The growth of surplus lines
The growth of surplus lines has reached record levels, but what is driving this momentum? Insurance Business TV spoke to three industry experts to get their takes
Brady Kelley
WSIA
Industry experts
Dave Obenauer
CRC Group
Wendy Houser
Markel Specialty
Kelley has served as WSIA’s executive director since 2017 and served in the same role with NAPSLO from 2011–2017. He is responsible for the overall management of the association’s staff support activities, service to members, and business operations. Prior to joining WSIA, Kelley was the chief financial and business strategy officer for the NAIC. A graduate of the University of Missouri, he received a BS in accountancy from the College of Business and Public Administration, and he earned the certified public accountant (CPA) designation in 1995
WSIA
Brady Kelley
Dave serves as CEO of CRC Group and has been with the firm since 2007. He earned a BS in business administration from Wake Forest University and an MBA from the Wharton Business School. Dave was appointed to the legacy NAPSLO board of directors in 2015 and joined the Wholesale & Specialty Insurance Association (WSIA) board of directors in 2017. He has served on the AAMGA/NAPSLO merger committee, and as chair of the WSIA PAC Committee, co-chair of the membership committee, and co-chair of the legislative committee, and has been a member of the executive committee since 2020.
CRC Group
Dave Obenauer
Wendy serves as chief wholesale officer for Markel Specialty. Houser has more than 20 years of experience in the industry, including 11 years as a broker prior to joining Markel in 2008. She holds a BS in organization communications and political science from Missouri State University. Wendy was honored in 2012 with the Dana Roehrig Award for outstanding service to a committee. She was appointed to the WSIA board of directors in 2019 and serves as chair of the emerging issues and innovation committee.
Markel Specialty
Wendy Houser
“We are seeing significant growth even as we head into next year”
Dave Obenauer,
CRC Group
THE SURPLUS lines space continues to grow and deliver value for the insured.
According to Fitch Ratings, in October 2023, the excess and surplus insurance market was expected to post a second consecutive year of direct underwriting profits, in part because of high demand and a continued favorable pricing environment.
Fitch was not alone in this reporting.
“Surplus lines measurement doesn’t capture admitted premiums placed by wholesalers. There’s no doubt that premium placed through the wholesale channel is well above $100 billion at this point”
Brady Kelley,
WSIA
“Ultimately, we’re here to pay claims. We need to make sure we are financially stable in order to do so. So education is so key in this process”
Wendy Houser,
Markel Specialty
“We believe that points to a very healthy market,” said Kelley. “It also shows increased demand for specialty insurance coverages.”
Based on intelligence gathered from stamping offices and its own membership, there is high confidence that growth will continue through the end of 2023 and into 2024, noted Kelley.
“We are seeing significant growth even as we head into next year,” said Obenauer. “We’re also seeing a re-acceleration of casualty growth,” which is also rate-driven. This comes in part because of awards from jury verdicts in lawsuits and settlements.
Wendy Houser, chief wholesale officer, Markel Specialty, agreed with Obenauer, saying she, too, is seeing similar trends in both property and casualty. Further to that, though, she is seeing growth in programs and cyber.
In the former, she is witnessing more private equity and capital flow into the sector, and fast growth compared to other lines. She’s also witnessed talent move over to the MGA side.
In a 2023 market segment report, AM Best credit rating agency also reported that growth of surplus lines direct written premium in 2022 rose to a record $98.5 billion, which is a jump of 19 percent. A report released by the Wholesale & Specialty Insurance Association (WSIA) and compiled by the 15 states with stamping offices also concluded that growth had continued through midyear 2023.
Nearly all lines are reporting double-digit growth in direct written premiums.
What’s behind this surge? And what does it mean for brokers?
Insurance Business TV sought the perspective of three top players in the field who shared their unique insights during a recent episode.
“If an insured is just receiving a higher price tag on their premiums, they don’t understand what is happening in the marketplace, and the need for rate adequacy, and the sustainability of the carriers because, ultimately, we’re here to pay claims,” she said. “We need to make sure we are financially stable in order to do so. So education is key to this process.”
Looking at partnerships, Kelley pointed out that a wholesaler may be able to find a solution to a problem that a retailer may not be able to access on their own. That solution can solve the client’s need for coverage, and helps the retailer retain that client. WSIA has a tool on its website to help retailers find wholesalers near them.
