Increased new business formation feeds into wholesale and E&S markets

As the impact of COVID-19 continues to be felt, the hardening market is set to continue, new business is coming into the wholesale and E&S markets and data analytics is set to be a key differentiator, Neil Kessler, chief operating officer for CRC Group, told Intelligent insurer.

With the number of applications for new businesses rising dramatically in the US, according to figures from the US Census Bureau, insurers could be set to see a corresponding increase in new business, Kessler said.

“There is a significant trend around new business formations in the US and typically those types of business come into the wholesale and the E&S markets,” he said.

“Necessity is the mother of invention—people are seeing opportunity and they are capitalising.”

It’s one of several ways the impact of COVID-19 is set to continue unfolding over the coming year.

“It definitely increased pressure on the industry,” Kessler added.

“If you insure small and medium-sized enterprise and hospitality businesses you’ll definitely be feeling the impact.

“There is a general awareness that the insurance market needs to come up with new and creative solutions around pandemic coverage for the future.

“There are a lot of ideas out there, including government backstop-type strategies, which I think make a lot of sense.

“I’m not sure a pandemic of the scale that we’ve seen, with the shutdown to the level we’ve seen, is something the private insurance industry can deal with on its own—and that’s a consensus view among many, if not most in the industry.”

Meanwhile, Kessler highlights hardening across many lines of business, with some of the standouts being excess liability, property and D&O.

“It is spilling beyond those lines as well, and as the year progresses we don’t see any sign of that slowing down,” he said.

“There are a lot of drivers behind the various classes of business that are experiencing these rate increases but ultimately it comes down to increased losses—and carriers have to price those things in to make it work.

“Specifically for a wholesale broker like CRC, rates are up more in some of the challenged classes than in some of the traditional classes.”

Wholesale flow
Kessler added that there is an increased flow of risks into the wholesale channel from the standard lines channel in the US as traditional carriers decide they want to exit certain lines, classes of business or geographies that they might have written in a softer market.

“In a harder market you see the pendulum swing the other way: they exit those lines and the wholesale channel increases,” he said.

For the future, he expects everyone to be looking closely at the new capital formations that are being widely discussed at present, paying close attention to what impact these will have on the marketplace.

“At CRC we are paying careful attention to many of those entrants and working with them to help them develop a plan and a go-to-market strategy in the E&S space,” he said.

CRC Group’s plans for 2021 centre around continuing to provide insurance solutions for the 40,000 plus retailers it works with across the group. With 2020 set to be a record year, with the group exceeding $10 billion in written premiums for the first time, its sights are set on further growth and expansion.

“We are doing that in two ways,” Kessler said. “We have been very focused on producer recruiting: a number of producers who work at other wholesale brokers are interested in perhaps joining a different type of platform, and we have been providing a compelling value proposition to those people.

“We have hired more than 90 new producers in the last year—a record for CRC Group.

“We are also very focused on M&A. We announced two transactions this year, and we are hard at work on several others as we look to build out our product and geographical offerings.”

Analytics matter
The group’s other major investment is its REDY data analytics platform, which it is using to differentiate itself in the marketplace.

“We see data analytics as a way for us to deliver better results for our clients,” Kessler said. “We think that almost every step of our process can be improved through the use of data and analytics.

“About five years ago we started collecting exposure and loss information on every account that we bind at CRC Group. We used that information to power our REDY platform.

“This enables us to deliver those data-driven insights into the workflow of our production teams at the right time.”

The group has developed a number of use cases around how that data can enable its brokers to produce better and faster results for clients. The platform is not meant to replace brokers’ individual knowledge, but to supplement and improve it.

“We’ve deployed those use cases in REDY and we’re making incremental improvements on a monthly release basis, investing millions of dollars in this platform,” Kessler said.

“The goal is to deliver better results for our clients and to ultimately differentiate CRC in the eyes of our retail clients so they choose us to help with their hard-to-place risks.

“I truly feel we are firing on all cylinders.

“I’m very excited about the solutions we are bringing to market to help customers in 2021 and beyond,” he concluded.