E&S market rating revised to stable
The sector's ability to navigate the pandemic led to the updated outlook, and 2021 is shaping to continue the upward trend.
In the spring of 2020, the E&S market was moving through a period of anticipated uncertainty, leading AM Best to lower the sector’s rating to negative.
In the face of the pandemic, the E&S segment continued profitably and growth, signaling persistent opportunities for surplus lines, AM Best reported, which revised the sector’s outlook to stable two weeks ago. The rating agency expects capacity to remain stable, with the potential to expand in the short term.
“Looking back now, we are very lucky to be working in an industry that responded in such a positive way. The E&S world really stepped up to be there for our clients,” Brenda (Ballard) Austenfeld, president of RT Specialty’s National Property Practice, said during a recent WSIA event. “Everybody on a combined basis has done an incredible job in finding creative solutions to continue moving forward.”
She noted additional capital is beginning to flow into the market now, with much of it being driven by retail brokers and insurers looking for “true specialization.”
As clients look to their E&S insurance teams for expertise, the sector has taken on a more consultative role, according to Worldwide Facilities, LLC CEO Davis Moore, who also serves as WSIA president.
“We are acting as a trusted advisor, and our clients are relying on us more so now than they ever had in the past,” Moore added.
Among the most in-demand specialized coverages are cyber, sports and entertainment, professional liability and construction, according to Austenfeld.
“The construction world also continues to be an important part of the E&S market, especially since growth in building has continued through COVID,” she said.
Outlook for 2021
Better economic times anticipated for the second half of 2021, a result of businesses reopen, is expected to be a growth element for the E&S market that was missing in 2020, according to Moore, who added: “As long as carriers are able to achieve the rate increases they believe they need, we expect to see premium growth in 2021.”
Additionally, Moore said he is seeing a push to provide more efficient, lower-touch technology solutions, particularly for online quotes, in Worldwide Facilities’ MGA business.
“The wholesalers that are making those investments now should see the benefits down the road,” he added.
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