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California Surplus Lines Weathered Pandemic, Wildfires, Civil Unrest

2021-02-09 22:16:50

In a year marred by a pandemic, massive wildfires in the western US, civil unrest and controversial elections, the California redundant line market has "never missed a beat."

That was the message from Ben McKay, CEO and Executive Director of the Surplus Line Association of California, who said surplus line premiums grew 22.7% in California in 2020, while the number of excess lines grew 8% despite the pandemic that ravaged the world. .

The disparity in premium and item growth points to a potential hardening market, McKay added.

He spoke at the group's annual meeting held virtually on Tuesday.

Other speakers included: SLA-Cal Chairman Terri Moran, chief underwriting officer of Paul Hanson Partners – Specialty Insurance Solutions; Robert Hartwig, with the Risk and Uncertainty Management Center at the University of South Carolina; Tim Chaix, with R.E. Chaix and Associates, the chair of SLA-Cal's education committee; and Hank Haldeman, with Worldwide Facilities LLC, the chairman of the legislative committee.

The SLA-Cal acts as the California Department of Insurance's legal redundant line advisory body and facilitates the state's capacity to monitor and direct the placement of surplus line broker insurance with eligible surplus line insurers.

All officers and board members who served last year were re-elected at this year's meeting.

Why did California's redundant lines thrive instead of losing ground during the COVID-19 crisis?

First, lines affected early by stay-at-home orders included the personal car and the work-related accidents, which are primarily allowed markets.

In fact, the pandemic has actually increased redundant lines in certain areas. Premiums increased in communications and networks, municipalities, utilities, food delivery and medical care. Lines that have slowed down included retail, ride sharing, services and hospitality, and entertainment. In other words, areas that make up a large part of the state's surplus line industry grew, while smaller areas were the hardest hit, according to McKay.

"What if there was no COVID?" was another question that analysts at the SLA-Cal have addressed.

It could have been an even better year for the state's redundant lines sector, it turns out.

"We've probably lost about 6.3% of the growth," said McKay.

Despite COVID, massive California wildfires and civil unrest, things will continue to look up in redundant ranks, he said, giving his bottom line going forward: "The market is hardening, consolidating and growing."

SLA-Cal officers and directors for 2021

Terri Moran, Chairman – Paul Hanson Partners
Janet Beaver, Vice Chairman – Tokyo Marine-HCC Casualty Group
Rich Gobler, Secretary / Treasurer – Burns & Wilcox
Robert Gilbert, Former Chairman – Markel West Insurance Services

Tim Chaix, R.E. Chaix and employees
James Faley, Vela Insurance Services, LLC
Hank Haldeman, Worldwide Facilities, LLC
Jason Howard, CRC Group
Pam Quilici, Crouse and Associates Insurance Services of Northern California, LLC
Charles Rosson, Ryan Specialty Group
Kathy Schroeder, Sierra Specialty Insurance Services, Inc.
Terrence Villar, AmWINS Insurance Brokerage of California
John Washington, Arch Insurance Group

Hartwig, the former economist and president of the Insurance Information Institute, provided an overview of the country's property / accident market at the meeting.

"We did get hit during COVID," said Hartwig.

Capacity fell by 9% in the first quarter of 2020, but has found its way back.

"It is almost certain that we ended 2020 with a record surplus for policyholders," said Hartwig.

He said he believes profitability will "take a bit of a hit," with an expected decline, but "not abruptly."

According to him, the return on equity for 2020 is expected to be around 4% to 4.5%, down 3-3.5 points from the previous year.

The numbers of the pandemic here are nowhere near as bad as they could have been.

Hartwig attributed this to a number of things, including an economic recovery that is progressing faster than expected, a rapid recovery in the financial market, massive government incentives, virus outcomes avoided in worse cases, the record pace of vaccine development leading to an optimistic view of employers' future. do a good job of protecting workers from exposures, many states don't repeat Spring lockdowns and the outcomes of lawsuits favor insurers.

“The economic consequences are enormous; they are underway, ”he said, adding that only a fraction of the estimated $ 9 trillion in global losses related to COVID is expected to be insured and covered by the insurance and reinsurance industry.

This also applies to business interruption risks, of which it was initially "doubtful" whether they would be insured.

"These large-scale pandemic risks, such as business continuity risks measured across the economy, are generally not insurable," said Hartwig.

He even sees opportunities for the insurance industry, including the E&S space, to develop products based on new risks that emerged during the pandemic, in areas such as event cancellation, travel and tourism, and supply chain problems.

“In the coming years, I think in many ways we will see a tremendous amount of innovation in the P / C industry to address these risks,” he said.

Moran spoke of the SLA-Cal as an organization that last year increased stamp compensation, paid off debts, including retiring pension obligations, transferring employees to work-from-home status, and "propping up the ship, bringing in the house". to order."

She said revenues for the year were $ 24.5 million, $ 4 million higher than the $ 20 million budget, and expenses were $ 17.9 million, which equates to $ 250,000 under the budget.



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