RLI’s Klobnak: MGAs ‘very aggressive in the Florida wind market’

By Michael Loney

April 24 - (The Insurer) - Excess and surplus lines property insurance is the most competitive product in RLI’s portfolio but catastrophe wind rates still remain “very well priced” despite aggressive competition from MGAs, said chief operating officer Jen Klobnak.

After markets closed on Wednesday, RLI reported $0.92 operating earnings per share for the first quarter that beat the $0.84 consensus estimate, and was down from $0.95 in the first quarter of 2024.

The combined ratio deteriorated 3.8 points in the first quarter to 82.3%, driven by worsening in the casualty segment.

New York-listed RLI’s share price was down 2.3% on Thursday as of 3 p.m. ET, compared to the previous day’s closing price of $78.07.

Gross premiums written increased 4.8% to $491.1 million in the quarter, from $468.7 million in the Q1 2024.

This included a 13.5% increase in casualty GPW to $278.5 million, and decreases of 5.7% in property GPW to $170.1 million and 0.9% in surety GPW to $42.6 million.

The property segment premium drop was largely because of rate decreases in E&S property modestly offset by continued growth in marine and Hawaii homeowners.

On an investor call on Thursday, COO Klobnak said: “E&S property is experiencing the most competitive market conditions in our product portfolio with premium down 14% in the quarter.

“The property insurance market is known for large catastrophes and short memories, and the current market conditions reflect this. Competitors, particularly MGAs, who are compensated on top-line growth, are very aggressive in the Florida wind market.”

Klobnak said MGAs have increased capacity and expanded terms and conditions while “slashing” rates.

“We continue to refine our underwriting guidelines to provide our underwriters the flexibility to compete on the best accounts. Although we saw a 14% decrease in cat wind rates in the quarter, we believe this business is still very well priced,” she said.

Klobnak also said the earthquake market is challenging, with rates down 6% in the quarter.

She continued that the property segment performed well in the first quarter with a 57.1% combined ratio that was only a 1.7 point deterioration despite a heavy quarter of catastrophe losses by the industry.

“We will continue to look for areas to grow in this segment despite the increased competition,” Klobnak said.

The property segment's bottom line was boosted by $17.6 million of favorable prior year reserve development, largely attributable to marine, E&S fire and Hawaii homeowners, which benefited the loss ratio by 13 points.

Storm losses and catastrophe events totaled $12 million, which was comparable to last year. Losses from the California wildfires account for about half of Q1 2025’s total.

The casualty segment posted a 99% combined ratio for Q1, a 6.0 point deterioration.

Chief financial officer Todd Bryant said RLI remains cautious “regarding wheels-based businesses, including commercial transportation and auto exposure in personal umbrella.”

Favorable development in this segment dropped to $5.1 million in this year’s first quarter compared to $18.1 million last year. General liability, commercial access and subsegments within professional liability were the strongest contributors to favorable development, partially offset by an increase in the wheels business reserves.

Klobnak said RLI is being more selective on providing auto coverage “as we have seen continued increased severities across our auto portfolio."

She said that auto liability coverages achieved a 17% rate increase in Q1. Personal umbrella had a 15% rate increase, slightly down from last quarter “as some of last year's higher rate filings have worked their way through the book,” she said.

Klobnak said the market for casualty business varies significantly by product.

“While we are seeing material competitors increasing rates for most coverages, introducing some exclusions or exiting certain classes or geographies, we still see new markets, and MGAs in particular, who are willing to write business at lower rates with broader coverage,” she said.