Research
US surplus lines surge to $115.6 billion as insurers adapt to volatile risks
Total US surplus lines direct premiums written (DPW) exceeded $100 billion for the first time in 2023, reaching a record $115.6 billion, according to a new report from AM Best. This marked a 17.4% increase over the prior year.
The Best’s Market Segment Report, titled "Improved Underwriting and Operating Results Sustain US Surplus Lines Market Momentum," noted that the surplus lines market has experienced strong growth, with annual double-digit DPW increases since 2018.
A key factor in this expansion has been the high volume of submissions from distribution partners, as well as market dislocation in property coverage. Rising climate risks and volatile weather patterns have resulted in higher insured losses, causing many admitted carriers to reassess their risk appetite.
This shift has created more opportunities for non-admitted insurers, particularly in regions prone to extreme weather.
The report also highlighted the impact of rising commercial lines pricing over the past three years. Surplus lines insurers, with their expertise in higher-risk commercial exposures, have taken on more of these risks. In 2023, surplus lines DPW as a percentage of the property/casualty industry’s commercial lines DPW increased, reaching 23.8%.
David Blades, associate director of Industry Research and Analytics at AM Best, said that the resilience of the surplus lines market is demonstrated by insurers’ ability to adjust strategies, innovate solutions, and modify enterprise risk management practices.
Over 250,000 U.S. Properties Have Repeat NFIP Claims: Report
More than a quarter million U.S. properties have repeated claims for federal flood insurance, costing the National Flood Insurance Program billions of dollars in claims, according to new federal data compiled by the National Resources Defense Council.
Four states account for more than half of repetitive loss properties (RLPs), led by Louisiana with more than 43,000. Texas has the next highest with over 41,000, followed by Florida (26,700) and New York (20,400).
Information on properties with repeated claims for federal flood insurance was hard to come until this year, when FEMA published data on properties with two or more NFIP claims.FULL ARTICLE
News
Workers' Comp Outperforms All P&C Lines in 2023: AM Best
The workers’ compensation insurance market continues its winning streak, outperforming all other major property & casualty (P&C) lines of business and posting an impressive 88.7 combined ratio in 2023, according to a new AM Best report. This sustained profitability is providing a significant boost to the overall P&C insurance industry, with workers’ comp results buoying commercial lines in particular, the report noted.
Several factors have contributed to workers’ compensation’s excellent underwriting margins. Effective workplace safety initiatives implemented over the past decade have helped control loss frequency. Additionally, declines in fraud and defense costs have boosted the line’s profitability, according to the report.
“Effective workplace safety initiatives of the past decade or more have helped control loss frequency, and, along with declines in fraud and in defense costs, have contributed to the line’s excellent underwriting margins,” said Christopher Graham, senior industry research analyst, AM Best. “Equally as impressive, the workers’ compensation line’s net operating ratio was 14.5 points better than that of the industry.”
Drivers of Profitability and Pricing Trends
Workers’ compensation insurers enjoyed a significant $6.9 billion in favorable development on prior accident year loss reserves in 2023, a key driver of the line’s calendar year profitability. Looking ahead, the National Council on Compensation Insurance (NCCI) estimates that current workers’ compensation reserves are redundant by $18 billion, even larger than the estimate at the end of 2023.
Commentary/Opinion
What do CEO departures signal for the future of InsurTech?
You may have noticed a growing trend of startups announcing leadership changes.
Back in March, I recorded a podcast analyzing this shift when ManyPet’s and then Wefox’s CEO were replaced. Since then, Clark and Tractable have joined them in making similar moves within the unicorn club.
These back-to-back announcements made me think there’s something deeper to explore, as there are several ways to interpret these changes. The analysis I shared then still holds true today, so I’m publishing it here.
1/ Growth phases and leadership shifts
As companies grow, their needs evolve. The early stages of a startup require innovation and vision, but as businesses scale, the focus shifts to operations, profitability, and expansion. It’s common for founders to step aside once the company reaches a certain size.
Wefox, for instance, has processed over €1.5 billion in insurance premiums and generated €800 million in revenue last year (according to the founders’ announcements). With over 860 employees, the challenges are now different from its early days.
Similarly, ManyPets has grown to over 400 employees and insures hundreds of thousands of pets. As companies scale, founders often move into advisory roles, bringing in CEOs with commercial expertise to manage the next phase of growth. This pattern is typical across the tech industry.
2/ Adapting to a changing market
The market environment has also shifted. Venture capital funding has slowed, especially in InsurTech, with an emphasis now on profitability over growth. This requires different leadership skills and strategies. For example, Element’s new CEO, with extensive insurance experience, was chosen to focus on technical profitability, reflecting the new priorities in the sector.
