Closing Quote: Health and Optimism in Surplus Lines

The surplus lines industry continues to outperform the overall property/casualty market, but that doesn’t mean it’s not without its own challenges.

The annual U.S. Surplus Lines – Segment Review, produced by A.M. Best with support from the NAPSLO/Derek Hughes Educational Foundation, confirmed the financial stability of the industry. For the 12th year in a row, there were no financial impairments in the surplus lines segment. We continue to see strong balance sheets and resulting secure ratings, so these quantitative signs all point to good conditions for surplus lines.

Ample capital also obviously impacts the competitiveness of the market and pressures rates. However, rate seems to be offset by an organic growth in demand.

Despite positive indicators, we do have ongoing challenges and NAPSLO continues to work on behalf of its members to help address them. We remain committed to educating stakeholders about the mechanics of surplus lines and we work daily to address misconceptions about the surplus lines model and its regulation. In fact, the solvency and financial stability of the surplus lines market is stronger than ever and it is outperforming the standard market, as documented in the A.M. Best Report.

A role of surplus lines insurers is to provide solutions for risks that the standard market is unable or willing to cover, serving as a safety valve. Misconceptions about surplus lines have arisen out of the private flood insurance debate in recent years, leading NAPSLO in cooperation with industry partners, to advocate for passage of The Flood Insurance Market Parity and Modernization Act. The Act has passed the U.S. House of Representatives and is awaiting action in the Senate.

Existing flood legislation must be clarified to ensure that surplus lines insurers can continue to cover complex flood insurance risks, and to ensure that consumers have alternatives to the National Flood Insurance Program (NFIP) and the standard market. This Act will preserve and clarify the coverage the standard and surplus lines markets offer, and we are hopeful that the U.S. Senate will pass it.

We also continue our ongoing effort to achieve full implementation of the Nonadmitted & Reinsurance Reform Act (NRRA). It is the model for uniformity in taxation and regulation of our market, which helps our members, and the industry, do business more efficiently, ultimately benefitting the consumer. We have had several important victories in achieving this uniformity this past year, including the dissolution of NIMA, which brought the industry much closer to the national home state tax approach envisioned by the NRRA.

New Talent Development

NAPSLO also remains committed to developing and recruiting new talent into the E&S industry. NAPSLO’s Career Development and Next Generation Committee has worked hard to inform prospective students around the country about careers in E&S and recruiting them to NAPSLO summer internships. Our member volunteers visited more than 25 different college campuses in the last year and talked to almost 2,000 students about careers in surplus lines. This year, 17 NAPSLO interns spent five weeks with a NAPSLO member surplus lines insurance company and four weeks with a NAPSLO member wholesale brokerage firm learning about all aspects of the business.

Education for professionals already in the industry also continues to be a priority. NAPSLO education programs for those brand new to the industry include the Excess & Surplus Lines Program and online programs. The Executive Leadership Summit, designed for senior-level team members, helps members improve their ability to think and act strategically.

NAPSLO will continue to advocate for the surplus lines market, and we will continue to get out the message on the value of the wholesale distribution system.