For one participant, there was even more good news hiding behind these headlines.
“Remember that surplus lines measurement doesn’t capture admitted premiums placed by wholesalers,”
Read on
The Wholesale & Specialty Insurance Association is the membership association of professionals and specialty market leaders dedicated to the wholesale distribution system. WSIA represents the interests of its members and the valuable role they play in the insurance market through networking, education, talent recruitment, and development, regulatory, and legislative advocacy for the wholesale, specialty, and surplus lines industry, and by promoting the value of the wholesale distribution channel.
Find out more
The growth of surplus lines
The growth of surplus lines has reached record levels, but what is driving this momentum? Insurance Business TV spoke to three industry experts to get their takes
Read on
Wendy Houser
Markel Specialty
Dave Obenauer
CRC Group
Brady Kelley
WSIA
Industry experts
Kelley has served as WSIA’s executive director since 2017 and served in the same role with NAPSLO from 2011–2017. He is responsible for the overall management of the association’s staff support activities, service to members, and business operations. Prior to joining WSIA, Kelley was the chief financial and business strategy officer for the NAIC. A graduate of the University of Missouri, he received a BS in accountancy from the College of Business and Public Administration, and he earned the certified public accountant (CPA) designation in 1995.
WSIA
Brady Kelley
Dave serves as CEO of CRC Group and has been with the firm since 2007. He earned a BS in business administration from Wake Forest University and an MBA from the Wharton Business School. Dave was appointed to the legacy NAPSLO board of directors in 2015 and joined the Wholesale & Specialty Insurance Association (WSIA) board of directors in 2017. He has served on the AAMGA/NAPSLO merger committee, and as chair of the WSIA PAC Committee, co-chair of the membership committee, and co-chair of the legislative committee, and has been a member of the executive committee since 2020.
CRC Group
Dave Obenauer
Wendy serves as chief wholesale officer for Markel Specialty. Houser has more than 20 years of experience in the industry, including 11 years as a broker prior to joining Markel in 2008. She holds a BS in organization communications and political science from Missouri State University. Wendy was honored in 2012 with the Dana Roehrig Award for outstanding service to a committee. She was appointed to the WSIA board of directors in 2019 and serves as chair of the emerging issues and innovation committee.
Markel Specialty
Wendy Houser
The growth of surplus lines
The growth of surplus lines has reached record levels, but what is driving this momentum? Insurance Business TV spoke to three industry experts to get their takes
Read on
Wendy Houser
Markel Specialty
Dave Obenauer
CRC Group
Brady Kelley
WSIA
Industry experts
Wendy serves as chief wholesale officer for Markel Specialty. Houser has more than 20 years of experience in the industry, including 11 years as a broker prior to joining Markel in 2008. She holds a BS in organization communications and political science from Missouri State University. Wendy was honored in 2012 with the Dana Roehrig Award for outstanding service to a committee. She was appointed to the WSIA board of directors in 2019 and serves as chair of the emerging issues and innovation committee.
Markel Specialty
Wendy Houser
Dave serves as CEO of CRC Group and has been with the firm since 2007. He earned a BS in business administration from Wake Forest University and an MBA from the Wharton Business School. Dave was appointed to the legacy NAPSLO board of directors in 2015 and joined the Wholesale & Specialty Insurance Association (WSIA) board of directors in 2017. He has served on the AAMGA/NAPSLO merger committee, and as chair of the WSIA PAC Committee, co-chair of the membership committee, and co-chair of the legislative committee, and has been a member of the executive committee since 2020.
CRC Group
Dave Obenauer
Kelley has served as WSIA’s executive director since 2017 and served in the same role with NAPSLO from 2011–2017. He is responsible for the overall management of the association’s staff support activities, service to members, and business operations. Prior to joining WSIA, Kelley was the chief financial and business strategy officer for the NAIC. A graduate of the University of Missouri, he received a BS in accountancy from the College of Business and Public Administration, and he earned the certified public accountant (CPA) designation in 1995.
WSIA
Brady Kelley
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Published 04 Dec 2023
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Acceleration of growth
As for cyber, as the world becomes even more connected, “with the increased frequency of cyberattacks, and ransomware, and just the unknown in that space, we will continue to see rate increases,” she said.
