{"id":180,"date":"2020-10-21T21:48:03","date_gmt":"2020-10-21T21:48:03","guid":{"rendered":"http:\/\/www.slameeting.com\/bodfeb2020\/?page_id=180"},"modified":"2021-03-11T00:56:02","modified_gmt":"2021-03-11T00:56:02","slug":"fad-report","status":"publish","type":"page","link":"https:\/\/www.slameeting.com\/bodfeb2020\/fad-report\/","title":{"rendered":"FAD Report"},"content":{"rendered":"\n
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Financial Analysis Dept. Report: February 03, 2020<\/h1>\n\n\n\n\n\n

Table of Contents<\/h2>\n\n\n\n\n\n
<\/div>\n\n\n\n

Executive Summary<\/h2>\n\n\n\n
  • COVID-19\u2013diligently monitoring underwriting impact, insurer investment portfolios, rating agency actions, and regulatory responses.<\/li><\/ul>\n\n\n\n
    • Premium registered in 2020 through September was $6.3 billion for LASLI companies and $2.2 billion for Non-LASLI companies (primarily Lloyd\u2019s). Premiums from LASLI and Non-LASLI companies increased by 8.6% and 11.4%, respectively compared to the same period in the prior year. Non-LASLI companies with a large California presence are monitored, but not as extensively as LASLI companies.<\/li><\/ul>\n\n\n\n
      • Progressive Corporation was the sixth largest insurer group by premium registered ($295.7 million) during the first nine months of 2020 due to Transportation Network Company (TNC) business written by its subsidiary, Blue Hill Specialty Insurance Company Inc. (Blue Hill).<\/li><\/ul>\n\n\n\n
        • Total number of LASLI companies stands at 127, flat from December 31, 2019.<\/li><\/ul>\n\n\n\n
          • No new companies added to the List of Approved Surplus Line Insurers (LASLI) in the first nine months of 2020. Several companies applying for LASLI are in the pipeline\u2014one is currently with California Department of Insurance (CDI), and two are being reviewed by the SLA, one additional application was voluntarily put on hold by the company.  <\/li><\/ul>\n\n\n\n
            <\/div>\n\n\n\n

            Financial Analysis Projects Update<\/h2>\n\n\n\n

            Most projects are part of a multi-year effort to review, document and update Financial Analysis department processes and procedures (FA Dept Reengineering in the Master Innovation Plan). Focus is on improving efficiency, simplifying processes, enhancing team effectiveness, updating research tools and portfolio management capability, and shifting focus from compliance to risk management and monitoring (move from 50\/50 compliance\/risk management to 25\/75).<\/p>\n\n\n\n

            Projects planned for 2020 or currently in progress<\/strong> include:<\/p>\n\n\n\n

            • Creating externship<\/strong> opportunities for key staff to get broader exposure to the industry. First externship was completed by Glenn Leung in January 2020 with Sierra Specialty.<\/li>
            • Updating the current Security Summary Review (SSR) template<\/strong> with a goal to simplify the process and make the analysis more consistent while still maintaining flexibility.<\/li>
            • Redesign document checklist <\/strong>used to log receipt and compliance of required documents filed by the carriers with the Financial Analysis department. The document checklist is in the RAPID system and was designed years ago. Over time, filing requirements and business needs have changed.<\/li>
            • Continuing to refine our automated compliance review<\/strong> process to confirm all LASLI companies meet the minimum capital and invested asset requirements<\/strong> under the California Insurance Code 1765.2. Project in progress to expand<\/strong> automated compliance review to quarterly results of US companies<\/strong> where less detailed information is available. Also, in progress of reviewing information available on Non-US companies<\/strong> to determine if an automated compliance review is possible. Even though NAIC requires Non-US companies to use a template, reporting is less consistent than for US companies.<\/li>
            • Reconciling admitted companies<\/strong> in RAPID (for SL-2 form) to CDI list.<\/strong> Plan to check-in with Data Analysis periodically to ensure that revised process is meeting needs of data analysts and brokers.
              <\/li><\/ul>\n\n\n\n

