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Spiking rates are a ‘tale of two worlds’ for P&C carriers: Burns & Wilcox panel

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As conditions firm in the wholesale insurance market, some carriers are cutting capacity in the binding market while others look to capitalize on rate increases, according to a panel of Burns & Wilcox executives.

During the wholesale broker’s Eye on Q4: Specialty Insurance Overview webinar, Bryant Steele, a senior vice president and managing director at Burns & Wilcox, said: “When you look at the carriers, there’s a ton of new entrances, and then there’s some people who are clearly just leaving.

“It’s kind of a cool thing to see some more people who want to play, who are viewing this as an opportunity.”

Looking at the small-business P&C market, Steele noted that, while there have been new entrances and exits, carriers are now following a more tailored approach, choosing to specialize in areas where they see opportunities for expansion.

“[In small business], there’s been a ton of entrance, and a handful have left,” he explained.

“A lot of carriers are looking at this as an area to grow, and they are maybe narrowing how they are going to do it.

“People used to get into small business and take a very wide look at small business. Now, they are picking narrowed approaches, becoming very specialized in what they are trying to grow in and not really trying to be something for everybody.”

Appetite changes, heavy underwriting in cat

Teresa Cowper, property broker at Burns & Wilcox, anticipates continued appetite changes in the market, especially due to convective wind areas and wildfire risk.

“We’ve seen another challenging year,” she said. “With all the wildfires in the West Coast, we have seen our carriers pull back capacity.

“Carriers are underwriting heavily. They want to know everything about the risk, they want a narrative, they want loss control, particularly with regards to any kind of heavy process in manufacturing.”

Cowper pointed out that, while cat business continues to be challenging, particularly amid successive storms in Louisiana, the E&S market remains financially stable and can endure large cat events in the current climate.

“I would say the toughest location is Louisiana to write business,” she noted.

“We are still seeing the market being a little hard but not really seeing any changes in terms of deductible rates at this point. We keep having these events, but it is not really affecting the market like it used to in years past.”

Looking at Covid-19 from an environmental perspective, Timothy Donnellon, senior broker for environmental, said that, while the virus outbreak initially spurred “panic”, the market reaction has “mellowed” over time.

“One of the things we've learned about Covid is that it's pretty hard to quantify a concentration that is going to create liability for somebody,” he explained.

“What is coming longer term out of this is a greater emphasis on cleaning that is up to a higher standard.”

He said this had been a boon, as it granted restoration contractors, clean-up contractors and janitorial services an opportunity to get an additional certification for which they could charge more money.

Limited capacity and increased pricing

According to Steele, the biggest challenge would come down to limited capacity and increased pricing, as the world continued to navigate significant pressure points.

“The one that keeps you up at night is taking out a renewal to a client where you're bringing them lower limits at a higher price, and it's a very big part of our business right now,” he said.

“We’re almost hitting a moving target that is getting worse. Just because you did something in August doesn’t mean we can do it today.”

Yet, while the market continues to firm, Cowper noted stabilization in certain lines of business.

“We’ve seen a lot of stabilization in our market,” she noted. “We're still seeing rate increases on middle-market accounts. Our national accounts are still seeing increases but maybe single digit rather than double digits we saw last year.”

Cowper went on to say that she had seen a migration of business from the standard market into the excess and surplus lines market.

“We're seeing standard market come back into the E&S, and, conversely, we're seeing standard accounts come back into the E&S,” she said.

“We continue to see our carriers work to be profitable and work to underwrite risk. It's going to be pretty much the same going into the new year in the last quarter.”

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