3 Things – Common Perils, Auto Segment Report & Strong Balance Sheets

Hello Friends! We hope all have a joyous and celebratory holiday weekend.  WSIA was a great success this week, we share thoughts in this post.  There were other news items outside of the conference.  We are following protection moves for now common perils, the AM Best Auto Market Segment Report and launches from Everspan and Skyward owners of strong balance sheets.  Here are the three things we learned:


Protection for Common Perils

Palomar Holdings announced the successful placement of additional earthquake reinsurance.  We have learned recently that secondary perils are now considered primary perils and this specialist insurer is shoring up their capital backing to provide cover for those with earthquake exposed property risks.  Kin Insurance was able to secure a CAT Bond for the more common peril of strong winds from hurricanes in the Florida market.  They closed the private placement bond with Hestia Re increasing their total outstanding limit by $100 million to $250 million.  Both entities were fortunate to find this reinsurance capacity as many larger carriers are pulling away from these types of risks.  There are emerging solutions like this Cat Bond Issuance platform provided by startup Tremor Technologies.  The modern platform will use capital markets and competitive forces to issue bonds in a matter of hours instead of weeks / months.


Auto Results

AM Best issued a market segment report on auto insurance that explains the results we have seen in 2022 and starts to provide outlook on 2023.  Not a surprise inflation has caused persistently high loss costs and has been the main cause of losses.  The return to profitability does not appears to be likely in 2023.  Best is forecasting a 106 combined ratio for the segment.  The Fed is trying to control inflation which is starting to take affect but in the meantime they advise that auto insurers focus on better risk selection, something we are already seeing.  More established players will have time to weather this difficult time by choosing wisely and pulling out of difficult markets.  It does not bode well for newer entrants that do not have scale to maintain discipline and as a result will continue to struggle to turn profitable.  March severe storms have already caused wide and expensive damage according to Aon so it could be another active year for cat events, creating headwinds for not only auto but all personal lines.


Everspan and Skyward Launches

Fronting carrier, Everspan, announced a partnership with tech-enabled MGA platform Aurenity to launch an excess casualty buffer program for mid-market construction, hospitality and real estate premises and product risks.  Skyward Specialty continues to broaden their specialty offerings by adding two key executives to launch captive and program business units.  Both are examples of the opportunity that can be harnessed from possessing a strong balance sheet.  Friend of ‘3 Things’ Ian explains further in this comprehensive ‘end of a season’ post Revenge of the Balance Sheet.  The higher interest rate environment has created a paradigm shift making those with balance sheets stronger and more capable of achieving results and growth.  This is a trend we will continue to monitor.

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