How brokers can capitalize on recent gains
So how can brokers capitalize on these market segments?
For Obenauer it’s important for brokers to have a purposeful strategy to access the wholesale marketplace, including a plan to have the right partners with key distributors, be they brokers or MGAs. The strategy also has to keep the client top of mind, to make sure that this ultimately serves them.
Houser noted that the partnerships Obenauer had spoken of went “hand in hand” with education.
Changing misconceptions
According to a 2021 Conning study, the wholesale distribution channel does not actually increase the cost of insurance transactions for the insured. In fact, the study found that it lowered the cost by 1.8 percent. But there remains a myth that the involvement of brokers makes the process more expensive. So how does one break that misconception?
For Obenauer, part of it comes down to making sure that the client understands the value proposition being put forward, such as making available products and services, through the wholesale channel, that would not otherwise be available. He added that there is no cost to seeking a quote.
Also, wholesale brokers are specialists, often in areas that are tougher to write for or find solutions for.
Houser was quick to sing the praises of the study, as it showed that “there is not an increased cost for a very necessary sector of our industry,” she said. “We need this sector to be solution providers for unique risk.”
In Partnership with
Individual lines, like liability, property, professional, residential, and multi-peril, have seen notable growth, too. Looking at statistics that compared 2021 and 2022 calendar year results, commercial liability and commercial property products make up the bulk of that sector – 68 percent of the premium written in the 15 states with stamping offices – followed by professional liability for another 12 percent.
For Dave Obenauer, CEO, CRC Group, the property market has received a lot of attention in the past year, in part because of years of catastrophe losses, which have put pressure on capacity.
noted Brady Kelley, executive director, WSIA. “There’s no doubt that premium placed through the wholesale channel is well above $100 billion at this point.”
Kelley said surplus lines has grown as a proportion of commercial lines, from just over 11 percent about 20 years ago to almost 22 percent today. On top of this, of the 15 states with stamping offices, surplus line premiums are up almost 16 percent through the first quarter of 2023.
WSIA Diversity Foundation
Founded in 2020 with the goal of promoting diversity and inclusion in areas of race, gender, sexual orientation, and disability with the larger, unified voice of the entire insurance industry
So far, has pledges of more than $3.5 million from member firms, individuals, and the WSIA Education Foundation
Focused on student and member initiatives
Headquartered in Kansas City, Missouri
The foundation’s Diversity Speakers’ Bureau volunteers visited with 242 college students in 2022 with informational sessions promoting career opportunities during presentations to INROADS and six colleges and universities
10 WSIA Diversity Foundation interns were selected in 2022, hosted by seven firms, during the first year of the program. In addition to earning a competitive hourly wage and learning opportunities over the summer, each student received a $5,000 scholarship to continue their studies at the successful conclusion of the internship
Supported eight students and two faculty members from Morgan State University, an HBCU (Historically Black College/University), with a grant to cover the cost of attendance at the WSIA Extreme Risk Takers Symposium in Atlanta, to enhance their understanding of, and interest in, the wholesale, speciality, and surplus lines industry.
Source: WSIA Diversity Foundation 2022 Annual Report
Snapshot of surplus lines
US surplus lines experienced direct premium growth of 18.3% in 2022
By the end of 2022, surplus lines direct premiums written totalled $99 billion
This represents 11% of the $899 billion in direct premiums written within the US property and casualty market
Of the $99 billion in surplus lines direct premiums, about $74.9 billion was written by US domestic insurers, while $15.6 billion was written through Lloyd’s syndicates, and $8.5 billion was written through non-US carriers
Source: Center for Insurance Policy and Research
In Partnership with
In Partnership with
Snapshot of surplus lines
US surplus lines experienced direct premium growth of 18.3% in 2022
By the end of 2022, surplus lines direct premiums written totalled $99 billion
This represents 11% of the $899 billion in direct premiums written within the US property and casualty market
Of the $99 billion in surplus lines direct premiums, about $74.9 billion was written by US domestic insurers, while $15.6 billion was written through Lloyd’s syndicates, and $8.5 billion was written through non-US carriers
Source: Center for Insurance Policy and Research