Crum & Forster CEO: ‘A head scratcher’ that E&S property is attracting so much capital

By Michael Loney

June 6 - (The Insurer) - Crum & Forster chairman and CEO Marc Adee has said the Fairfax subsidiary has pulled back on excess and surplus lines property business so far this year because rates are falling despite wildfire losses.

Speaking at S&P Global Ratings’ 41st Annual Insurance Conference in New York on Thursday, Adee said that E&S pricing and terms and conditions can move faster than in the admitted market because they are less regulated.

“Think about the first quarter where you had the fires in California and that put a fair dent on a lot of people, you would have expected maybe a subdued approach to the market after that,” he said. “But really the commercial property in that sense went really hard toward shared and layered, which has much broader terms and tends to be cheaper.

“The speed with which that market moved out I think might indicate that maybe some of the people that were moving capacity from homeowners found something they liked better in the commercial line side. But that market moved hard and fast in kind of a strange way.”

Adee suggested that the E&S property rate decreases do not make sense given the losses, as well as the higher return periods in new versions of risk models.

“Other than there's a lot of capital chasing it, and not as much business as they might want,” he said. “We've dialled back a lot on property just within the last quarter.

“That's one of the things with the E&S companies, they can kind of turn on a dime. It’s an interesting moment on the property side. It’s a little bit of a head scratcher why people find that as attractive as they do.”