A.M. Best Special Report: Domestic Surplus Lines Insurers Reverse Downward
OLDWICK, N.J. -- October 01, 2012
Many surplus lines insurers have reported lessening competitive pressure from
standard market companies. While this trend has not signaled a decisive shift
in the market, it was enough to help reverse the four-year decline in the
premium produced by domestic professional surplus lines (DPSL) writers, which
reported a 3.2% increase in direct premiums written (DPW) in 2011. DPSL
insurers generated 72.5% of total surplus lines DPW for the year.
The reversal in premium trends also was exhibited during the first quarter of
2012, as DPW for the surplus lines industry increased approximately 7%
(compared to first quarter 2011). In addition, key performance measures for
the surplus lines composite in 2011 continued to outpace that of the total
property/casualty (P/C) industry.
In terms of some key operating performance metrics, the margins between
surplus lines insurers and the P/C industry increased slightly in 2011 after
narrowing in recent years.
Despite the catastrophic events of 2011, low investment yields and continued
competitive pressures, surplus lines specialists, particularly the market
leaders, once again generated considerable operating profits and returns on
both revenue and surplus.
As for the top 25 surplus lines insurers, DPW increased 1.4%, which again
somewhat reflects the subtle turn in the market. While it is inconclusive as
to whether or not any of this growth was caused by standard market insurers
returning business back into the surplus lines market, it has become
increasingly apparent that a growing number of standard market insurers have
been publicly expressing the need for rates to increase.
Lloyd’s maintained its spot as the leading surplus lines writer in terms of
DPW in 2011, generating just under $5.8 billion compared to the slightly more
than $5.3 billion reported by second place, American International Group, Inc.
For the eighth year in a row, the surplus lines industry reported no
financially impaired companies. This was in marked contrast to the admitted
P/C industry’s 34 disclosed financial impairments for the year.
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Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
A.M. Best Co.
David Blades, CPCU, 908-439-2200, ext. 5422
Senior Financial Analyst
Rachelle Morrow, 908-439-2200, ext. 5445
Senior Manager, Public Relations
Jim Peavy, +(1) 908-439 2200, ext. 5644
Assistant Vice President, Public Relations
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