First-Half 2010 E&S Premiums Decline 

If a harder insurance market or some economic improvements do not come together to drive E&S premiums up dramatically in the second half of the year, the segment will suffer a record-setting four straight years of premium declines.

According to Highline Data—a data affiliate of The National Underwriter Company—comparable premiums for the U.S. E&S market totaled $12.1 billion for the first six months of 2009.

The single-digit premium decline was slightly less than the 7.5 percent full-year drop for E&S carriers reported for 2009.

For the six-month period, however, E&S insurers fared worse than the property and casualty industry overall, which managed flat growth, according to the latest figures released jointly by Insurance Services Office, the Insurance Information Institute  and the Property Casualty Insurers Association of America.

The latest E&S numbers do not provide any insight into the combination of price declines and exposure changes that contributed to the 5 percent tumble.

Highline Data also compiled a list of the top-50 E&S groups, ranked by direct written E&S premiums, revealing that only 18 of the 50 managed to record premium growth in the first half of this year.

Continuing a trend that was evident based on Highline Data’s prior report for the full-year 2009, published by National Underwriter magazine in May, several Bermuda-based organizations with U.S. E&S operations vaulted up the ranking with the largest premium jumps, including Bermuda-based Ironshore Group, with its $237 million total pushing the group up from the 25th spot based on first-half 2009 premiums.

For all of 2009, Ironshore’s U.S. E&S premiums totaled $312 million.

Two other Bermuda-based firms—Torus Insurance Group and Aspen Insurance Holdings—leapt into the top 50, but landed still well shy of the $120 million mark that separates the top-25 groups from the rest of the pack.

On U.S. shores, Cincinnati Financial also moved into the top 50 for the first time, with $30 million of E&S direct premiums landing it in the 49th spot.

Direct written premium data for the rankings accompanying this article is taken from Schedule T of quarterly statutory financial statements filed with U.S. insurance regulators.

For each individual U.S. insurance company that filed the schedule by mid-September, Highline summed premiums in states where the carrier’s active status is shown as “E” denoting that a carrier is eligible or approved to write surplus lines or non-admitted business in the state.

The column labeled “Percent Growth” is an indication of organic premium growth. In other words, first-half 2010 premiums for all insurers that were part of a group in first-half 2009 were used to calculate growth figures (excluding those divested in 2010 and including those acquired in 2010).

The analysis excludes Lloyd’s, which writes this business through licensed surplus lines brokers rather than U.S. companies.

Chartis (formerly American International Group) suffered the biggest dollar drop—$387 million—but the group, and its Lexington Insurance Company operation, still garnered top spots on Highline’s group and the individual company rankings.

Chartis and Lloyd’s have traditionally occupied the first and second spots on a separate ranking that includes alien insurers published by Oldwick, N.J.-based A.M. Best. Best positioned Lloyd’s behind Chartis from 2002-2009—with Lloyd’s taking the top spot in 2000 and 2001, but falling behind Chartis ever since.

Lloyd’s did not have U.S. E&S premium tallies available to share with NAPSLO Daily News in time for this report. But separately, Lloyd’s has indicated that U.S. coverholder business—underwritten by U.S. managing general agents on behalf of Lloyd’s—has become a priority. (See related article in yesterday’s edition, page 10.)

Earlier this year, Lloyd’s reported a 22 percent increase in gross premiums written globally for all of 2009—also indicating that 45 percent of the total came from the U.S. and Canadian markets, up from 40 percent in 2008. Since some of this North American premium is reinsurance premium, it remains unclear whether U.S. E&S insurance premiums written by Lloyd’s in 2009 or 2010 will eclipse the Chartis total.

The A.M. Best report—commissioned by the Derek Hughes/NAPSLO Educational Foundation and published in September in advance of NAPSLO’s annual meeting—reported three consecutive years of premium declines for writers of U.S. E&S business in total, excluding Lloyd’s and other true aliens.

According to historical A.M. Best data dating back to 1988, U.S. E&S premiums haven’t dropped for two consecutive years since the late 1980s, and the Best figures show no prior three-year slide.

Historical records for U.S. domiciled companies going back further—to 1971—maintained at National Underwriter (based on articles authored by NAPSLO members in the late 1990s), indicate that a three-year slide occurred in 1981, 1982 and 1983, when surplus lines premiums fell 2.3 percent, 2.6 percent and 3.6 percent respectively.

According to A.M. Best’s latest report, the magnitude of the more recent trio of surplus premium drops was much larger, with the numbers falling 5.9 percent for domestic professionals in 2007, 11.1 percent in 2008 and then 7.2 percent in 2009.

(Editor’s Note: Highline’s indicated full-year premium drop of 7.5 percent for 2009 is comparable to the A.M. Best figures for domestic professionals and domestic specialty companies added together. Best distinguishes between “professionals” and “specialty companies,” based on the percent of non-admitted business to the total for the company. Those with more than 50 percent are defined as “professional” companies by the rating agency analysts.)

