E&S sector to continue scorching growth rate: AmTrust’s Bublitz

Erich Bublitz, head of AmTrust’s excess and surplus (E&S) lines business, says growth rates in his sector continue to soar.

In an interview with Insurance Day in October last year, Bublitz highlighted similarly high growth rates in the sector, which reached around 20% in 2022. He said at the time he did not expect that growth to decelerate.

“I think the predictions panned out incredibly well,” Bublitz says. “We continue to see double-digit growth – not only what we write, but the industry as a whole. Business generally is flowing in one direction: into the E&S space and staying there.”

E&S underwriters are not having difficulty accessing capital, despite the hard reinsurance market that has developed over the past year. Bublitz says reinsurers are still happy to lend to “responsible” E&S carriers.

However, the AmTrust executive warns not all E&S underwriters are good long-term bets. The sector’s galloping growth rates have attracted many “opportunistic” entrants, which form managing general agents (MGAs) in the hope of making a quick profit and selling out after a few years.

“I think the predictions panned out incredibly well. We continue to see double-digit growth – not only what we write, but the industry as a whole. Business generally is flowing in one direction: into the E&S space and staying there”
_{Erich Bublitz
AmTrust}

“They’re looking more for a top-line growth. They’re looking to show significant scale very quickly,” Bublitz says. “And I think those are the ones that cause the most concern in the market. Are they going to be around?”

Bublitz says inflation remains a serious problem for the E&S segment. The spike in economic inflation seen across most major economies between 2021 and 2023 may have eased, but Bublitz warns it remains “materially impactful”, even if social inflation is “vastly more concerning”.

Consumer price inflation in the US was 2.9% year-on-year in July 2024, down from a peak of 9.1% in June 2022. The July 2024 figures for the UK and the eurozone were 2.2% and 2.6% respectively. However, service sector inflation has tended to diminish more slowly than other price increases.

Can fleet-footed E&S ease the US property insurance crisis?

In recent years, US property insurance markets have become stressed or even dysfunctional in several US states as a result of the increasing frequency of natural catastrophes. In the worst-affected states – California, Florida and Louisiana  –  commercial property insurance has become completely unavailable, forcing hundreds of thousands to buy narrower policies from insurers of last resort.

AmTrust began offering E&S property cover across the US earlier this year, Bublitz says. “E&S has started to flow into… those spaces where the standard markets are exiting,” he says, adding this is “exactly the market dynamic that’s supposed to exist”.

Bublitz’s team is only writing commercial E&S cover at present, but he says brokers are increasingly seeking residential products too. Historically, only the very wealthy would seek E&S policies for houses, but now there is greater demand among the middle class.

The AmTrust executive points out E&S underwriters, unlike standard property insurance providers, do not need state regulatory consent to set prices. This allows them to react to market signals more nimbly, Bublitz says, while mainline providers may depart a market rather than deal with an insurance commissioner under political pressure to keep rates low.