The market for surplus lines increased premium growth by 11.2% in 2019 to $ 39.06 billion, which corresponds to 2018, but operations this year may be hampered by the influence of COVID-19, says A.M. Best Co., in its annual report on the sector issued on Thursday.
"Market strengthening finally gained momentum in 2019, after what many observers characterized as a relatively lukewarm response, in terms of prevailing prices, to large natural disaster losses and deteriorating loss trends in accident lines," the report said.
Interest rate hikes for most commercial lines increased from 2-3% in early 2019 to 10-11% from the second quarter to the end of the year "and maintained that momentum until 2020", says the report Expanding Chancers Bolster Surplus Lines Growth and Operating Results.
However, Oldwick, New Jersey-based AM Best changed its market segment outlook to negative from stable in April due to the impact of COVID-1
"When the third quarter of 2020 began, positively tested The results in many states continued to increase, which could lead to further business closures – and somewhat reduce the insurance amount that these companies need," the report said.
Pandemic's economic impact on various industries "could be offset somewhat by governments and public authorities pushing for more spending on infrastructure projects, which would be a boon for the construction industry.
However, while a reduction in exposures yields “some positives”, the insurance business's cash flow decreases, potential claims rates and severity increases and challenging investment market. conditions "will leave some insurers struggling uphill", and both standard and surplus insurance companies "may be subject to insidious creeps, which state legislators are already trying to address with business interruptions," the report said.
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