Growing capacity will limit rate hikes and promote persistent competition in the excess and surplus (E&S) lines market, Fitch Ratings said in a recent report.
The U.S. E&S market, which reversed a four-year consecutive slide in direct written premiums in 2011, has seen continued growth through the first nine months of 2013, according to the report.
Rising rates in various lines, increased exposure related to the economic recovery and a reduced appetite from standard carriers to write nonstandard risks were behind the higher premiums, Fitch said. But rate hikes slowed in the second and third quarters of 2013 and the absence of large catastrophe events during the second half of the year will lead to moderating rates in catastrophe-prone areas in 2014, Fitch predicts.
Fitch said the entrance of Berkshire Hathaway into the E&S market has not significantly altered the market through third-quarter 2013. However, Fitch said it “expects pricing implications related to its expansion to materialize in coming quarters.”
U.S. E&S underwriters’ direct combined ratio outperformed the P/C industry by an average of 11 points from 2008-2012, according to Fitch’s analysis of statutory premium and aggregate underwriting performance.
Source: Fitch Ratings
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