Insurance Business America 7.09

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Because the West has the highest number of stamping/service offices in the country, its performance is often a significant gauge for the E&S market nationwide. Of the Western states, California, Arizona and Idaho reported the largest premium growth between mid-2018 and mid-2019. In California, the increases were partially due to several large-scale late policy filings, while Idaho saw a number of large property accounts previously recorded elsewhere being reported back to the state. In Arizona, however, the rise in premium was attributed to overall policy increases, including changes in construction, professional and general liability classes, according to Scott Wede, executive director of the Surplus Line Association of Arizona. While many have flagged the West as a hardening market, Chris Bading, senior vice president at Brown & Riding, believes the present condition is more of a market correction due to specific product lines and classes of business are being scrutinized by carriers, rather than prompted by a catastrophic event or a contraction in the capital market. For example, in the E&S property space, Bading says the marketplace is “focused on rate adequacy in key areas such as catastrophe perils, wildfire exposures, frame builder’s risk, frame habitational, etc. Also, certain states are seeing greater increases, depending on their characteristics and historical pricing.”


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It’s impossible to think about the E&S market in the West without considering catastrophic exposures like wildfire, earthquake or landslide. While Bading says that “all of these areas are being impacted by the changing insurance landscape, wildfire-exposed risks in particular represent some of the more challenging placements for brokers, especially in the state of California. The industry is still evolving and looking for more accurate and detailed ways to model and rate wildfire-exposed accounts.” Given the widespread wildfire losses in the region, Bading says carriers need to establish and refine their underwriting guidelines to better determine what risks they will take on. “While wildfire exposures present their challenges, I see this as an opportunity for the E&S marketplace as more accounts make their way out of the admitted market,” he says. “The surplus lines market has historically been the innovator in the industry and has more flexibility when it comes to pricing risks. Our job as E&S brokers and carriers is to find a way to align ourselves with the needs in the market and develop the necessary tools and rating methodologies so insureds have a place to obtain critical insurance coverage not available in the standard market.” As the market tightens and rates rise, the best way for brokers to navigate the challenges and provide the best possible service to clients is to remember that “insurance is based on relationships,” Bading says. “We must focus on understanding our clients’ needs and expectations and guide them through this rapidly changing environment. This is especially true since most insurance buyers have experienced

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