Hot E&S market fuelling growth in US programs sector

Growth in the US programs sector is being accelerated by risks being jettisoned from admitted carriers and the freedom of rate and form afforded to MGAs by launching non-admitted programs, according to a panel of senior industry executives.

Panelists at Program Manager’s virtual debate discussion this month highlighted the natural fit for MGAs and program business in the E&S market, with lower start-up costs, speed to market, and the shared focus on innovation.

They noted that after a shift towards the use of admitted paper for programs over a decade ago, the balance was now moving to the E&S market, in part because of loss ratio pressures in the standard market leading to business moving to specialty markets.

At the same time, MGAs have become more comfortable in selling non-admitted, or E&S, products, and are attracted to the segments flexibility on rate and form at a time where rates in particular are fast-changing and they don’t want to be locked in to an admitted filing.

“That whole (E&S) marketplace allows them to be aggressive in the rating, get to market quickly, and be confident they can sell their product” Matt Beard, head of client solutions at GC Access

Matt Beard, head of client solutions at GC Access, said that MGAs in the past had been more focused on creating admitted products, but in the last 12 months there had been a shift towards non-admitted products.

“They understand the speed to market it gives them and they’re concerned about having an admitted filing with a rate that’s stuck in a very fluid rating environment.

“That whole (E&S) marketplace allows them to be aggressive in the rating, get to market quickly, and be confident they can sell their product, where a couple of years ago they had a lot more concern that the retailers wouldn’t be as accepting of non-admitted products,” he commented.

“Most capital is counting on MGUs for their innovation and speed to market and these are the obvious strengths of the E&S freedom of rate and form” Miles Wuller, COO of RSG Underwriting Managers

Meanwhile, Miles Wuller, COO at RSG Underwriting Managers, commented: “Most capital is counting on MGUs for their innovation and speed to market and these are the obvious strengths of the E&S freedom of rate and form.”

Other panellists suggested that Covid-19 had also been a factor in the increased use of the E&S route to bring products to market, with the process of getting regulatory approval on an admitted basis from insurance departments more challenging.

“Being able to have that freedom of rate and form in the E&S marketplace makes it a lot easier for MGAs,” said Matt Grossberg, CEO of ISC.

“Being able to have that freedom of rate and form in the E&S marketplace makes it a lot easier for MGAs” Matt Grossberg, CEO of ISC

Fronting carriers target E&S

The growing cadre of hybrid fronting carriers are also adding E&S platforms to target the fast-hardening sector and broaden their offerings to MGA and reinsurer partners.

Pat Rastiello was recently hired by Randall & Quilter’s program management business Accredited to lead its newly launched E&S subsidiary in the US, adding to its established admitted platform. Both are rated A- by AM Best.

Speaking during the debate, the former Aon veteran said that over the last decade the MGA marketplace has grown in tandem with the E&S sector.

He also pointed to continued strong hardening of rates in the E&S market in the third quarter of 2020, and said that other than the heavy cat experience of the last few years, the segment had outperformed the standard marketplace, delivering results to MGAs and their capacity providers.

“That’s why it’s hot. And I think we’re going to see new capacity come in to take advantage of this burgeoning marketplace on the reinsurance side, which will be very effective for us,” Rastiello added.

Providing a reinsurer’s view, Swiss Re’s direct national lead Daryl Polenz said his company had seen examples of programs that have initially come to market with a non-admitted product because of the speed the E&S market offers.

“It gives them the opportunity to evaluate the market, and then potentially roll out an admitted product in order to expand and get to other risks that you couldn’t with the E&S market,” he commented.

Rastiello’s colleague Todd Campbell, president and CEO of Accredited Surety and Casualty Company, said the admitted carrier has a pipeline that includes programs that will start out on one platform, then could split to provide admitted and non-admitted offerings through a single-source provider.