Property generates 15% E&S growth in 2023 to increase total P/C share

For the sixth consecutive year, US excess and surplus insurers in 2023 saw double-digit growth in direct premiums written.

E&S direct written premiums (DWP) rose 15% last year to increase its share of the total property/casualty market to 9%, according to a report from Fitch Ratings.

“It expects continued profitable growth, albeit at a reduced rate, and to remain close to 10% of the total market,” said Douglas Pawlowski, senior director. The E&S sector maintained a 5% share of the total P/C market until the “growth spurt” began in 2018.

Years ago E&S market expansion grew faster than global P/C market growth by 7% DWP in 2023 and its combined ratio of 86 improved the overall P/C market level of 99. E&S market reported combined rates of 96 in 2022 and collapsed in 2021, Fitch said.

“We expect E&S underwriting performance to remain profitable in 2024 and outperform the standard P/C market, barring severe catastrophe losses,” Fitch added, with favorable pricing expected to keep pace with loss costs.

DWP’s E&S increase was recently driven by property insurance premiums leaving the standard market in catastrophe-exposed states as major home insurance insurers left the E&S eligible market. Profit and pricing trends continue to attract additional competitors to the market, as property lines posted a combined ratio of 66 – a 27-point improvement from 2022. However, Fitch noted high volatility in combined property rates in the last decade.

The allied and fire line of business, which includes homeowners, posted a combined ratio of 63 in 2023, with improved results also seen in multiple commercial risk and other liability claims made.

Commercial auto, medical professional liability and other liability did not enjoy a profitable year with combined ratios of 122, 105 and 101 respectively.

For E&S casualties, the combined ratio was 99 in 2023, up two points from 2022. Rate increases appear to be keeping pace with loss costs, but “the impact of inflation on loss costs remains a nagging challenge for the sector,” it said Fitch.

Last year, 70 insurance groups recorded E&S premiums of more than $200 million, led by Lloyd’s of London, Berkshire Hathaway, AIG, Fairfax and Markel. The top three accounted for 31% of total DWP E&S in 2023, Fitch reported.

TOPICS
Trends Excess Surplus Properties Real Estate Crash