domestic employees; Mechanical Breakdown up to $100,000; Personal Injury; Identity Fraud up to $250,000; Mold Coverage up to $250,000; etc. etc. We can include coverage for excess flood, personal articles floaters, earthquake coverage and so much more.  Sounds pretty great, right?  Offering an “E&S” policy with these coverage offerings would certainly be to the benefit of your client, NOT a detriment!

The market is shifting towards Surplus Lines and Risk Innovations is shifting with it.  Stay tuned for some really exciting new developments and new carrier partnerships.  Better markets and better expertise will take on a whole new meaning soon!

– Kathryn Powell Smith, Personal Lines Manager