A.M. Best: Surplus Lines Results Dip in Response to Competition, Losses

In 2008, the underwriting and operating performance of surplus lines companies continued to outpace that of the total property/casualty industry, although at a diminished level from 2007 due to persistent soft market conditions, the recession, and underwriting and investment losses.

Although the surplus lines industry generated a profit for the year, it represented an almost 67 percent decrease from 2007. As expected, market competition began affecting the performance metrics of the surplus lines insurers to a greater extent.

Standard market carriers continue to compete on surplus lines risks, and efforts by American International Group Inc.’s surplus lines companies to protect their renewal portfolios also have contributed to the sustained competitiveness in the market. Other pressures came from the Bermuda-based carriers with their substantial capital and the desire for top-line growth.

Overall, surplus lines insurers remained very well capitalized, managed the market cycle adequately and maintained conservative balance sheet strength.

In 2008, the surplus lines:

• Direct premium written declined by the largest percentage since 1988.

• Combined ratio rose due to weather-related losses on natural catastrophe-exposed business. Favorable reserve development reduced the combined ratio by 10.7 points.

• Total investment losses of $161.3 million were generated, off from the $2.38 billion total gain in 2007.

• Policyholders’ surplus declined for the first time since 2001.

Source: A.M. Best Co.

Latest Comments

• September 30, 2009 at 5:19 am

  WI Agent says:

  There are about a dozen carriers that AM Best has had marked with negative implications for a year or more. Hmmm, they can't figure out how negative the implications are in mo... read more
• September 28, 2009 at 10:12 am

  Not a Best Fan says:

  And A.M. Best has had several carriers listed with NEGATIVE implications for almost a year, but won't pull the trigger on downgrading. Get with it AM Best - you're waiting to... read more