May 5, 2005 by Canadian Underwriter
A survey of the U.S. general insurance marketplace by specialty reinsurance brokerage Guy Carpenter & Co. Inc. points to renewed growth in specialty risk program business handled by third-party program administrators. In addition to rising demand by insurers for this type of business, the survey suggests that this segment of the industry has attracted the entrance of new third-party administrators as well as increased merger and acquisition activity.
"The survey results suggest that carriers are actively seeking new business and the market appears ready to expand," observes Guy Carpenter. The survey indicates a rise in new markets interested in third-party managed specialty programs, which has led to the development of new products as well as increased use of alternative risk mechanisms. Overall, the specialty program marketplace in the U.S. has a current estimated value of US$20-$40 billion in annual gross written premium (of which the survey respondents account for about US$10 billion of the total), Guy Carpenter says.
The insurers surveyed expect that they will write between 70 to 80 new specialty programs over the course of this year, while 38% of the respondents believe that the market will increase over 2005. Over 90% of those surveyed indicate that they want program administrators to produce, rate, quote and bind business on their behalf, Guy Carpenter notes. Over 75% of the total number of insurers responding to the survey also expect, or are willing to allow, program administrators to perform underwriting functions and issue and service policies.