New capital will not materially impact E&S pricing in short term: AmWINS CEO

Capital raised by start-ups and incumbents is unlikely to change hard E&S market dynamics in the short-term, according to Scott Purviance, CEO of wholesale giant AmWINS.

Speaking to The Insurer TV, the executive said that at the start of 2021 the market is little changed from the conditions that prevailed in 2020, with property, casualty and professional lines all seeing double-digit to high teens rate increases on the majority of accounts.

“We’re clearly still in a broad-based hard market with the lone exception being workers’ comp, and I don’t think there’s anything on the horizon that I see leading to a short-term change in market conditions,” he commented.

While there has been significant capital raised – including from start-ups, scale-ups and incumbents specifically targeting the E&S sector – Purviance said it is not yet dampening pricing momentum.

“A number of them are true start-ups and it will take a bit of time to get up and running, with infrastructure to build, systems to build and licences to get.

“Then look at the aggregate of $7bn-$8bn of capital raised… compare that to $25bn of booked losses on Covid alone, it’s less than a third, so I don’t think enough capital has come into the market to materially change things short term,” he commented.

The executive said it is clear that there is a need for additional capacity in the E&S market, but as it is a “return-driven hard market” and not a “supply-driven hard market”, carriers are demanding to get a certain return on their capital and that is driving dynamics.

“So it’s not that we can’t get things placed, but more whether buyers are willing to pay the price carriers are demanding,” the AmWINS CEO suggested.

Purviance said there was still plenty of demand from potential capital providers to deploy in the E&S market, if they can find the right management team and a platform, whether in the form of a shell company or an existing business to repurpose.

Creating capacity

The executive highlighted some of the areas where capacity is at its tightest and pointed to initiatives at his firm to address the issue for buyers.

In property he identified cat-exposed business and certain distressed classes such as habitational and frame builders’ risk. In casualty it has been commercial auto and excess liability that have been toughest, although primary general liability pressure was also mounting in the latter part of last year.

And in professional lines, public D&O “has got very hard, very quick”, he said, especially in the IPO market in relation to the surge of special purpose acquisition company activity.

“So we’re focused on building some proprietary capacity for our brokers on the underwriting side and leveraging some of the underwriting expertise we have in the firm,” said Purviance.

The firm already has a broad-based portfolio of property cat products available on an exclusive basis to its brokers and is working on expanding that to other lines of business where there is a shortage of capacity.

As previously reported, AmWINS has teamed up with start-up Integral ILS with the fund set to participate across the property programs of the wholesaler’s three main underwriting segments as it adds another source of consistent capacity to existing relationships with other ILS funds.

AmWINS backer Canada’s Public Sector Pension Investment Board has made a cornerstone LP investment in the new Bermuda-based ILS platform.