Leadership changes can signal that a company is adapting to these market conditions, acknowledging the end of the "growth at all costs" era.
3/ Potential challenges ahead?
These leadership shifts may also hint at underlying challenges. Wefox reduced its workforce by 13% last year, and ManyPets exited the Swedish market despite strong demand there. Additionally, mental health concerns among startup leaders are rising, with nearly half of CEOs considering stepping down due to stress (according to Sifted’s report).
These moves suggest that more leadership changes in InsurTech could be on the horizon, driven by both market forces and personal pressures.
The leadership transitions at InsurTech startups are likely a mix of natural growth and response to market realities. As the sector matures, more companies may face similar decisions in the months ahead.
Florian Graillot, Investor @ astorya.vc (insurance & emerging risks ; Seed ; Europe) Paris
The Future of EVs Is Less Predictable
Timelines for electric vehicle adoption remain uncertain as more challenges play into their evolution, an automotive expert says.
Electric vehicles, now the most hotly debated issue for the automotive remarketing industry, are going through a deceleration, said Steven Greenfield, the CEO of Automotive Ventures and an informal “futurist” for the vehicle remarketing industry. He spoke on Aug. 21 at the Automotive Remarketing Alliance’s annual Summer Roundtable conference near Dallas.
Unlike in most previous waves of economic innovation, the U.S. does not appear to be leading the transition to electric vehicles, as consumers are either avoiding or delaying purchasing them and sales remain “choppy,” an automotive analyst and author told a conference of vehicle remarketers last month.
InsurTech/M&A/Finance💰/Collaboration
Cerity Partners Welcomes Touchdown Ventures
Cerity Partners, a leading independent wealth management firm in the U.S., announced today that it is merging with Touchdown Ventures (Touchdown), a leading provider of advisory services for corporate venture programs. Following the closing, anticipated in the coming weeks, Touchdown will operate as Cerity Partners Ventures (CPV) and integrate into the firm alongside Cerity Partners' broader service offerings.
Partnering with Touchdown will facilitate the expansion of Cerity Partners' offerings to corporations and businesses to include Venture Capital-as-a-Service (VCaaS) which aims to unlock access to external innovation through tailored venture capital solutions. The merger will also broaden access to innovative startups, while enhancing Cerity Partners' offerings to its private clients and expanding its footprint in key growth-oriented markets, including Philadelphia, Chicago, Los Angeles, and San Francisco.
"Our partnership with Touchdown Ventures comes during a period of significant growth for Cerity Partners and will be instrumental in deepening our offering to corporate partners," said Kurt Miscinski, CEO of Cerity Partners. "Touchdown's best-in-industry VC professionals, coupled with our shared fiduciary commitment to deliver exceptional service in our clients' best interest, make them an ideal partner. We couldn't be more excited to welcome the Touchdown team.
Park Sutton Advisors, a Waller Helms Company, served as exclusive financial advisor to Touchdown and Nelson Mullins provided legal counsel. Lowenstein Sandler served as legal counsel for Cerity Partners.
Functional Finance Secures $20M Series A Round Led by Walkabout Ventures
The funding will fuel platform expansion and strategic hiring as premium payment volume surges 2,500 percent YOY.
Functional Finance (San Francisco), a software platform dedicated to modernizing financial operations (FinOps) for MGAs, carriers, and wholesalers, has announced the closing of a $20 million Series A funding round led by Walkabout Ventures (Los Angeles) with participation from Munich Re Ventures (Munich) and Phil Edmundson, the visionary behind Corvus Insurance.
Functional Finance launched with an $8 million seed round where the company garnered early support from a diverse group of influential insurance and technology investors, including Walkabout, New Enterprise Associates (NEA), Altai Ventures, and Hank Greenberg’s Starr Insurance.
The announcement follows a period of significant growth for Functional Finance which saw an increase of more than 2,500 percent in premium payment volume year-over-year (YOY). The vendor says growth demonstrates the increasing demand for streamlined FinOps in the insurance sector, particularly as MGAs, insurers, and wholesalers modernize and scale.
Ex-Google Executive’s Startup to Use AI to Forecast the Weather
A startup founded by a former Google executive aims to use artificial intelligence to improve weather forecasting, joining technology behemoths like Nvidia Corp. and Huawei Technologies Co. in an increasingly crowded field.
