California Wildfires Helped Drive Homeowners Premium Volume in Surplus Lines

Wildfires have evidently been driving more Californians into the surplus lines market, pushing up homeowners surplus premium volume to more than $122 million in 2018, according to the Surplus Line Association of California.

“We have seen over the last five years an increase in homeowners every year,” said Ben McKay, executive director of the SLA-Cal.

The group reported 49,370 transactions for 2018 – that’s new policies, renewals, endorsements and other items. There were 30,500 transactions reported in 2014.

“It’s almost a doubling,” McKay said.

It is believed that severe wildfires over the last few years are making it harder for homeowners in high risk areas to find coverage in the admitted market, which is driving them to the state’s FAIR Plan or into the surplus lines market.

McKay noted that the vast majority of the state’s roughly 14 million homeowners policies are still sold by admitted carriers.

In 2017, the last year for which the California Department of Insurance has data on its website, surplus lines policies accounted for 1.4 percent of all homeowners’ premiums written in the state. It’s estimated that FAIR Plan policies accounted for roughly 1 percent.

That leaves the admitted market to account for 97.6 percent of all homeowners premiums in California based on the latest data available.

Other than 2015, both the number of transactions and premium volume in the state’s homeowners surplus lines market have been on the rise dating back to at least 2009, SLA-Cal figures show.

There were 14,116 transactions and $46.09 million in premiums reported in 2009. Premium volume first topped $100 million (reaching $110 million) in 2017, with 44,973 transactions reported that year.

This year is also on pace to be a good one for surplus lines in California.

McKay believes overall surplus premium volume and transaction count will be up for 2019. He estimates the total number of transactions will be roughly 700,000 and that premiums will reach close to $8 billion.

“I would say we’re going to be up,” he said.

In the early 2000s surplus premium volume was roughly 7 percent of the state’s total commercial marketplace. It rose in 2007 and 2008 to roughly 18 percent of the total, and has pretty much stayed at that level since.

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