With record levels of business flowing through the wholesale channel, data from the US Surplus Lines Service and Stamping Offices for the first half of 2021 shows that premium soared 22 percent to $24bn.
Speaking to The Insurer TV in the latest of our Leading Voices series, Obenauer said the current E&S market is the best he’s seen in terms of demand and supply.
“It’s a market that most people a few years ago predicted would never happen again. But who would have thought a few years ago we’d have the confluence of events of the pandemic, social unrest, social inflation, core inflation and a number of natural catastrophes that were 100-year plus events,” he commented.
That had presented a significant opportunity for the E&S market and wholesale brokers to solve challenging needs.
“And the bigger picture is that risk clearly is a growing factor in our world and if anything the E&S market is the best positioned to address those risks as we think about the world going forward,” said the executive.
He said wholesalers have a great line of sight into client needs and evolving risk characteristics in the industry and across society at large, and that the sector is a natural home for innovation.
Obenauer highlighted the raft of exclusive products CRC has developed using its own data and analytics to build solutions for clients and partner carriers that are interested in pursuing specific market segments and to deliver solutions more efficiently.
He also pointed to the flexibility in rate and form filings as well as the creativity of talent operating in the sector as a driver of innovation.
The executive believes the rapid growth of the E&S market represents a cyclical and structural shift.
“There’s been a long-term trend of growth of the E&S business as a percentage of overall P&C business and that reflects the point around risks becoming greater and E&S being the market to help solve those risks as we evolve as a society.
“But then clearly in the last year or two there have been significant temporal events that don’t always happen,” he observed.
Temporal events included the pandemic, spiking cyber risks around ransomware, social unrest and some of the recent natural catastrophe events.
Pricing momentum remains
The executive also suggested the positive pricing environment for the E&S market continues to have strong momentum.
The Truist Insurance Holdings subsidiary has been releasing a series of pricing indexes over the last year.
Obenauer said that although the pace of increases is decelerating in 2021, there is still a healthy rate-on-rate environment compared to last year.
That includes excess and umbrella up comfortably in the mid-teens, after rising close to 20 percent last year, leading to compounding growth.
Private D&O is up around 10 percent in 2021, after increases in the mid-teens last year. Cyber increases are accelerating with rates up 40 percent this year under pressure from underwriting results and concerns around ransomware.
“Overall it will remain a positive pricing environment for the E&S market this year and likely into next year from everything we see and hear,” he concluded.
Part two of our interview with Dave Obenauer will be published tomorrow (14 September). In it we discuss the M&A opportunities our guest is eyeing up in transactional broking, MGA and binder segments.