E&S carrier ASIC surpasses $100mn GWP in first year as it eyes capital base expansion
E&S carrier and accredited reinsurer AM Specialty Insurance Company (ASIC) has written more than $100mn gross written premiums (GWP) in its first year of operations as the company capitalized on reinsurance opportunities, the company’s co-founders told Inside P&C.
The company was launched around a year ago by AM Re Syndicate owners Shevawn and Simon Barder in a bid to expand the group’s underwriting platform into risk retention. While the carrier has caught the current E&S boom in the US market, the reinsurance segment has also been a key driver of the firm’s growth, and it is expected to continue fueling its expansion into next year. CEO and co-founder Shevawn Barder told Inside P&C: “In response to the market's trajectory, we've honed our focus on reinsurance rates where opportunities currently demonstrate stronger potential, and we feel that this emphasis will continue into 2024.” Co-founder and chairman Simon Barder added: “While we anticipated a heavier lean towards the primary side, the reinsurance side presented unexpected yet welcomed opportunities, leading us to pivot and capitalize in that area due to our expertise in the space and the promising landscape it presented.”
“Given the level of competition and risks presented in the primary fronting space, the reinsurance space also offers more scope for differentiation,” he added.
The (re)insurer’s current portfolio comprises various lines, including commercial and niche property, casualty, transportation, marine, cyber and miscellaneous specialty risks.
While part of the company’s strategy has focused on the reinsurance sector, Shevawn Barder said the firm has also written “a few primary programs that we strongly believe in, with a 100% retention.”
Surplus expansion via equity and debt mix
The E&S carrier is currently working with Stonybrook Capital as it seeks to inject capital to expand its surplus in a bid to move up a carrier category as defined by AM Best.
The carrier is now looking into a mix of equity and debt as it expects to expand its capital base beyond $100mn.
“Our aspirations to transition from a category VII to a category VIII insurance carrier, as per AM Best's guidelines, is well underway,” Shevawn Barder said.
The executive continued: “We're diligently working towards bolstering our capital base, progressing a mix of equity and debt solutions, and we’re confident that this strategic bolstering of our surplus will amplify our ability to deliver exhaustive, innovative solutions.”
“Enhancing our surplus and ascending to category VIII aligns with our dedication to sustainable growth and service broadening,” the chief executive added.
A category VIII carrier has $100mn-$250mn in capital, compared to a $50mn-$100mn category VII platform.
Increased competition in the fronting carrier sector is one of the reasons why ASIC has pivoted to reinsurance opportunities from the primary side over the last months as it presented them with a broader client base with which to deploy capacity.
As this publication has discussed, there has been a proliferation of fronting companies or hybrid fronts, with around 20 dedicated firms formed in recent years.
In addition to competition, the recent downfall of Vesttoo — the ILS platform involved in a scandal related to alleged fraudulent letters of credit — has led many MGAs and fronting companies to look for alternative capacity providers as some seek to replace lost paper, creating additional opportunities in the sector.
Simon Barder said: “Competition is intense, especially in the fronting market, which at times struggles to secure top-tier reinsurance capacity.”
He said this competition enabled it to “pivot from the densely populated primary space to the quota share market when needed, which provides more lucrative opportunities.”
Meanwhile, Shevawn Barder said that the fronting model is experiencing more challenges than before, and these challenges look to have evolved beyond just credit risk. “It is for this reason we are focusing more so on quota share reinsurance business which poses more appealing opportunities in our view.”
The E&S market
The executives anticipate a hard market in various lines, particularly property, to continue fueling E&S growth in 2024.
The rapid growth in E&S has been one of the major themes in the US market over the last few years as the space has benefitted from surging flow of business from the admitted channel as well as rate momentum.
The surplus lines share of P&C commercial direct written premium rose above 20% for the first time in 2021 and ended 2022 at 21.6%, according to AM Best data.
But while the ratings agency has projected the surplus lines market will play a growing role in the overall P&C insurance space, it has also noted that growth slowed down in 2023 compared to 2022 rates.
Yet, some are still seeing surging growth into E&S property and some long-tail casualty lines.
Yesterday, Ryan Specialty president Tim Turner said that, besides property cat, some classes including transportation, consumer product liability and construction are seeing increasing demand.
Commenting on the E&S sector, Shevawn Barder said she expects growth to continue “given the continuous demand for specialized coverage and a continued squeeze on capacity.”