Surplus lines insurers’ share of the market is expected to continue decreasing over the near term unless a catastrophe curtails competition from standard market insurers, according to an A.M. Best report released Monday.
“While surplus lines insurers outperformed the property/casualty industry in underwriting and operating performance in 2007, the softening market and more aggressive competition portend deterioration in profitability as premium levels decline,” Best said in its annual report on the surplus lines industry commissioned by the Derek Hughes/National Assn. of Professional Surplus Lines Offices Educational Foundation.
The soft market’s impact on surplus lines insurers was evident merge from an 8.7% decline in net premium written for 2007, Oldwick, N.J.-based Best found. Meanwhile, merger and acquisition activity for the surplus lines industry has been high through midyear 2008.