E&S submissions “recovered significantly” in past two weeks: Kinsale

Excess and surplus lines specialist Kinsale has revealed that submissions have bounced back recently after a Covid-19 driven slowdown, while discussing Q1 results that included a 46.6 percent increase in gross written premiums.

Brian Haney, chief operating officer at the Richmond-Virginia-based carrier, said submissions in the past two weeks have picked up.

“Pre-coronavirus, submission growth was on track to be around 30 percent for the quarter,” he said on Kinsale’s Q1 earnings call today. “The first couple of weeks of the lockdown the growth rate slowed to a single-digit rate but has recovered significantly to the low to mid-20 range in the last two weeks. Weekly numbers can be volatile, but we are encouraged by the bounce back.”

Haney commented that the coronavirus slowdown had one benefit in that it allowed underwriters working from home to get out more quotes than previously.

“So while submission growth has moderated in response to the Covid situation, quote growth has stayed high and, combined with the rate increases, we’ve been able to continue to grow the premium at a healthy pace,” he said.

“The market dislocation we have discussed over the last year hasn’t abated due to the virus. Accordingly, we continue to increase rates in response to market conditions. We see rates up in the plus 10 percent to plus 12 percent range in the aggregate during the first quarter,” he added.

Kinsale reported net operating earnings of $17.2mn in the first quarter, up 24.5 percent on the $13.8mn in the prior year period.

The $0.76 earnings per diluted share, up from $0.64 in Q1 2019, beat the $0.66 mean estimate of analysts that cover Kinsale’s stock.

The $124.0mn of gross written premiums in the quarter was up 46.6 percent on the $84.6mn in the first quarter of 2019.

Underwriting income of $14.4mn resulted in a combined ratio of 83.9 percent, an improvement on the figures of $12.1mn and 80.3 percent in the prior year period.

Kinsale said the increase in underwriting income was due primarily to premium growth period over period, partly offset by lower favourable development on loss reserves from prior accident years of $3.0mn (3.3 points) compared with $6.4mn (10.4 points).

Discussing the Covid-19 on the company’s earnings call today, CEO Michael Kehoe commented “we do not believe the coronavirus will have a material impact on Kinsale’s profitability or growth”.

Kinsale does not write event cancellation, workers comp, surety, trade credit, mortgage insurance or reinsurance. Kehoe identified areas where the company could be exposed to losses as commercial property, premises liability, management liability and its allied health division

In commercial property. Kinsale’s property book focuses on industrial-type exposures such as processing facilities, recyclers, warehouses and vacant properties. It generally avoids occupancies like restaurants, gyms and theatres.

“We believe the overwhelming majority of our policyholders are still operating during this crisis,” Kehoe said. “All of our policies require direct physical damage to trigger coverage, all include virus exclusions and all include an authorities exclusion, which specifically precludes coverage for claims arising from government shutdown orders.”

Kehoe revealed that Kinsale has received 17 commercial property claims. He said there is zero exposure to its coverage on eight of these because they involve policies that either do not have business income coverage or policies where the BI limit is below the attachment point of Kinsale’s excess policy.

“The remaining nine policies could possibly present exposure to loss, subject to a complete investigation subject to the terms and conditions of the policy and subject to a BI calculation that exceeds Kinsale’s attachment point, as these are mostly excess policies,” he said.

Kinsale has not received any claims to date in the management liability, premises liability or the Allied Health areas related to coronavirus.