Excess and Surplus Lines (E&S) specialty insurance is created for businesses with niche high risks that the traditional insurance market will not cover.
Yesterday, Insurtech Insights reported that Chubb had seen a significant surge in fourth-quarter net income, which more than doubled to US$3.30 billion from $1.31 billion in the previous year.
But according to a report by Insurance Journal, during a recent fourth-quarter earnings conference call, Greenberg informed analysts that while the majority of Chubb’s personal insurance portfolio remains on admitted paper, the company’s E&S business is witnessing significant growth. Despite acknowledging the rapid expansion, Greenberg stopped short of celebrating the development, indicating a measured approach towards the company’s evolving business landscape.
Greenberg reportedly said: “I don’t like the trend. More will go on non-admitted. Climate change continues, and states take the wrong actions to try to cover up price and deflect price signals…. You have to go through a more administrative process to place [a risk] in E&S. You can’t just jump to E&S; you have to be able to leap through admitted-market hurdles to get to E&S.”
He went on to say that states and regulators “don’t allow us to tailor coverage for those who [are] exposed in a more outsized way to catastrophes. Remember, affluent people want to live in beautiful places that are right on the edge of civilization, and it’s more [catastrophe]-exposed. Where we can’t tailor coverage in line with exposure, we’ll use [E&S] and price it adequately.”
Greenberg’s words echo those of other industry experts, who have expressed concern at the rise in E&S business.
As a percentage of US commercial lines, the E&S market topped 20% for the first time in 2022, according data collated by AM Best. A recent report by the Wholesale and Specialty Insurance Association (WSIA) indicates that the US surplus lines market surged by 15.9% in the first half of 2023, reaching nearly $36 billion.
Karl Fischbach, Head of Wholesale Distribution, Americas, AXA XL also wrote of the trend, saying: “As the global business landscape becomes increasingly complex, many companies are finding the traditional insurance market insufficient to meet their specific requirements.”
Fischbach concluded: “By turning to the E&S market, companies are not merely purchasing an insurance product; they are engaging in a specialised risk management approach that resonates with the intricacies of modern business operations.”
Author: Joanna England