Commentary/Opinion
"Insurance is very old and slow to change for a reason"
Jett Abramson, executive vice president, casualty, and national construction practice leader at Amwins Group, has seen firsthand how trends in construction insurance and the factors driving growth have shaped a new reality of the sector.
Reflecting on the unique perspective of an E&S broker, Abramson said that growth in their segment doesn’t necessarily correlate with the industry’s overall expansion.
“The industry could be theoretically shrinking in premium while our segment grows,” he explained. “I’m a casualty broker, so from that narrow vantage point, we’ve seen a shift since the 10-1 renewals in 2019, when the excess marketplace went crazy.”
A significant change has been the reduction in capacity by larger carriers in both standard lines and E&S markets.
“We used to do $100 million umbrella towers with four carriers, sometimes three. Nowadays, if you’re doing $100 million, you’re involving 10 carriers, sometimes more,” Abramson explained. Retailers, once accustomed to direct coverage for the first $10 million to $25 million, are now turning to E&S markets due to reduced direct carrier capacity.
“We started seeing deals four or five years ago that we normally wouldn’t see in the E&S marketplace,” he added.
Sharing an anecdote highlighting this inconsistency in carrier capacity decisions, Abramson remembers an admitted carrier underwriter initially reduced capacity on a deal, only to fully restore it two years later.
“I called him right after the renewal and asked, ‘When were you being stupid? Yesterday or two years ago?’” Abramson told IB. The underwriter admitted that the decision to restore capacity was driven by growth targets rather than risk assessment, which Abramson criticized as shortsighted.
News
Which insurers face the biggest hit from Hurricane Francine?
Ranking shows insurers with biggest market shar
Which insurers face the biggest hit from Hurricane Francine?
Francine, which became a Category 1 hurricane in the Gulf of Mexico before its expected Wednesday landfall in Louisiana, is set to hit State Farm, Allstate, and USAA based on their homeowners’ multi-peril insurance market share in the state.
According to 2023 data from AM Best, nearly 22% of the homeowners’ multi-peril insurance market market in Louisiana is held by State Farm. Next in line is Allstate, with an almost 14% market share.
AM Best’s ranking was based on the insurers’ direct premiums written (DPW). State Farm’s DPW for homeowners’ multi-peril insurance in Louisiana amounted to $659.7 million. Allstate’s was at $417.2 million.
Ranked third to 10th are USAA, Liberty Mutual, Forza Insurance Group, Louisiana Farm Bureau, Safepoint Insurance Group, Progressive, Louisiana Citizens, and Allied Trust Insurance.
U.S. insurance industry sees beginnings of surplus recovery
Early 2024 was characterized by an uptick in non-traditional CAT activity, including numerous convective storms.
An illustration of a tree made of money When adjusted for inflation, industry surplus has not recovered to the levels seen in early 2022, but despite losses similar to those in 2023, 2024's losses thus far are not reducing the surplus as they did in the past few years.
Insurance industry gains for the first half of 2024 are estimated at $95 billion, according to a report from Verisk and the American Property Casualty Insurance Association (APCIA). When adjusted for the $50 billion-plus realized by one insurer, that leaves H1 gains for the industry at large at around $45 billion.
When adjusted for inflation, industry surplus has not recovered to the levels seen in early 2022, but despite losses similar to those in 2023, 2024's losses thus far are not reducing the surplus as they did in the past few years.
According to the report, insurers wrote $463 billion in premiums in the first half of 2024 – an increase over the $420 billion collected at that point in 2023. Earned premiums grew by 11% to $436 billion to start 2024.
"Insurers' surplus is continuing to recover from the catastrophic losses in 2022, although it has not kept pace with inflation or the economic demands for insurance coverage," Robert Gordon, senior vice president of policy, research, and international at APCIA, said in a release. "Commercial lines have been profitable and are restabilizing, while personal lines have improved but are still struggling to keep up with rising losses. With an expected spike in hurricane season activity in the forecast and the remaining months of wildfire season still ahead, it remains to be seen if insurers can finish the year with an underwriting profit after two straight years of underwriting losses."
There was a significant improvement in underwriting in the first half of the year, with a $3.7 billion gain reported, compared to losses of $23.4 billion in the first half of 2023 and $5.6 billion in the first half of 2022.
Policyholder surplus increased slightly, from $1.01 trillion to at the end of 2023 to $1.07 trillion in 2024, but insurers' rate of return on average policyholders' surplus jumped from 3.6% at the end of 2023 to 9.1% in the first half of 2024.
