After a flat year in 2005, U.S. surplus lines premium volume rebounded in 2006 and carriers again posted strong underwriting results.
In 2006, surplus lines carriers generally stuck to their guns on pricing in lines where standard carriers lowered theirs and grew by writing more coastal property business at higher rates.
This is according to the annual A.M. Best special research report on the U.S. surplus lines industry.
Surplus lines premium volume grew by about 7.1 percent based on reports from the 14 states with stamping offices for this business.
Underwriting results were strong in 2006. Carriers with more than 50 percent of their business on a nonadmitted basis — which A.M. Best terms domestic professional surplus lines companies — posted strong underwriting results in 2006 with a 79.6 combined ratio, according to the A.M. Best report.
The A.M. Best surplus lines report is issued every year to coincide with the annual meeting of the National Association of Professional Surplus Lines Offices, which starts next week.
Other highlights from A.M. Best’s 2006 Surplus Lines Special Report:
Surplus lines writers maintained strong risk-adjusted capitalization after posting modest surplus growth in 2006, driven by strong operating earnings and capital gains.
Catastrophe-exposed coastal property remained an exception to the market softening, an exception that has been a benefit to surplus lines carriers.
Surplus lines took a 14.4 percent share of total U.S. commercial insurance business in 2006, A.M. Best found. About 80 percent of all surplus lines business is commercial.
The top three U.S. surplus lines groups in 2006 were unchanged from 10 years ago: American International Group, Lloyd’s and Zurich Financial Services Group.
Over the past five years, surplus lines has grown 173 percent— far faster than the 40 percent growth of the total U.S. property/casualty market.
No surplus lines company insolvencies were reported in 2006, another area where surplus lines carriers have outperformed the overall industry for years.
For the first six months of 2007, the 14 states with stamping offices reported a 17.3 percent jump in premium.
Source: A.M. Best Co., Inc.
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