Fitch: Growing Capacity Limits Upside in U.S. Excess & Surplus Market

CHICAGO--()--The U.S. excess and surplus (E&S) lines insurance market reversed a four-year consecutive slide in direct written premiums (DWP) in 2011 and has seen continued growth through the first nine months of 2013, according to a new Fitch Ratings report. E&S DWP increased by 9% to $32 billion at year-end 2012 while losses related to Hurricane Sandy led to lower underwriting results.

In a new report, Fitch illustrates how growing capacity limits rate hikes and promotes persistent competition in E&S lines. Higher premiums were driven by rising rates in various lines, increased exposure due to a continued, albeit slow, economic recovery, and a reduced appetite from standard carriers to write nonstandard risks. However, rate increases slowed in the second and third quarters of 2013 and the absence of large catastrophe events during the second half of the year will lead to moderating rates in catastrophe-prone areas in 2014.

While admitted carriers have pulled back on risk typically covered by the E&S market, capacity continues to enter the market. Berkshire Hathaway's increased participation in the E&S market has not significantly altered the market through third-quarter 2013; however, Fitch expects pricing implications related to its expansion to materialize in coming quarters.

Fitch's analysis of statutory premium and aggregate underwriting performance of U.S. E&S insurers reveals that E&S underwriters' direct combined ratio outperformed the property/casualty industry by an average of 11 percentage points from 2008-2012. E&S writers provide an important role to the insurance marketplace by creating a market for hard-to-place risks, representing a relatively modest 6% of U.S. property/casualty insurance industry premium volume.

The full report is available on the Fitch web site at 'www.fitchratings.com' under 'Insurance' and 'Research'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research: U.S. Excess and Surplus Lines Market Review

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=726596

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Contacts

Fitch Ratings
Dafina M. Dunmore, CFA, +1-312-368-3136
Director
Fitch Ratings, Inc.
70 West Madison St.
Chicago, IL 60602
or
Jim B. Auden, CFA, +1-312-368-3146
Managing Director
or
Media Relations:
Brian Bertsch, New York, +1 212-908-0549
brian.bertsch@fitchratings.com

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Contacts

Fitch Ratings
Dafina M. Dunmore, CFA, +1-312-368-3136
Director
Fitch Ratings, Inc.
70 West Madison St.
Chicago, IL 60602
or
Jim B. Auden, CFA, +1-312-368-3146
Managing Director
or
Media Relations:
Brian Bertsch, New York, +1 212-908-0549
brian.bertsch@fitchratings.com