WIN Magazine - Summer 2016 - (Page 30)

FEATURE BEYOND THE NEW NORMAL: COULD THE SURPLUS LINES MARKET BE HEADING FOR A 10% MARKET SHARE? BY DR. GEORGE ZANJANI A FEW YEARS ago, I posed the question of whether the nonadmitted market had reached a "new normal" in terms of market share, or whether it was destined to retreat to its historic norms. To date, there has been little sign of retreat. According to A.M. Best's annual survey of the market, surplus lines market share edged up to 7.1% in 2014.1 With the previous hard market peak a decade past, the market's resilience suggests that maybe, instead of fretting about retreat, we should be considering a different question: Could the surplus lines market be heading even higher? In this article, I'll cover three ongoing trends that could propel the 3 0 | v i e w t h i s i s s u e a t | market beyond a 10% share: 1) declining interest rates, 2) big data and 3) catastrophe risk. INTEREST RATES In 2004, I took out a 30-year purchase mortgage with a fixed rate of 5.375%, and I crowed to my wife about how low the rate was, and how we couldn't possibly expect to see a rate this low ever again. In 2009, we again took out a 30-year purchase mortgage, this time with a fixed rate of 4.375%. I again crowed to my wife about how low the rate was, this time opining that it was a "once-in-a-lifetime opportunity" created by the recent financial crisis, and that we couldn't possibly see rates this low again. Nevertheless, in 2012, we refinanced, with no closing costs and points, to a 30-year mortgage at 3.50%. This time, I held my tongue. With plenty of egg on my face already, I decided that I should get out of the business of forecasting the bottom of the interest rate cycle. Only time will tell whether my capitulation was a case of "better late than never" or a sure sign that bottom was in the offing. What is indisputable, however, is that intermediate and long-term interest rates have been in secular decline for over 30 years: Moreover, strange as it seems, yields have significant room to fall if we continue along the path of other rich countries. As of the time of this writing, Japan's 10-year government bond yield had hit zero, while Germany's stood at 0.2%. The 10-year US Treasury yield? A comparatively lofty 1.6%.

Table of Contents for the Digital Edition of WIN Magazine - Summer 2016

44,000,000,000,000,000,000,000 Opportunities: The Exponential Cyber Liability Market
AAMGA’S 2016 Winning White Papers
IoT: Insurance, Opportunities, Threats
Hydraulic Fracking: The MGA’s Guide
The Infringement of Standard Markets on the Excess & Surplus Lines Market
Beyond the New Normal: Could the Surplus Lines Market be Heading for a 10% Market Share?
Personal Lines Perspectives: Updates and Opportunities to Writing a Better Exposure
Underwriting Unusual Exposures: Tips, Tools and Techniques
A Changing World of Risk and Regulation
Going to the Dogs—The Cause for Paws: How a Specialty Underwriter is Changing the Lives of Our Best Friends
In the WIN-ner’s Circle: Thomas B. Rogan
In the WIN-ner’s Circle: Roger Ware
5 Steps to Create a Production Culture That Advances Your Business
Index of Advertisers

WIN Magazine - Summer 2016