Kinsale sees 'huge' opportunity in E&S homeowners space

By David Bull

Feb 28 - (The Insurer) - Kinsale is “learning into” opportunities in personal insurance, including E&S homeowners business, according to management at the specialty insurer, which is continuing to see strong new business submission growth even as it reported overall rates were around flat in the fourth quarter.

• Combined ratio of 73.4% in Q4 2024, up from 72.1 in Q4 2023.

• GWP increased 12.2% to $443.3 million in Q4 2024.

• Net operating earnings of $107.8 million ($4.62 per diluted share) exceeded estimates

• UW income rose to $97.9 million in Q4 2024 up from $84.8 million in Q4 2023

• Kinsale estimates Q1 2025 pre-tax catastrophe losses of $25mn from CA wildfires

On the Richmond, Virginia-based carrier’s Q4 earnings call, chairman and CEO Michael Kehoe noted that larger shared and layered deals in E&S property are under some competitive pressure after seeing “tremendous inflation in rates” over the previous several years.

“We think that’s a normal evolution of that market. The returns have been extraordinary, so it makes sense. A lot of capital has flowed back into that space. Our small property divisions are still growing very rapidly, and we’re getting positive rate increases there, so we’re upbeat on property,” said Kehoe.

He added that in small casualty, market conditions are variable depending on the product line.

“So on construction, commercial auto, excess … very healthy rate increases. Other lines like management liability, professional liability, where we’ve seen some extraordinary levels of profitability; we’re trying to be incrementally more aggressive,” said Kehoe.

President and CEO Brian Haney said that rate declines in larger layered property transactions had a “dampening effect” on the growth rate in the quarter as that segment of the market has normalised after a period of crisis pricing conditions in the prior years.

Casualty is still achieving “steady” growth overall, with excess casualty, commercial auto and general liability among the fastest-growing divisions with management and professional liability among the most competitive, said Haney.

While overall rates for the quarter were around flat, excess casualty, commercial auto and construction were up in the high-single-digits range, while larger layered property accounts were down mid-to-high teens.

“We are being more aggressive in pricing in some select areas because the margins are so high that the trade-off between a lower rate and more growth is worthwhile,” Haney continued.

The executive highlighted the carrier’s “sophisticated risk management strategy” and “robust reinsurance program” to limit volatility.

“We don't expect recent catastrophe events in the industry will be enough to change the overall market, but it may create more opportunities in personal insurance, which we are already leaning into,” said Haney.

He said the homeowners space alone in the U.S. is bigger than the E&S market.

“And an increasing percentage of it, even though it’s small, is moving into the E&S space. So I think there’s a huge opportunity for it, especially things like high-value homeowners in California.

“It’s a very concentrated market that’s just suffered a giant loss among a small number of players. So I think there’s an opportunity there. I think there’s an opportunity to expand what we do in the manufactured housing space.

“I think there’s an opportunity to expand into a sort of adjacent type of business like stick-built or non-manufactured homes.

“Again, these are hard-to-place catastrophe-exposed high-margin business, but there’s just a lot of it. And right now, it’s probably one of the harder areas of the overall P&C business,” he continued.

Kinsale’s management talked to analysts after the carrier reported fourth quarter results that included a 73.4% combined ratio, up from 72.1% in the prior-year period, with gross written premium up 12.2% to $443.3 million.