WSIA: Past, Present and Future
The wholesale, specialty and surplus lines market is healthy and stable with a bright future.
Proof of this can be found in recent quantitative analysis like A.M. Best’s 2017 Special Report on U.S. Surplus Lines, as well as observable evidence, like record attendance at the 2017 Wholesale & Specialty Insurance Association (WSIA) Annual Marketplace.
The segment has also demonstrated resilience over time, with no financially impaired surplus lines companies in the last 13 years.
We believe this stability is driven by the value of the wholesale distribution system and demand for specialized solutions to complex and emerging risks.
To begin, Kansas City, Mo.-based WSIA is a membership organization of insurance brokers, managing general agents, underwriters and service providers committed to the wholesale distribution system. It was formed in August 2017 from the merger of the American Association of Managing General Agents and the National Association of Professional Surplus Lines Offices. WSIA serves more than 775 member firms, representing roughly 1,700 offices and thousands of professionals.
WSIA members offer retail agents, risk managers and their insureds, access to markets and specialized and customized coverages that are not available in the standard market. It is the wholesaler’s valuable technical expertise and knowledge of the specialty markets that helps retail agents solve problems and identify the right option for their clients. These are products and markets that retailers don’t work in every day, but wholesalers do.
Wholesalers offer cost-effective options for insurance buyers. A 2016 analysis by Conning Inc.’s Insurance Research Division found that median distribution costs from 2010 to 2015 for 10 commercial lines of business represented 32.1 percent of direct written premium for a composite of 266 insurance companies with predominately retail distribution networks and 31.1 percent of direct written premium for a composite of 83 insurance companies with predominately wholesale distribution networks. The 1.0 percent favorable variance is evidence that wholesale distribution does not increase the cost of the transaction to the insured.
The value that wholesalers offer to retail agents and insurance brokers – technical expertise, innovative solutions to complex risks, access to strong and stable surplus lines insurers – adds no cost to the transaction.
Leveraging a wholesale partner to seek the best and most cost-effective solution for the insured is the best way to serve the end customer. While there has never been a price for seeking a wholesale quote, we now know there is no additional cost in leveraging a wholesaler.
We believe these attributes are driving the top line growth we are experiencing in the segment, demonstrated by the 2.8 percent increase in surplus lines premium from 2015 to 2016, a new record level at $42.2 billion in surplus lines premium, and the 6.6 percent growth reported by the 15 states with stamping offices through mid-year 2017.
WSIA strongly supports the state-based system of insurance regulation, and our advocacy at the state level is focused on promoting the market and its uniform taxation and regulation pursuant to the Nonadmitted and Reinsurance Reform Act.
At the federal level, our advocacy is focused on the passage of the Flood Insurance Market Parity and Modernization Act of 2017. Privatization of flood insurance became a reality by way of the 2012 Biggert-Waters Act (BW12), but there are several legislative improvements underway in this Congress with much needed reform of the National Flood Insurance Program (NFIP) that further promote the private market. Our advocacy of the Ross-Castor/Heller-Tester legislation continues to focus on the need for BW12’s clarification of the definition of private flood insurance. The improved definition provides lenders with clarity in accepting private market solutions to fulfill the mandatory purchase requirement of the federal law.
While we have a new name, a new brand and a renewed energy and purpose, we remain focused on our core values. I am confident the future for WSIA is very bright.
Kelley is the executive director of the Wholesale & Specialty Insurance Association (WSIA).