“Some people are doing cat-peril carveouts or taking a higher deductible because we’ve hit a point in our market where we’ve peaked in terms of what we can charge insureds with regards to rates,” Kyle Burnett, head of E&S property and senior vice president North America, told Inside P&C on the sidelines of WSIA 2023 in San Diego.
Those insureds that have taken higher retentions or less limit due to increased cost could be exposed this year if there is a major cat event.
“The only thing you can hope for their sake is that a major event doesn’t come through because [that] could mean they’re in rough shape,” Burnett said.
As this publication has reported, Burnett confirmed that convective storms, and hail in particular, have come to the fore this year as a major cat peril.
Convective storms “used to be a distant second or third” among major concerns on an account, but that is changing quickly, said Burnett.
In terms of capacity, there are new entrants slated to come into the market given the high rates, particularly in the MGA space, as well as more London capacity looking at the US E&S market.
“It’s like everything else – if people see rates go up, they want to get involved and see if they can generate a profit,” Burnett said.
One sector that’s been less active than in past years in injecting new capital into the E&S market is private equity, he said.
Reinsurance availability, meanwhile, has been a limiting factor on capacity.
“Where people were using [reinsurance] prior to expand their lines, you’re really not seeing that anymore, and that’s leading to that capacity shortage. It’s not the only factor, but it’s one contributing factor.”
As reported by AM Best recently, E&S premium growth was strong last year, and Burnett predicted that trend would continue.
“We’re here to stay, and E&S is always going to be considered as part of placements,” he said.
“It’s going to be an effective tool for being creative in the future.”
