Property cat: The capacity challenge

Going into last week’s Wholesale & Specialty Insurance Association (WSIA)’s Annual Marketplace 2021 event our sister publication The Insurer predicted despite the bullish atmosphere around a “best ever” E&S market, challenges in the property market would likely figure heavily in discussions.

And property cat proved to be a dominant theme, especially in relation to capacity issues being faced by a number of the larger MGAs and MGUs focused on the space.

It is perhaps not surprising given the rapid growth in the programs and MGA sector – and the fact that WSIA represents the 2017 marriage of Napslo and AAMGA – that speculation in the meeting rooms and corridors of the San Diego venues was rife on the subject.

The Insurer revealed that AmRisc – the giant of the space – and ICAT are among several of the larger cat-focused property MGAs seeking new capacity for 2022 as a number of carriers including Scor, QBE and Hiscox retrench either by cutting their participation or exiting programs.

We bring you full coverage of that story in this issue.

The impact is likely to go beyond the MGA space, with tightening capacity expected to accelerate hard market conditions for E&S property next year, as the carriers also react to increasing reinsurance costs.

The MGAs in question are already expected to push for rate increases in the 20-30 percent range on their books of business.

Meanwhile, wholesale distributors have been looking to add capacity to their own in-house MGAs to cope with new demand.

This publication revealed from WSIA that wholesale broker CRC has brought together the exclusive E&S property products written by its in-house MGA Insurisk into a combined offering with up to $80mn in capacity for its brokers and clients as it looks to build a stable and diversified portfolio for its capital providers.

And on Ryan Specialty’s earnings call earlier this month president Tim Turner said his firm was prepared for a surge of property cat into the E&S market, both through its wholesale brokerage operations and underwriting platform.

He added that the company had been building out its proprietary MGUs and underwriting platforms, including JEM Underwriting Managers, which is accessed exclusively by RT Specialty brokers.

Parametric plays

At a time when capacity is scarcer for traditional insurance products, there was also increased talk at WSIA about alternative solutions, including parametrics, with a panel dedicated to the subject.

As we report in this issue, there have been several new offerings arriving on a scene which has to date had a limited number of MGA participants such as New Paradigm and Descartes.

Arbol’s partnership with Sig Re has a parametric focus, as does a new MGA from K2 led by Scott Carpinteri and a tie-up between Canopius’s Vave and insurtech Demex.

Similar to the E&S marketplace it crosses over with, the program and MGA space continues to innovate, both by finding new sources of traditional capacity and alternative solutions.

We hope you enjoy this month’s issue…