Progressive is the latest insurance company to stop offering homeowner coverage in Texas
In a letter to shareholders, Progressive Insurance CEO Tricia Griffith stated the company is “temporarily restricting new homeowners’ business.”
New homeowners in Texas may have to look a little harder for insurance policies as another company has pulled out of the state.
In a letter to shareholders, Progressive Insurance CEO Tricia Griffith stated the company is “temporarily restricting new homeowners' business.”
The letter adds that “Reducing the impact from weather-related volatility is strategically important."
Progressive halted homeowners' insurance policies just over a month after Hurricane Beryl tore across Houston. And this isn't the only major insurance company to do so. Foremost Insurance, a holding of Farmers Insurance, stopped writing and renewing new policies a little more than two weeks before Beryl hit.
In a letter to a customer, published in the Houston Chronicle, Progressive said: “We recently reviewed our exposure and risks relating to natural and catastrophic losses, and have determined that we will no longer offer this insurance program in your area. As a result, this policy will not be renewed at the end of your current policy term."
Progressive, Allstate outpace property and casualty peers on Wall Street in H2
Shares in The Progressive Corp. and The Allstate Corp. have outpaced many of their larger property and casualty peers since the start of the second half as the industry turns a corner toward improved profitability,
Progressive ranked fourth and Allstate ranked eighth in terms of the top-performing listed US insurers. Progressive shares increased 20.1% between June 28 and close of business Sept. 5, while Allstate was up 16.3%.
The two insurers' positive stock movement was likely driven by the fact that both are on a profitable path, CreditSights analyst Josh Esterov said in an interview. This has contributed to a "mounting body of evidence" that the recovery in the retail auto insurance market is "sustainable."
"Progressive is way ahead of the curve relative to other leading insurers in terms of having already restored strong profitability," Esterov said. "Allstate is probably going to be next in line in terms of demonstrating sustainable profitability out of retail auto."
Signs of success
During the second-quarter earnings season, talk of positive news in the personal auto lines segment dominated earnings calls by property and casualty insurers as executives focused on growth.
Progressive and Allstate were both standouts with their second-quarter results.
Progressive's second-quarter revenue in its personal lines business surged 21% to $13.8 billion, from $11.4 billion a year ago. Roughly 93% of its personal lines are written for personal auto insurance. Progressive's net premiums in personal lines also grew significantly, rising 26% to $14.6 billion from $11.6 billion.
Allstate also experienced positive momentum in the second quarter, driven by growth in its personal auto profitability. Earned and written premiums for the insurer's auto segment grew 11.8% and 12.3%, respectively, year over year. Allstate's underlying combined ratio improved 8.7 percentage points to 93.5%, from 102.2% in the second quarter of 2023.
Esterov said Allstate has now posted several consecutive quarters of profitability, evidence that the insurer would be next to see a "permanent restoration of profitability."
InsurTech/M&A/Finance💰/Collaboration
Sigo Seguros bags $10.5m to expand car insurance offerings
Sigo Seguros, a car insurance startup focused on underserved communities, has raised $10.5m in a Series A funding round.
The round was led by Varco Capital and Listen, with additional support from Angeles Ventures, Flintlock Capital, Zeal Capital, Rise of the Rest, and Fiat Ventures, according to the Coverager.
Founded in 2018 and based in Austin, Texas, Sigo Seguros primarily targets immigrants and working-class communities with its unique “Spanish-first approach”.
The company currently offers car insurance coverage in Texas through a partnership with Old American Insurance and plans to expand its services to Florida and California.
The fresh funding will be used to fuel this geographical expansion and enhance its product offerings. Additionally, the company aims to continue its focus on providing accessible, inclusive car insurance to underserved groups across more states.
Sigo Seguros reports that it has already provided coverage to over 60,000 individuals. In 2023, its partner, Old American, disclosed that the startup was responsible for generating $13.8m in written premiums.
The company previously raised $12m in disclosed funding before this Series A round.
The Demex Group raises $10.25 million
DC-based MGA, The Demex Group, has raised $10.25 million through a Series A round and a previously closed SAFE funding round, led by Congruent Ventures with participation from Moxxie Ventures, MetaProp, and existing investor Blue Bear Capital. This brings the company’s total funding to $28.5 million.
Founded in 2020, Demex offers a parametric reinsurance solution for severe convective storms—such as tornadoes, thunderstorms, hail, and wind.
