Analysts at Risk Placement Services (RPS) have argued that a wave of new market entrants are helping to shift dynamics in the umbrella and excess market space, resulting in more competitive pricing that favours insureds.
RPS notes that investment capital looking to take advantage of current market conditions has flooded into the marketplace over the past year.
But throughout the first three quarters of 2021, that new capital wasn’t seen to have a significant overall impact on rate change, and was predominantly holding rate increases at the low end of the spectrum.
Then in the fourth quarter, analysts point out that new capacity offer rate reductions were seen across the excess marketplace and not just in pockets.
This helped in shifting placement structures in order to achieve more competitive pricing than would have been seen if the incumbent structure had been renewed.
“It would appear as if these new entrants finally have their feet under them and are starting to actively attack business in order to grow their books of business and produce returns for their capital-backed partners,” RPS observed.
Looking ahead, the firm expects to see excess placements shuffled around in 2022 with new carriers moving onto placements holding down cost, while many incumbents could be displaced off their accounts.
“The one aspect we weren’t anticipating is that the end of the fourth quarter would be as competitive as it was,” RPS explained.
“We’re hesitant to say we are entering into a buyers’ market, but in December—for the first time in a couple years—many accounts were oversubscribed with capacity, rate reductions were achieved across asset classes, and buyers were not stuck with the only option because they finally had options,” analysts continued.
“The market finally seems to be turning in the insureds’ favor and we hope that dormant claims that have been waiting for the court system to catch up don’t push us back in the other direction.”
