As the industry continues to count the cost of the tragic and devastating LA wildfires, demand for E&S products in California is expected to further increase after years of retrenchment by admitted carriers.

The growing volume of $10mn+ homes, fine art collections and other valuable assets destroyed by wildfires raging in and around Los Angeles means the profile and distribution of a rapidly escalating industry loss is likely to be atypical compared to other recent catastrophic events.

Analysts at rating agencies and investment banks as well as other industry sources suggest the Los Angeles wildfires will rank among the most destructive in California’s history – and will possibly be the largest ever insured loss from the peril, with JP Morgan doubling its estimate to $20bn.

It was no surprise that US casualty was one of the dominant themes of the recent Q3 earnings season.

Late last month we highlighted some of the themes that were expected to drive discussions as another record attendance descended on San Diego for the WSIA Annual Marketplace 2024.

Nothing lasts forever. The good times always end. Or so conventional wisdom goes.

Five years ago, the wider US commercial P&C insurance market was in the throes of a broad firming that led to a lengthy hard environment, as carriers exercised limits shortening and an aggressive push for higher rates almost in lockstep across multiple lines.

Much of the market commentary so far in 2024 has been around shifting conditions and whether they may herald a slowdown of the significant growth seen in recent years in the E&S sector.

Property casualty leaders remain bullish about the E&S space but have noted shifting dynamics as property rate increases slow while submissions remain strong for casualty.

John Doyle’s comment on Marsh McLennan’s earnings call last week that the firm is not looking to build a third-party wholesale business at its recently launched Victor Access arm is likely to have been viewed positively by large wholesalers fearful of the broking giant’s ambitions.

Late last August, just before the WSIA Annual Marketplace, this publication highlighted the importance of "guarding the goose that laid the golden egg”, as we put it.

Anecdotal evidence of a meaningful acceleration in E&S property pricing increases through the last couple of months of 2022 has been proven out in the latest REDY Index data from broker CRC Group, with the firm warning adjustments to terms and conditions and pricing should accelerate through 2023.

Last summer, ahead of the WSIA Annual Marketplace, this publication raised concerns about the threat of regulatory risk for the fast-growing E&S market as its expanding role in the wider P&C industry raises its profile with lawmakers.

Buyers are facing higher rates and restrictive terms in the professional lines excess and surplus lines (E&S) market, AmWINS has reported, with the exception being the extremely competitive cyber segment.

The latest monthly REDY indexes from US wholesale giant CRC Group reveal September rate increases averaging 48.7 percent in cyber, 16.2 percent in excess/umbrella, and 12.9 percent in private D&O, with all three accelerating from August.

The cyber, coastal property and commercial property insurance markets are likely to remain hard in the next six to 18 months, according to the latest P&C Market Overview by Burns & Wilcox.

Cyber carriers this year are using “vastly different” tactics around rates and security requirements, while lower sublimits and more exclusions are increasingly making their way into policy wordings, according to a new report from wholesaler Risk Placement Services (RPS).

One of the biggest topics of discussion in the E&S market this year has been the continued evolution of distribution, and in particular the relationship between retailers and wholesalers.

Here at E&S Insurer, we are in the process of putting together the program for our conference and awards event in New York City on 20 March 2024 (see the back page of this issue for more details and look out for updates and a new website in the coming weeks).

After strong messaging from reinsurers earlier this month on the need to further drive down cede commissions on casualty quota shares, Lloyd’s set out its stall, flagging US general liability as one of three key areas of focus for performance oversight.

Ambac Financial Group has satisfied all required pre-closing conditions for the sale of its legacy financial guarantee business to funds managed by Oaktree Capital Management and has extended the deal timeline by three months pending final regulatory approval.

Amwins has acquired New Jersey-based independent general agency Nelligan, which specialises in group ancillary benefits.

Arthur J Gallagher-owned Risk Placement Services has confirmed its acquisition of El Paso-based independent wholesaler Litchfield Special Risks.

Arthur J Gallagher-owned Risk Placement Services (RPS) is close to a deal to acquire long-established El Paso, Texas-based independent wholesaler Litchfield Special Risks as the segment continues to consolidate.

CRC Group has added to its casualty brokerage capabilities with the acquisition of Dallas, Texas-based Risk Transfer Partners, which has a focus on the construction, energy, environmental and manufacturing sectors.

Goldman Sachs-backed World Insurance Associates (WIA) said on Friday that it has no plans to divest of wholesaler Novatae, which it said remained a “vital part” of its platform.

Axis has reached a renewal rights deal to take over Markel’s U.S. large financial institutions professional liability (PL) book, a move that comes after the Virginia-based insurer said last month it was streamlining its PL offering.

BV Investment Partners-backed Balance Partners has closed its first M&A deal with the acquisition of MGA and programs platform Vanguard Specialty in a move that will significantly scale up its professional liability offerings and add a meaningful amount of GWP to Balance Partners’ already considerable premium volume.

CRC Group CEO Dave Obenauer said the “pure-play” wholesaler will be able to compete more effectively now it has become independent, including the ability to incentivise employees by making them shareholders.

Bridge Specialty Group, the wholesale broking division of Brown & Brown, has completed its previously announced acquisition of Columbus, Ohio-based NBS Insurance Agency from Nationwide.

Amwins has acquired Folsom, California-based Community Association Insurance Solutions (CAIS), an MGA and program administrator specialising in insurance solutions for homeowners' associations (HOAs), townhomes, condominiums, and planned unit developments (PUDs).

CRC Group’s proposed acquisition of Stone Point Capital stablemate ARC Excess & Surplus is one of a wave of transactions expected in what is set to be a highly active year for specialty distribution M&A, fuelled by strong buyer demand.

