Regardless of what insurance regulation looks like in 2010, experts say the surplus lines industry will still be defined by its ability to adapt and innovate in the product arena.
The industry’s freedom from rate and form regulation provides it the opportunity to innovate. Those that seize the opportunity will flourish. “As the market softens, product innovation will increase. Companies that are effective at product development and innovation will be more successful,” David Blades, analyst with A.M. Best, predicts.
Surplus lines will still be there for contractors, nursing homes, new technologies, vacant buildings, coastal properties, high risk professionals and other traditional surplus lines risks. There will also be products that fly under the radar such as policies for urban convenience stories or for redevelopers of brownsfields.
The Internet will mean that more products for smaller risks will be standardized by 2010, according to online wholesalers.
No area is expected to grow more than products for international risks. “It’s going to be a big market,” said Dick Bouhan, National Association of Surplus Lines Offices.
“A lot of alien insurers are here because they want to write the international exposures of U.S.-based companies,” said Daniel Maher, Excess Lines Association of New York.
Businesses will take a more enterprise-wide view of risk requiring more customization and integration of products such as supplier interruption, weather products and even terrorism coverage, suggested Maher.
Marshall Kath, chief executive officer for Colemont Insurance Brokers, sees the industry as instrumental in a world worried about everything from tsunamis to terrorism. “Terrorism is the symptom of what we see but it’s all the uncertainty in the world that has people concerned and that people and businesses will seek to mitigate,” he suggested.
Kath sees the dawning of a new era of risk management under which businesses will have to treat some risks differently than others. They may have to allocate a big share of their budget to cover bioterrorism, while self-insuring for exposure to their computers. Answering the call in an age of uncertainty will demand “creative horsepower” and better educated professionals, Kath said.
Topics Excess Surplus
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