E&S growth – are these the good old days?

The development of the E&S market during the past five years has been remarkable, and we have seen extraordinary growth in premium as risks continue to grow more complex.

During this time, the E&S market has matured and expanded because of ongoing investment in data and analytics, an expansion of underwriting tools, talent and digital capabilities. As I reflect on these past few years, I believe we will likely one day look back on this period as the “good old days” for the wholesale market.

To be clear, at its heart, the core purpose and fundamental value of the wholesale channel has not changed in decades: we address dislocation in the market by providing creative solutions to the growing difficulties of emerging risks. The true ‘art’ of the specialty wholesale market is connecting people who have the expertise to underwrite challenging risks that do not fit the constraints of the standard insurance market.

While the core purpose of wholesale remains largely unchanged, the risk landscape has evolved dramatically, and may never stop evolving. We live in a world where the quantum of change can often be overwhelming: economic uncertainty, political tensions, war, extreme weather, sweeping technological shifts and AI. All of us feel the impact of these changes both inside and outside of work, and – as insurers – our customers look to us to help manage these uncertainties.

That means today’s risk environment is increasingly more dynamic, complex and challenging. As customers face a myriad of new risks, the wholesale market is being called upon to deliver specialty solutions more quickly and efficiently than ever before. In my view, the channel is responding effectively – the future belongs to specialists.

It is worth taking a moment here to acknowledge the transformation of the past few years, to consider how far we have come, and to look ahead to see how brokers and carriers can continue to grow and elevate delivery for our mutual customers in the years ahead.

Dramatic growth in the wholesale channel

The growth numbers in the E&S market are stunning. According to a recent report from AM Best and the Wholesale & Specialty Insurance Association, the E&S market has grown by double digits for six years in a row, rising to $115bn in 2023. It is striking to realise that is triple the E&S premium in 2018 when carriers wrote about $35bn.

AM Best also notes that, despite numerous economic, regulatory, legislative and market challenges, surplus lines insurers’ commercial market share has more than tripled since the start of the century from 7.1 percent to 23.7 percent.

At Axis, we expect the E&S market will continue to experience sustained growth in the years ahead, albeit perhaps not at the same peak level of 32 percent we experienced in 2021.

With the world more uncertain and new challenges emerging, the wholesale market is the natural home for such risks. Since its inception, Axis has been committed to the wholesale market. With a stated ambition to be the leading specialty carrier in the market, we remain as committed as ever. It’s a part of our DNA and there is no insurance market more energising, exciting, or demanding in which to operate.

The wholesale channel is also an essential driver of growth for Axis in North America. It requires continued investments in talent and other capabilities to address the shifting demands of the marketplace and to meet the growing needs of wholesale brokers.

Shifting wholesale environment

The premium growth numbers are impressive, yet they illustrate only a portion of the dynamism of the wholesale channel.

This brokerage space has always been populated by innovative, creative and entrepreneurial people and today is no different – we see wholesale broker partners continuing to grow, acquire, consolidate and adapt. While the fundamentals of this market may be consistent, its leaders have continued to innovate.

Today, US wholesale brokers are more than mere conduits to specialty carriers. They are leading the way in innovation with digital trading platforms, expansive and even global underwriting platforms. These initiatives complement their open market broking platforms, but also challenge carriers to support broader solutions for their retail broker partners.

That growth and development goes hand in hand with a level of sophistication that might not have been the case a generation ago. At one time, some wholesale brokers might have been merely a pathway to access wholesale and specialty insurance carriers. Wholesale brokers today are savvy risk advisors and solution providers for complicated risks. They are data-orientated, provide deep specialised expertise and have access to innovative analytical tools.

In turn, companies and retail brokers are demanding more from their wholesale brokers and specialty insurers. In my view, wholesale brokers and specialist carriers are rising to the occasion – making massive investments in the wholesale channel and supporting the sustained growth of this market.

The future belongs to specialists

We believe that the future belongs to specialists in the wholesale market. Time after time, we have experienced the best outcomes for customers when all those involved in structuring coverage have a keen focus on and understanding of the business, the risks, and a drive to create an effective solution.

A generalist who, on any given day, handles a food processor, a metal fabricator and a nursing home, may struggle to deliver the best outcome for a heavy wheels transportation firm. A risk from one of those businesses that arrives in the wholesale market naturally has challenges, and likely past claims or other issues. Every one of those risks requires business acumen and a unique approach to deliver the optimal insurance solution.

That’s what specialists provide: keen insight, knowledge and expertise that allow for pragmatic and creative solutions through informed experience, enhanced data and analytics. This is the science that supports that true art and craft of specialty underwriting.

Indeed, we likely are living in what will one day be the “good old days” in the wholesale market. We have sustainable growth and a vibrant and innovative brokerage community increasing in sophistication every year. Carriers like Axis are elevating our approach to risk and responding to the uncertainties in a riskier world. As we look to the future, it is vital that we build on our current achievements. It is up to us as carriers and brokers to recruit, develop, train and support more specialists and experts. We must continue to innovate, build new analytical tools and expand our capabilities to help our customers address growing uncertainties and emerging threats.

The iconic musician David Bowie once said, “Tomorrow belongs to those who can hear it coming.” Forward-looking business leaders need risk specialists at their side to help them navigate the risks and opportunities ahead.

At Axis, we stand alongside our wholesale broker partners and customers to support and guide them through uncertainty, and to build for a future of sustained “good old days”.

By Ed Ashby, chief commercial officer, Axis