Specialty Premium Growth Continues to Impress, but Are Cracks Forming in the Foundation?
Specialty premiums are expected to produce $180 billion and comprise ~20% of the P&C marketplace in 2023. Some have characterized the delegated authority segment as being in its Golden Age and the excess and surplus market is on fire experiencing both rate increases and a continued influx of policies. However, with foundational cracks starting to show, is this growth rate sustainable?
Video Transcription
Hello, I’m George Bucur, managing director and co-head of MarshBerry specialty practice. Serving MGAs (managing general agent), MGUs (managing general underwriter), wholesale brokers and program managers, we’re here to bring you yet another update on what we’re seeing in the overall specialty marketplace.
AM Best and Conning have just come up with their 2022 premium results. And the specialty distribution segment on the delegated authority side is clocking in in 2022 at around 85 billion of premium. MarshBerry estimates delegated authority premium will be around 100 billion by the end of this year. If you couple this with that of the E&S (excess and surplus) segment, we expect the overall specialty premium volume to be around 175 billion in 2023 and comprise around 22% of the overall P&C (property and casualty) marketplace. This is very significant, because if we compare it to where the P&C marketplace was, just let’s say 10 years ago or so, specialty premium made up around 8% or 9% at that time. It continues to show why the delegated authority and specialty segment has gotten the attention of many within the marketplace. And specifically, as we think through the challenges that are underlying the overall continued growth, we look at some issues that have arisen with Trisura in the fact that their underwriting standards may not have been up to snuff, and as such, certain reinsurers didn’t reimburse to the tune of $60 million of claims.
More notably is the recent Vesttoo debacle. In that situation Vesttoo, which essentially creates a reinsurance marketplace did not have appropriate collateralization of their reinsurance and as such, it is creating billions and billions of dollars of issues for those in the marketplace as they scramble to replace some of that collateral. Now the real implications of Vesttoo really haven’t been seen to the extent that they could potentially. And that will be significantly influenced by the level of catastrophic activity and overall claims that we have in the overall marketplace. The specialty distribution segment has been on a tear. Where it goes from here is still questionable, and with these current headwinds that we might be seeing with inflation, recessionary pressures, and that on the reinsurance marketplace, it’s questionable if we’re able to keep up at the growth rates that we’ve seen in the last several years.
If you have questions about how these dynamics might be impacting your organization, we request that you reach out. Until next time, be well.
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