Brightband has raised a $10 million series A led by Prelude Ventures, with participation from investors including Bain & Co.’s Future Back Ventures and Slack co-founder Cal Henderson, the company said Thursday. It was launched this summer by Julian Green, who was previously at Google X, and three scientists with the aim of developing a paid product along with an open-source AI forecasting model trained on raw weather observations.READ ON
Sikich partners with VIPR Solutions to expand Insurtech services in the US
Sikich, a Chicago-based provider of technology-enabled regulatory, quality, and compliance solutions in the insurance technology sector, has announced a strategic partnership with VIPR Solutions.
VIPR specializes in delegated authority business, focusing on underwriting authorities granted by insurers to third parties such as managing general agents, brokers, and coverholders. The company offers software solutions tailored to the program business insurance sector, including data management, compliance, and regulatory tools.
According to Sikich, this collaboration strengthens the firm’s commitment to the insurance industry and its role as a systems integrator for VIPR’s US operations. The partnership aims to enhance local implementation and provide first-line support across various time zones, supporting VIPR’s growing presence in North America.
Announcements
Mike Miller launches E&S managing general agency
Pivix Specialty Insurance Services Inc. Thursday said it has launched operations as a managing general agency focusing on the excess and surplus lines market.
Former Scottsdale Insurance President Mike Miller, who helped found the company, will serve as CEO and president of Scottsdale, Arizona-based Pivix, the fledgling MGA said in a statement.
Pivix founders and management team Mike Miller, Ken Levine, Joe Griffith and Sandy Vertunon are all alumni of Nationwide Inc., the statement said.
Pivix will offer excess and surplus property and casualty coverages for targeted segments, which will be distributed exclusively through wholesale brokers, the statement said.
Fraud
Risk company reports business email cybercrime claim costs have skyrocketed
There is a growing financial burden on small- to medium-sized enterprises (SMEs) when it comes to cybercrime, particularly due to the surge in Business Email Compromise (BEC) incidents, according to NetDiligence’s 14th annual Cyber Claims Study.
The average cost of a BEC claim skyrocketed from $84,000 in 2022 to a staggering $183,000 in 2023.
“While we’ve seen a significant increase in incident costs for business email compromise claims, there’s also been a reduction in losses related to general ‘hacker’ incidents,” stated Mark Greisiger, NetDiligence president and CEOm, in the report.
“Some additional positive trends noted include: wire fraud costs have steadily declined since 2020; healthcare SMEs appear to have continued to benefit from decreasing average incident costs; and manufacturing SMEs saw their costs drop to a five-year low.
“Conversely, the financial services sector appears to have experienced a sharp increase in incident costs, which continues to underscore the fact that cyber risk can — and usually does — evolve in different ways for different sectors.”
People
Amwins Global Risks Names Nick Abraham Chief Executive Officer
Amwins, a global distributor of specialty insurance products and services, announced today that Nick Abraham will succeed Nathan Mathis as chief executive officer of the firm's London-based specialty distributor, effective January 1, 2025.
Abraham has been part of the Amwins' Brokerage Division leadership team since joining Amwins in November 2021. Prior to taking on his role with Amwins, Abraham held multiple leadership positions with Markel over a 17-year period.
"For the past 3 years, Nick has made a substantial impact across the Brokerage Division and truly embodies the Amwins servant leadership culture," said Scott Purviance, Chief Executive Officer of Amwins Group, Inc. "His experience on the carrier side, combined with his wholesale broking knowledge, make him an ideal choice to lead the continued expansion of our London operation."
Mathis, who has served in multiple leadership roles in London for six years, including three as CEO, will rejoin the US-based leadership team in Charlotte and will continue to focus on select key growth initiatives of the company.
"Under Nate's leadership, Amwins Global Risks has firmly established itself as the leading independent Lloyd's broker, representing more than $3 billion in placed premium. We look forward to welcoming him back to Charlotte," said Purviance.
Zywave appoints Martin Simoncic as CEO and Christian Kasper as EVP & CFO
Insurtech provider Zywave has announced the appointments of Martin Simoncic as Chief Executive Officer (CEO) and Christian Kasper as Executive Vice President (EVP) & Chief Financial Officer (CFO).
Zywave is backed by Clearlake Capital Group and Aurora Capital Partners.
Prashant Mehrotra, Partner and Managing Director, and Erik Hansen, Vice President, at Clearlake, stated, “We are fortunate to have experienced software executives such as Martin and Chris join Zywave as CEO and CFO, respectively, and we look forward to partnering with the Company’s broader management team to accelerate the growth of the business organically and continue to propel Zywave’s buy-and-build initiatives in the insurance technology industry.