U.S. Surplus Lines Premium Ranking
Ranked by Group First-Half 2010 Direct Written E&S Premium ($000)

			Total US E&S Premiums
2010	2009		1H2010 ($000)	1H2009 ($000)	Percent Change	Market Share
1	1	Chartis/American International Group	2,885,252	3,271,778	-11.8%	25.1%
2	2	Zurich Insurance Group	612,492	738,603	-17.1%	5.3%
3	3	Nationwide Group	577,828	598,791	-3.5%	5.0%
4	4	ACE Ltd Group	464,578	454,809	2.1%	4.0%
5	5	WR Berkley Group	418,665	438,442	-4.5%	3.6%
6	6	Markel Corporation Group	413,021	429,259	-3.8%	3.6%
7	8	CNA Insurance Group	345,330	360,324	-4.2%	3.0%
8	10	QBE Insurance Group	344,904	278,101	24.0%	3.0%
9	7	Alleghany Group	328,398	365,333	-10.1%	2.9%
10	12	AXIS Capital Group	264,071	270,316	-2.3%	2.3%
11	25	Ironshore Group	237,850	128,024	85.8%	2.1%
12	13	Arch Capital Group	229,657	253,800	-9.5%	2.0%
13	11	Argonaut Group	219,336	277,597	-21.0%	1.9%
14	14	Travelers Group	216,883	226,078	-4.1%	1.9%
15	9	Berkshire Hathaway Ins. Group	207,730	285,644	-27.3%	1.8%
16	15	Chubb & Son Group	192,204	194,648	-1.3%	1.7%
17	17	Allied World Assur Holding Group	175,786	181,847	-3.3%	1.5%
18	18	Munich American Holding Group	163,532	171,245	-4.5%	1.4%
19	20	XL America Group	163,162	160,118	1.9%	1.4%
20	16	HCC Insurance Holdings Group	159,037	184,978	-14.0%	1.4%
21	21	First Mercury Financial Group	150,701	146,631	2.8%	1.3%
22	24	Alterra Capital Group	149,058	134,063	11.2%	1.3%
23	19	Allianz Insurance Group	138,434	167,500	-17.4%	1.2%
24	23	Endurance Group	134,227	136,909	-2.0%	1.2%
25	22	RLI Insurance Group	123,499	139,916	-11.7%	1.1%
26	27	Fairfax Financial Group	110,140	121,155	-9.1%	1.0%
27	28	Assurant Inc Group	108,563	115,460	-6.0%	0.9%
28	26	American Financial Insurance Group	108,379	126,396	-14.3%	0.9%
29	31	Meadowbrook Insurance Group	100,633	97,676	3.0%	0.9%
30	35	Catlin US Insurance Group	98,914	87,515	13.0%	0.9%
31	30	Liberty Mutual Insurance Group	97,922	98,749	-0.8%	0.9%
32	61	Aspen Ins Holding Group	88,767	12,243	625.1%	0.8%
33	33	White Mountain Group	88,127	90,618	-2.7%	0.8%
34	29	United American Ind Group	83,957	109,648	-23.4%	0.7%
35	34	Western World Group	80,183	89,237	-10.1%	0.7%
36	32	IFG Group	79,676	91,151	-12.6%	0.7%
37	39	American Safety Holding Group	77,032	69,601	10.7%	0.7%
38	40	Geovera Holdings Group	67,079	63,437	5.7%	0.6%
39	37	Everest Reinsurance Holdings Group	65,935	77,305	-14.7%	0.6%
40	41	Navigators Group	59,273	57,925	2.3%	0.5%
41	36	Swiss Reinsurance Group	58,396	77,597	-24.7%	0.5%
42	38	James River Group	57,169	76,138	-24.9%	0.5%
43	43	State Auto Mutual Group	53,117	46,804	13.5%	0.5%
44	45	Maxum Specialty Insurance Group	41,827	34,520	21.2%	0.4%
45	81	Torus Ins Grp	36,319	1,158	3035.3%	0.3%
46	49	NY Marine & General Group	35,746	29,158	22.6%	0.3%
47	47	SCOR Group	31,351	31,054	1.0%	0.3%
48	44	IAT Reinsurance Group	30,501	35,058	-13.0%	0.3%
49	57	Cincinnati Financial Group	30,054	17,912	67.8%	0.3%
50	46	Maiden Holdings Group	29,105	32,290	-9.9%	0.3%
		Top 25	9,315,634	9,994,754	-6.8%	81.2%
		Top 50	11,033,799	11,684,561	-5.6%	96.1%
		Total US E&S	11,476,896	12,068,371	-4.9%	100.0%