A.M. Best Special Report: Surplus Lines Results Remain Strong, As Competitors Grab at Market Share.
OLDWICK, N.J. -- While surplus lines insurers outperformed the property/casualty industry in underwriting and operating performance in 2007, the softening market and more aggressive competition portend por·tend
tr.v. por·tend·ed, por·tend·ing, por·tends
1. To serve as an omen or a warning of; presage: black clouds that portend a storm.
2. deterioration in profitability as premium levels decline. Absent a catastrophe that curtails the incursion in·cur·sion
1. An aggressive entrance into foreign territory; a raid or invasion.
2. The act of entering another's territory or domain.
3. of standard market insurers and the new offshore market, the surplus lines industry's market share is expected to continue decreasing over the near term.
* After-tax return on equity, which measures after-tax profitability from underwriting and investment activity, slipped slightly to a still solid 12.4% from 15.05% at year-end 2006.
* The impact of the softening market was evident in the 8.7% drop in net premiums written in 2007 for professional surplus lines insurers.
* Merger and acquisition activity has been high among surplus lines companies and distribution through midyear 2008, and is expected to continue over the near term.
* For the fourth consecutive year, in 2007, surplus lines recorded no financial impairments, compared with the four impairments for the admitted P/C industry
* The top three surplus lines groups were unchanged from 2006: American International Group
American International Group, Inc. (AIG) (NYSE: AIG; TYO: 8685 ) is a major American insurance corporation based in New York City. , Lloyd's and Zurich Financial Service Group.
* An interstate compact A voluntary arrangement between two or more states that is designed to solve their common problems and that becomes part of the laws of each state.
Interstate compacts in the United States were first used by the American colonies to settle boundary disputes. designed to solve the surplus lines industry's multistate tax and compliance problems was finalized in 2008, as Congress considered the Nonadmitted and Reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. Reform Act (NRRA NRRA North Rosedale Ratepayers Association (Toronto, Canada)
NRRA New Richmond Regional Airport (New Richmond, Wisconsin)
NRRA Nuclear Resonant Reaction Analysis ), also supported by the surplus lines industry.
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Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.