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E&S Feeling Squeezed

E&S has historically been able to move independently from other financial service sectors. A downturn in the economy often has led to strengthened pricing as insurers tightened their underwriting guidelines.

By Nick Abraham | Updated on June 30, 2010

These are unparalleled times in the insurance marketplace and the economy. The Great Recession, Chinese drywall, the Deepwater Horizon oil spill, the failure or near-failure of numerous “too big to fail” companies like AIG, high unemployment, and the housing and mortgage industry meltdowns have made even the most robust businesses wary.

The E&S segment of the insurance industry has historically been able to move independently from other financial service sectors. In the past, a downturn in the economy has led to strengthened pricing as insurers tightened their underwriting guidelines. Today, however, E&S carriers face pricing pressure due to the highly competitive environment within the E&S community itself and from the voluntary market. While the case for a market firming can be made, certain basic underlying principles are preventing that from happening.

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