Surplus lines premium up 14.9% in 2020 despite item count decline: WSIA
Surplus lines premium in 2020 in stamping office states exceeded $41.7bn, up 14.9 percent over 2019, according to the 2020 Annual Report of the US Surplus Lines Service and Stamping Offices.
The statistics were gathered and reported individually by each state stamping office and then aggregated and summarized by the Wholesale & Specialty Insurance Association on their behalf.
The stamping office data provides a good indication of the overall US surplus lines market. According to AM Best, states with stamping offices accounted for 62.7 percent of US surplus lines premium volume.
Each of the 15 stamping offices reported premium growth in 2020, with 11 states reporting double-digit percentage increases.
In contrast, item counts decreased by 63,299 in 2020, down 1.3 percent compared to the 2019 item counts. Nine states reported increases in line counts, however.
“The report certainly points to a hardening market based on both premium growth and increasing premiums per transaction; however, the overall reduction in transactions suggests the industry is battling some headwinds due to economic conditions resulting from Covid-19,” said Dan Maher, executive director of the Excess Line Association of New York.
Stamping offices each reported item counts that included new and renewal business, plus endorsements that included audit premium. While item counts are still down relative to 2019, they are down less than they were as of the 2020 midyear report.
Both premium and items for the overall year increased their pace relative to the first two quarters of 2020. The almost $20bn of premium reported at the halfway stage of the year was up 10.3 percent over the first six months of 2019 while item counts were down 2.6 percent.
Utah and Idaho lead premium growth
The largest increases in premium volume in 2020 came from smaller states including Idaho (up 35.8 percent) and Utah (up 37.1 percent). Utah set records with both premium and item counts in 2020 driven primarily by large increases in general liability along with fire and allied lines.
But large states including California, Florida, Illinois and Texas all saw double-digit increases, which continued trends that began in 2019.
California’s premium was up 22.7 percent in 2020 while its item count was up 8.0 percent. In Illinois, premium increased 10.2 percent despite a 7.2 percent drop in item count.
As this publication reported earlier this week, the Surplus Lines Stamping Office of Texas (SLTX) reported record premium volume of $7.92bn in 2020, up 14.0 percent on the previous year. The state’s item count fell by 3.1 percent.
The SLTX noted that contingency premium volume increased by 115 percent year on year. Fire and allied lines, the largest coverage code in Texas, saw premium jump by 24 percent in 2020 when compared with the previous year. Flood premium increased by 19 percent compared with 2019.
In Florida, the surplus lines premium reported to the state’s stamping office exceeded $7.5bn for the first time in 2020, increasing 13.4 percent over 2019 premium. This was the third consecutive double-digit increase for premium in Florida, with every quarter of 2020 experienced record premium for the period.
However, the Florida Surplus Lines Service Office (FSLSO) item count decreased 6.1 percent in 2020.
“The overall decrease in policy count was due to significant decreases in personal liability, HO-3 and inland marine – personal policy counts,” said Gary Pullen, executive director of the FSLSO. “Coverages with the largest increases in policy count amounts were commercial property, flood – personal, dwelling property and excess commercial general liability.”
The stamping offices commented that they are “hopeful that a stabilising economy will continue to strengthen the surplus lines industry into 2021”, with the possibility of new federal financial relief and the continued rollout of the Covid-19 vaccine.
As this publication commented this week, the fast-hardening surplus lines market is attracting a number of start-ups and scale-ups.
Just this week former Narragansett Bay Insurance Company CEO Todd Hart launched excess and surplus lines carrier Upland Capital Group with up to $200mn of backing from Newlight Partners and further investment from management.
LIO Insurance is among other start-ups in the pipeline understood to be targeting the sector, while recently launched newcos including Vantage and scale-ups such as the rebooted Core Specialty, Skyward Specialty, Applied Underwriters, Palomar Specialty and ProSight are also actively pursuing the opportunity.