Direct written premiums for the industry fell 6% in 2008 to $34.4 billion—the largest percent decline since 1988, said Oldwick, N.J.-based Best. The rating agency attributed the decline to persistent soft market conditions and the effect of the U.S. recession, which has resulted in less insurance being purchased, along with declining payrolls and revenues.
At the same time, admitted insurers continue to compete on surplus lines risks, and efforts by American International Group Inc.’s surplus lines insurers to protect their renewals also contributed to the sustained competitiveness in the market, Best said.
Despite this, the surplus lines industry reported a $1.16 billion profit in 2008. Net income, however, was off 67% from 2007.
The industry’s combined ratio rose more than 10 percentage points in 2008—to 93.6% from 76.1% in 2007—due to weather-related losses on natural catastrophe-exposed business, Best said.