- Chicago, IL
Business is booming in the excess and surplus lines (E&S) market. Want to get involved but feel confused? Daunted? Don't. We've gathered a group of RPS experts to walk you through exactly how to work with a wholesaler to navigate this growing market.
In 2021, total E&S premiums exceeded $51 billion, a 22% increase over the same period in 2020, according to the Wholesale & Specialty Insurance Association (WSIA)'s 2021 Surplus Lines Stamping Office Midyear Report.Transactions increased by 6.6% during the year compared to the year prior. General and excess liability categories — including commercial general liability, cyber, pollution, products and employment practices liability — led the way with a 60% increase over the year before. Property, including all risk, increased 23%, the WSIA reported.
Why the continued shift to the E&S market? There are several factors, including in part a more conservative admitted market with changing and more restrictive appetites. The shift to the E&S market includes business placement for property with catastrophe (CAT) loss exposures and liability risks where social inflation and emerging risks top concerns.
As more insurance agents and brokers look to the non-admitted market for insurance solutions for their clients, we've rounded up our five top tips for agents new to the E&S market and partnering with a wholesaler. Here's what our RPS experts — Sarah Wirtz (casualty branch manager, area senior vice president and environmental practice leader), Christa Nadler (area executive vice president), Adam Mazan (area president) and James McNitt (area president, Healthcare) — have to say.
1. Expertise Matters — Lean into Your Wholesaler
Risks don't fit the standard market for different reasons. Some may have experienced losses; in other cases, it may be due to the location of the risk or a business class that is no longer within the admitted market's appetite. When working with a wholesale broker to place one of these types of risks in the E&S market, rely on the broker's expertise.
"Don't be afraid to use a wholesaler as your subject matter expert," says Nadler. "We all specialize in specific product lines and areas and have years of experience doing so. When you have questions or want to talk through a coverage or do a coverage comparison, being able to lean on a wholesale broker who has expertise brings more to the table than just getting a quote."
"As an experienced wholesale broker, we have the ability to think outside the box with the confidence to present an account to underwriters," explains Wirtz. "We take the time to really listen to the details of the account, its exposure, and why it may be coming to our space. We ask agents questions to prequalify an account and let them know if we can place it."
2. Consider the Wholesaler an Extension of Your Office
Look at a wholesaler as an extension of your agency operation to work in concert for the best interest of your client.
"The reliance on a wholesaler's specialized knowledge on a specific product is ultimately to help protect an insured at the end of the day," notes McNitt.
"A client may not necessarily know you're working with a wholesaler, but when you deliver improved outcomes, you'll continue to rely on the wholesaler's expertise to get the work done. Healthcare, for example, is a complicated area requiring specialized knowledge. We have a dedicated division that solely focuses on healthcare and can help agents get what they need."
3. Work with a Wholesaler with Real Market Clout
It's not only important to work with an experienced wholesale partner but also one with a sizeable book of business in the E&S market.
"The more business a wholesale broker writes with an insurance carrier," explains Nadler, "the more likely the broker cab get an underwriter to review a risk and provide a quote and terms. When you're considering which wholesale brokers to use, look at each broker's reputation in the market, the amount of business written and their carrier relationships."
Underwriters receive hundreds of submissions every day. "Wholesaler-carrier relationships and market clout get submissions reviewed and work done. Premium placement with a carrier goes a long way," McNitt concurs.
Additionally, Mazan says, with the E&S market so strong, there is more capacity. "We stay abreast of all new opportunities and markets that can help clients."
4. Help the Wholesaler Tell the Account's Story
Nadler explains that the job of a wholesale broker is not only to know the best markets but also to get an underwriter to look at each submission.
"The best way for us to get submissions before an underwriter is to tell a complete narrative. We'll explain to the underwriter the good and bad about the risk. Perhaps an insured has had some losses but we're able to explain the losses after speaking to the agent and reviewing the account. The more we can get into the details behind the story of the risk and present it in our submission, the more likely we will get a quote and an account written."
When submitting business to the E&S market, it's important to also be cognizant of timelines.
"There are times when you need a quick turnaround on an account as the admitted market is no longer renewing an account or accepting new business for a specific class," says Wirtz. "While a quick turnaround time is possible, it will depend on whether we have all the information necessary to send to an underwriter. Sometimes it takes longer to get the information to tell the whole story, depending on the complexity of the account. It's important to understand that with more time, we can negotiate better terms and conditions."
5. Review Terms and Conditions of the E&S Policy with the Wholesaler
E&S terms and conditions often differ from those found in the standard market and may be more restrictive than what agents new to the E&S space are accustomed to.
"Review policy terms and conditions with your wholesale partner to have a complete understanding of any coverage differences. Be sure your clients also understand those differences to avoid misunderstandings down the road and potential E&O claims," says Mazan. "Ask the wholesaler any and all questions."
"A wholesale broker can also help break down complicated information to convey in layperson's terms so clients understand how and when coverage is triggered," adds McNitt.
Mazan advises agents to not be afraid to ask whether certain coverage enhancements can be added back or an exclusion removed. "This change may not always be possible, but it's worth asking."
In addition, agents should be aware when they go shopping for coverages that policies which were once available in a package policy with one carrier in the admitted market are often written on a monoline basis and with different carriers in the E&S space.
"The account is going to transact differently in the E&S market. An experienced wholesaler will advise where and how the different policies will be written and will loop in the right people or point the agent in the right direction to get an account covered," says Mazan.
"Don't shy away from E&S placement. The markets and coverage are here and are a very viable alternative to the standard market," emphasizes Mazan.