“Growing losses from these storms are a critical problem for the insurance industry – challenging insurance companies’ annual earnings and balance sheet surpluses. We’re grateful to have investors who bring climate perspective, technology capabilities, a property mindset, and insurance experience to Demex.” – Bill Clark, President and CEO of Demex.
AI in Insurance
Reinsurers commit to AI tools to improve efficiency, risk selection
Reinsurers say they are continuing to invest in and deploy technology, including tools supported by artificial intelligence, to allow them to do more things better and faster.
Technology developments are helping reinsurers better analyze data, model exposures, and bolster cyber defenses, they said during interviews and presentations at the Rendez-Vous de Septembre in Monte Carlo this week.
The reinsurance meeting is the traditional beginning of the year-end renewal season but is also the scene of general business discussions between industry participants.
Munich Reinsurance Co. is heavily committed to utilizing technology in its business, said Marcus Winter, CEO of Munich Re North America property/casualty.
“We use AI and data and analytics for our own underwriting, and we share that with our cedents,” he said. “We see that when we invest in technology to help ourselves make better decisions, those technologies are also very attractive to cedents. It helps with retentions.”
Everest Group Ltd. “absolutely” invests in technology, “particularly artificial intelligence,” said Sharry Tibbitt, Warren, New Jersey-based global head of property and deputy chief underwriting officer of the company’s reinsurance division.
“We’re using AI every day, and now we’re really looking into how we can correlate our investment in AI to loss costs,” rather than simply achieve process and operational efficiencies. “We’re really trying to use it to impact loss costs, and that will be the bigger investment.”
Innovation
Is design thinking the missing piece of your insurtech strategy?
At its core, design thinking is rooted in empathy. It's not just about solving problems; it's about working to understand the people behind them.
In the fast-paced world of agency-focused insurtech, staying ahead isn't just about having the latest technology or offering the most innovative solutions.
It's about deeply understanding the needs of insurance professionals and continuously working to refine and enhance their experience. Design thinking and user feedback are essential components of your company's success.
What is design thinking? At its core, design thinking is rooted in empathy. It's not just about solving problems; it's about working to understand the people behind them. This approach begins by immersing your team in the experiences, needs, and challenges of the individuals you're designing for. By truly seeing the world through their eyes, your team will create solutions that address their real needs.
Here's an overview of the process:
*Empathize: Get to know your users, understand their challenges, and identify their needs.
Define: Clearly articulate the problem you're aiming to solve.
Ideate: Brainstorm a wide range of ideas and potential solutions.
Prototype: Develop simple, testable versions of your ideas.
Test: Gather user feedback and refine your solutions based on their input.
Awards
And the Finalists Are.... | Insurance Thought Leadership
We've picked the nine finalists for this year's Global Innovation Awards, presented with the International Insurance Society, and they're an impressive lot.
This past year was a good one for innovation, as demonstrated by the large number of stellar nominations we received for our second year of the Global Innovation Awards, which we collaborate on with the International Insurance Society.
The nine finalists chosen by our panel of distinguished judges show, in particular, how AI is moving from theory to practice, how insurance is stepping up to some of the biggest societal problems, and how the industry is finding opportunities in the Predict & Prevent business model, moving beyond the traditional repair-and-replace approach.
Let's have a look.
Paul Carroll, editor-in-chief, Insurance Thought Leadership
Fraud
Shift Technology Named a Celent Luminary in 2024 Insurance Fraud Detection Solutions Reports for Both Property & Casualty and Health
Shift Technology, a provider of AI-powered decision optimization solutions for the global insurance industry, today announced that Shift Claims Fraud Detection and Shift Improper Payment Detection/Fraud, Waste and Abuse Detection achieved Luminary status in Celent's recently published Insurance Fraud-Detection Solutions: Property and Casualty Insurance, 2024 Edition and Insurance Fraud-Detection Solutions: Health Insurance, 2024 Edition respectively. Celent defines a Luminary as a technology that excels in solution capabilities and demonstrates a leading market presence.
"We are pleased to recognize Shift Technology's 'Shift Claims Fraud Detection' and 'Shift Fraud, Waste, and Abuse Detection/Improper Payment Detection as Luminary solutions in our Insurance Fraud Detection reports for P&C and Health insurance, respectively," said Fabio Sarrico, analyst, Research and Advisory, Celent. "Being designated as a Luminary solution signifies that both of Shift Technology's solutions excel in terms of functionality and technology in Celent's evaluation, making them a compelling choice for insurers seeking a fraud detection solution in the market."
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