E&S property market succumbs to gravitational pull

By David Bull

April 30 - (The Insurer) - January's devastating California wildfires led at the time to some discussion about a potential moderating influence on E&S property rate softening.

Reinsurer discipline at January 1 renewals meant there were no concessions on the higher retentions set two years earlier, with suggestions this could help set a floor on primary pricing that had softened during 2024.

Then the turmoil triggered by the Trump administration’s tariff and trade policies added the element of potential inflation that could drive loss costs higher post event.

But so far, at least, none of those factors appear to be having any impact on the downward trajectory of E&S property rates in the segment’s busiest renewal season ahead of the Atlantic hurricane season.

Instead, the sense is of a market heading into freefall.

RLI chief operating officer Jen Klobnak summed it up on the company’s earnings call as she said: “The property insurance market is known for large catastrophes and short memories, and the current market conditions reflect this.”

And comments from Brown & Brown president and CEO J Powell Brown earlier this week questioned why anyone should view the current trajectory as unexpected.

“I find it very interesting how you all are sort of surprised by the rate decreases in cat property. I would have said I thought this was going to happen a year ago.

“Cat property historically goes up faster than you anticipate, and it comes down faster than you anticipate. And it’s all about the availability of limits out there, whether it be through a traditional insurance company, or through an MGA, or some combination thereof,” he said on the broker's quarterly earnings call.

As we report in our lead article this month, the key driver has been a surfeit of capacity, with carriers across the domestic, Bermudian and London markets willing to concede ground on pricing, terms and conditions to meet lofty growth targets.

The fundamentals of supply outweighing demand mean the gravitational pull cannot be denied.

In emerging news, there are also suggestions of questionable capacity being brought to the market in London that is wildly undercutting incumbents on certain risks, accelerating the softening of the market.

CASUALTY CONTRAST

The contrast between the precipitous softening in property and what’s happening in the casualty market could not be greater.

In casualty, the predicted rehardening of the market has come to fruition – especially in umbrella and excess – as carriers apply an ever-keener focus on limit management in a bid to insulate themselves from the effects of rising loss cost trends driven by legal system abuse and other factors.

Here, wholesale brokers are having to work harder than ever to piece together programs and find capacity for their retail clients.

And there are no signs of a change in market dynamics that would ease the pressure in the sector.

As previously reported, wholesalers are having to be increasingly creative to bring solutions and capacity to fill placements.

The latest example involved Amwins, which announced the launch of an excess casualty sidecar earlier this month, confirming this publication’s earlier reporting.