NU Online News Service, Sept. 26, 3:10 p.m. EDT
A declining exposure base and a high level of competition conspired to cause a fourth year of declining written premiums in 2010 for the surplus-lines industry, according to an A.M. Best Special Report.
A.M. Best says that, to offset the effects of the soft market, some surplus-lines companies again chose to release reserves from prior years' favorable loss development. But the Oldwick, N.J.-based rating agency says it believes the reserve cushion is being depleted, and benefits from reserve releases may not be as robust.
The surplus-lines industry was able to generate a net-operating profit in 2010, A.M. Best says, but underwriting results “worsened appreciably, driven primarily by increased catastrophe-related losses and higher loss totals for the lead 'other liability' line of business.”
A.M. Best notes that although the surplus-lines industry still outperforms the overall property and casualty industry in most measures, the gap continues to narrow.
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