Underwriters of U.S. excess & surplus (E&S) lines are expected to continue to outperform standard market underwriters in the coming months, although this is anticipated to be by a smaller degree as market conditions challenge results in 2017, according to Fitch Ratings’ U.S. E&S Lines Market Review.
Following a small decline in 2016, Fitch expects the U.S. E&S lines segment to remain modestly positive in 2017, with premiums in the sector benefiting from exposure growth and economic expansion.
In 2016, Fitch explains that the market was impacted by “material deterioration in performance,” in relation to the huge adverse reserve development charge experienced by AIG, something that is “unlikely” to happen again this year.
Weaker results in 2016 were also in response to the weaker performance of several key segments of the market, which Fitch says includes automobile, and medical professional liability insurance.
“E&S underwriters will likely still outperform standard market underwriters going forward, but by a smaller margin than historic norms. Competitive pricing and diminishing favorable loss reserve development in liability segments will continue to challenge results in 2017,” explains Fitch.
Furthermore, Fitch warns of near-term profit uncertainty as a result of hurricanes Harvey and Irma, and the potential for more storm activity during the ongoing 2017 season.
Adding; “No major turn in underwriting conditions is anticipated for 2018.”
