NAPSLO Survey Finds Specialty Lines Capacity Unchanged and Submissions Up in 2009

Despite an economic slowdown, the majority of wholesale brokers and E&S carriers are not seeing a decline in capacity or a tightening of terms along specialty lines, but are seeing an increase in submission activity, according to the results of a recent survey of members of NAPSLO.

The survey, which was conducted in mid-May 2009, compared results of the first quarter in 2009 to the same period of 2008.

“NAPSLO members confirmed that pricing, capacity and terms in specialty lines remain relatively flat, but recognized that a major catastrophic event or changes in the economy could have a significant impact on capacity,” said John Wood, NAPSLO president. “During these uncertain times, wholesale brokers and surplus lines carriers remain strong with ample capacity to meet specialty lines needs in any market cycle.”

Nearly half of the respondents to the survey said that they were not seeing a change in the availability of specialty insurance coverage; 38% said they were seeing an increase in coverage availability and only 12% said they were seeing a decline in availability.

Regarding terms, 44% said the limitations on coverage were about the same as in the first quarter of 2008, while 31% said terms were loosening, and 22% said terms were either tightening or tightening slightly.

More than half of the respondents reported submission activity increasing, with 32% reporting a slight increase and 22% reporting consistent increases. Only 23% reported declining submissions and 22% reported submissions were about the same as in the first quarter of 2008. Specialty lines where respondents reported seeing the greatest increase in submission activity in 2009 were Property, General Liability, Casualty, and Cat Exposed Property.

When asked what factors would have the potential to have the greatest impact on availability and pricing on specialty lines in the remainder of 2009, respondents most frequently cited the economy, catastrophic losses and declining capacity among carriers and reinsurers.

Respondents were also asked about pricing and retention level changes along 10 specialty lines of business: Property, Cat Exposed Property, Casualty, Professional Liability, D&O-Private, D&O-Public, Healthcare and Medical Malpractice, Excess & Umbrella, Environmental, and Transportation. Of the 10 areas, Cat Exposed property was the main area where respondents consistently saw increases in pricing while respondents saw decreases in Property, Casualty, Professional Liability, Excess and Umbrella, and Transportation.

While availability, terms, pricing, and submission activity were comparable to 2008, respondents reported decreased retention levels in many of the 10 specialty lines surveyed, led by Casualty, Property, Excess & Umbrella and Transportation. While significant decreases were reported along these lines, the majority of respondents reported retention levels were about the same along all lines.

Results are available on the website.

Webinar on State of Industry Set for June 11

Industry leaders will review the state of the market for specialty insurance in light of a new survey conducted by NAPSLO. The special online live presentation is set for Thursday, June 11, at 11 a.m. EDT. The event is free, visit www.ambest.com/excess09 to register.

Participants in the one-hour discussion include:
--Paul Springman, President and Chief Operating Officer, Markel Corp.
--Marla Donovan, Vice President, Burns & Wilcox
--Kevin Westrope, President and CEO, Westrope
--Richard Kerr, Chairman and CEO, MarketScout Corporation
--A member of the A.M. Best Co.'s specialty lines rating group

The panel will examine today's market, including pricing and availability, for specialty insurance, known in various forms as surplus lines, excess & surplus or non-admitted coverage. They will also survey changes in the financial strength of the specialty insurance sector of the property/casualty industry. Specialty insurance includes coverages typically not available through standard commercial or personal insurance products. Best's Review, A.M. Best Co.'s monthly news magazine, will cover this topic in the September issue and will include content from the Webcast.

Topics to be covered in the panel discussion include:
--The state of insurance capacity and the availability of various lines of coverage
--How terms and limitations may be changing for various lines of specialty coverage
--How pricing, availability and retention experience have been affected for these lines of insurance coverage: property, catastrophe-exposed property, casualty, professional liability, directors and officers (both public and private), healthcare and medical liability, excess and umbrella, and environmental and transportation
--Financial strength of insurers serving the specialty lines industry

Registration for this event is free. Participants are encouraged to send in comments and questions for the discussion portion of the presentation. The Webcast will be available worldwide via a link provided upon registration.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers.

NAPSLO Applauds Introduction of Surplus Lines Bill in House

NAPSLO applauded the introduction of the Non-Admitted and Reinsurance Reform Act of 2009 in the U.S. House of Representatives by Reps. Dennis Moore (D-Kan.) and Scott Garrett (R-NJ), and indicated they hoped the bill would be introduced soon in the Senate.

“NAPSLO is pleased to see Rep. Moore and Garrett introduce the bill in the House and we look forward to working with them to get the bill passed,” said NAPSLO President John Wood. “We are also encouraged regarding prospects for the bill being introduced in the Senate shortly. Passage of this bill would help streamline and reduce barriers in state regulation of surplus lines insurance”

The NRRA is, in part, aimed at making access to the surplus lines market more efficient for consumers and the brokers and agents who assist them. In addition the bill could help standardize state regulations facing the industry.

Reps. Moore and Garrett, members of the House Committee on Financial Services, submitted the bill on Thursday. Senators Evan Bayh (D-IN) and Mel Martinez (R-FL), members of the Senate Committee on Banking, Housing and Urban Affairs, have also announced that they plan on introducing a version of the bill in the Senate.

“We believe that this legislation will bring efficiency and reduce the cost of regulatory compliance in surplus lines placements with multi-state exposures,” said NAPSLO Executive Director Richard Bouhan. “Consumers will benefit because the costs related to the inefficiencies and redundancies, which they bear, will be eliminated.”

The bill would establish national standards for how states regulate the surplus lines market and reinsurance and would create a uniform system of surplus lines premium tax allocation and remittance, one-state compliance on multi-state surplus lines risks, and direct access to the surplus lines market for sophisticated commercial purchasers. These are concepts long endorsed by NAPSLO and promoted with members of Congress during meetings over the past few years.

The House passed similar versions of the bill in the last two sessions of Congress and the Senate took up a similar bill in 2007 but no action was taken in the Senate prior to the end of the 110th Congress, requiring that the bill be reintroduced in the 111th Congress in order to be considered.

“Rep. Moore’s leadership has been important in getting the bill approved in the past two sessions and with the addition of Rep. Garrett as the lead Republican sponsor, we believe the prospects for passage are excellent,” said NAPSLO’s Washington D.C. representative, Maria Berthoud of B&D Consulting. “We are also encouraged by the interest in the bill by the Senate and are hopeful it will be passed in that chamber this year.”