E&S catching huge spill-over flows, could grow over 30%: Ryan Specialty

Failure in admitted insurance markets is fuelling massive spill-over flows for excess and surplus lines (E&S) that could push growth rates even above the 30% mark, officials at  Ryan Specialty have claimed.

“The environment remains very resilient and strong,” Ryan Specialty president Tim Turner told his company’s Q2 investor call.

“Admitted markets face pressure from reinsurers de-risking their portfolios which pushes more business into the E&S market,” Turner explained. “During the quarter we saw an acceleration of this trend, driven by one of the most challenging reinsurance renewal cycles in a number of years.”

Pricing is said to be “firm in nearly all classes of business” with “material firming” in select niche lines, most notably cyber. D&O for listed companies is the chief downside outlier, with some volumes even migrating back into the admitted marketplace.

Ryan believes it is poised to capture volumes, a bigger driver than even the market’s heady rate gains. “We expect the increasing flow of business into the non-admitted market to continue to be a significant driver of Ryan Specialty’s growth, more so than rate,” Turner said.

“The current conditions we see indicate 30% plus growth in volume into the channel,” CFO Jeremiah Bickham added, citing intel from his own stamping offices. “We see no real let up on flows into the channel.”

Cyber, property, construction and transport are amongst lines that admitted markets can no longer handle and where E&S offers can sweep up.

“We believe that the majority of cyber risks in America will flow into the E&S channel,” Turner said. Double digit growth in submissions should continue.

Construction also has “significant” double-digit increases in submissions for both infrastructure and residential. “We don’t see this slowing down and the pipeline in these classes remains at historic highs.”

Transportation, especially trucking, looks “very risky” and is “increasingly being directed into the E&S market.”

Comments on the E&S explosion come hand in hand with upgraded forecasts for organic revenue growth at the group.

Bickham told investors they can expect FY 2022 organic revenue growth in a range of 16.5 to 18.0%, above prior forecast for 13.5 to 15.5%. That would represent a decrease versus 23.2% organic revenue growth claimed for Q2 2022, but officials pan off hint of slowdown.

“The circumstances that lead to a 20% organic growth quarter are really hard to predict,” CFO Bickham said. “Quite frankly, even if you felt like you had a pretty good line of sight, it is questionable how prudent it is to put that in the guidance.”

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