After a significant drop in deal volume last year, the number of M&A transactions in the specialty distribution space is expected to pick up this year, according to MarshBerry.

CRC Group is in talks to acquire Long Island-based ARC Excess & Surplus in a potential $500 million deal that would combine the two Stone Point Capital-backed wholesalers.

Bridge Specialty Group, the wholesale broking division of Brown & Brown, has entered into an agreement to acquire Nationwide Property & Casualty (NBS) Insurance Agency based in Columbus, Ohio, in a deal expected to close in March 2025.

Lovell Minnick-backed employee benefits-focused general agency (GA) Warner Pacific has acquired five GAs from Acrisure and entered into a strategic alliance with the self-styled fintech firm.

TIH has entered into an agreement to sell Crump Life Insurance Services and Hanleigh Management to AmeriLife Group after this publication revealed last month that the PE-backed insurance distribution platform was close to divesting its wholesale life insurance arm.

Amwins has acquired Bellevue, Washington-based MGA Superior Underwriters in a deal that bolsters its capabilities in the Pacific Northwest.

Wholesaler CRC Group has bought SLB Insurance Group in its first acquisition since its parent TIH was spun off from Truist and former sister company McGriff was sold to Marsh, E&S Insurer can reveal.

US insurance brokerage M&A transactions had reached 633 by the end of November, up 2.5 percent on the same period of 2023 and dominated by private capital-backed buyers, with activity expected to end the year strongly, according to boutique investment banking firm MarshBerry.

Beazley CEO Adrian Cox has told The Insurer that he expects the company to produce “healthy” margins this year despite increased competition and wildfire losses, while also stating that the industry needs to price quickly for the impact of the U.S. tariffs.

CRC Group CEO Dave Obenauer said the “pure-play” wholesaler will be able to compete more effectively now it has become independent, including the ability to incentivise employees by making them shareholders.

The Hartford has said it remains on track to hit $300mn in E&S binding premium this year, with John Russo, small commercial CUO at its Navigators unit, telling this publication that the stickiness of the business and surging submissions mean there should be a “several year runway” for growth.

Allied World’s decision to maintain a dual distribution model rather than launching a dedicated wholesale unit has not been an impediment to growth, with the carrier’s E&S book expanding significantly in recent years to account for more than half of its US premium.

To remain relevant in a shifting distribution landscape and capitalise on the flow of business to the E&S space, wholesalers will need to deliver additional value by offering advice, expertise and proprietary product, according to Risk Placement Services (RPS) CEO Kevin Doyle.

Everest’s rebranded Evolution US wholesale business is building its talent base both in underwriting and in operations and technology, bringing in more digitisation and identifying and capitalising on E&S market opportunities, according to the unit’s leadership team.

Craig Smiddy has highlighted Old Republic’s 21 percent E&S premium growth in Q3, with the carrier also on track for its tenth consecutive year of favourable loss reserve development despite the quarter’s lower commercial auto and workers’ comp releases and a $25mn financial indemnity charge.

US casualty has arguably been the hottest topic in the sector over the last year amid growing concerns over deteriorating loss trends.

Novatae Risk Group, the wholesale operations of World Insurance Associates, has acquired the assets of Denali Specialty Group, a St Louis, Missouri-based full-service intermediary founded in 2019.

Brown & Riding’s “market-leading” growth rate has seen it more than double in size over the last four years with premium placed set to pass $2.6bn in 2024, as the firm capitalises on its position as an independent, internally owned wholesaler, according to CEO Jeff Rodriguez.

Aon is continuing to look at options that would allow it to directly access the E&S market, including the creation of an in-house placement operation, according to the firm’s president Eric Andersen.

Wholesaler XS Brokers has been riding the wave of the E&S market’s expansion, with the Quincy, Massachusetts-based intermediary continuing to add talent and moving into new lines as it looks to broaden its reach.

The increasingly complex and dynamic risk landscape means the shift of business to the E&S market is a structural rather than cyclical development, with the best access point to the sector through brokers with expert and sophisticated wholesale capabilities, according to Ironshore president Matt Dolan.

Wright Flood’s newest private flood program FocusFlood continues to gain traction with the Lloyd’s capacity-backed surplus lines product now being offered in 19 states, while the MGA has made a pair of senior appointments as it readies for the next stage of its development.

The founding leaders of Emerald Bay Risk Solutions have said the AM Best A- rated start-up will differentiate itself through alignment of interest – including taking a 20 percent share on most of its programs – and its collaborative approach to MGAs and reinsurers, as it eyes an opportunity it says is not being addressed by current fronting players in the sector.

In this second instalment of a two-part interview with OIP president and CEO Martina Seferovic, the executive talks about the unique needs of the E&S sector and how modernisation efforts need to be carefully shaped to meet them.

Successful insurers will be those that focus on specialisation and can help mitigate losses for insureds in an evolving risk environment that includes pervasive threats such as legal system abuse, according to Nationwide’s Russ Johnston.

The president of Distinguished Programs’ new executive lines business Ryan Becker has highlighted the importance of launching the offering with an exclusive wholesale-only distribution strategy as it prepares to begin accepting submissions in the new year, writing on the A++ paper of an RSUI subsidiary.

Most E&S carriers recognise they cannot keep pushing rate on property deals at a time when captive formations are potentially at their highest level ever, as buyers seek alternative solutions, according to Wes Robinson of Risk Placement Services (RPS).

Nationwide’s Scottsdale-based primary casualty unit has big growth ambitions for the year ahead, with the E&S unit on the recruiting trail as it looks to staff up and grow its portfolio by 70 percent to $35mn in premiums in 2024.