              Projects completed in 2019 include:<\/p>\n\n\n\n

              • Review and update of the Company Profile templates used for US<\/strong> and Non-US companies<\/strong>. The Excel company profile is core to the LASLI company financial analysis process and is a combination of financial information downloaded from NAIC or RAPID and information input by the analyst. Improved run-time, organization<\/strong> and usability<\/strong> of the profile to support analysis and reporting. Reduced manual entry.<\/strong><\/li>
              • Updated prioritization descriptions <\/strong>to shift focus to overall financial strength of the LASLI companies, including financial support offered by the ultimate parent and\/or overall group. Completed prioritization reviews <\/strong>of year-end 2018 results of US and Non-US LASLI companies.<\/strong> Applied revised prioritization descriptions as part of this process. Prioritization reviews help the financial analysts plan the sequence of their financial reviews and highlight companies that have financial or compliance concerns to management.<\/li>
              • Implemented revised procedures to monitor and maintain admitted companies in the RAPID database<\/strong>, used by brokers to complete the Diligent Search report (SL-2).<\/strong><\/li><\/ul>\n\n\n\n
                <\/div>\n\n\n\n

                Premium Registered – 2019 (January through December)<\/h2>\n\n\n\n\n\n\n\t\n\t\n\t\n\t\n\t\n\t\n\t\n\t\n\t\n\t\n\t\n\t\n\t\n\t\n\t
                <\/td>Total Premium Registered ($000's)<\/td>Market Share<\/td>Insurer Count<\/td>\n<\/tr>\n
                <\/td>2019<\/td>2018<\/td>2019<\/td>2018<\/td>2019<\/td>2018<\/td>\n<\/tr>\n
                LASLI Insurers<\/b><\/td><\/td><\/td><\/td><\/td><\/td><\/td>\n<\/tr>\n
                US Insurers<\/span><\/td>7,293,421<\/td>5,194,392<\/td>71.1%<\/td>67.9%<\/td>108<\/td>106<\/td>\n<\/tr>\n
                Non-US Insurers (all IID listed)<\/span><\/td>344,775<\/td>324,490<\/td>3.4%<\/td>4.2%<\/td>21<\/td>20<\/td>\n<\/tr>\n
                SUBTOTAL<\/span><\/td>7,638,196\t<\/td>5,518,882<\/td>74.5%<\/td>72.2%<\/td>129<\/td>126<\/td>\n<\/tr>\n
                Non-LASLI Insurers<\/td><\/td><\/td><\/td><\/td><\/td><\/td>\n<\/tr>\n
                Lloyd's Syndicates<\/span><\/td>2,028,525\t<\/td>1,715,866\t<\/td>19.8%<\/td>22.4%<\/td><\/td><\/td>\n<\/tr>\n
                US Insurers<\/span><\/td>309,225<\/td>250,490<\/td>3.0%<\/td>3.3%<\/td><\/td><\/td>\n<\/tr>\n
                Non-US Insurers<\/span><\/td>214,304<\/td>112,052<\/td>2.1%<\/td>1.5%<\/td><\/td><\/td>\n<\/tr>\n
                Others (Suspense, Unknown Insurer, etc.)<\/span><\/td>11,258<\/td>8,715<\/td>0.1%<\/td>0.1%<\/td><\/td><\/td>\n<\/tr>\n
                SUBTOTAL<\/span><\/td>2,563,312\t<\/td>2,087,124\t<\/td>25.0%<\/td>27.3%<\/td><\/td><\/td>\n<\/tr>\n
                TOTAL - LASLI\/Non-LASLI Insurers<\/td>10,201,508<\/td>7,606,005<\/td>99.4%<\/td>99.5%<\/td><\/td><\/td>\n<\/tr>\n
                Taxable Fees<\/td>57,076<\/td>42,026<\/td>0.6%<\/td>0.5%<\/td><\/td><\/td>\n<\/tr>\n
                TOTAL - Premium and Fees Registered 1<\/sup><\/td>10,258,584<\/td>7,648,031<\/td>100.0%<\/td>100.0%<\/td><\/td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n\n

                1<\/sup> Totals may not equal the sum of components due to rounding.<\/p>\n\n\n\n

                2<\/sup> Total includes $1,168,470,944 in captured backlog.<\/p>\n\n\n\n

                • Total premium registered through December 2019 increased 34% year over year. Premium registered for 2019 includes an estimated $1.2 billion from the backlog reduction project (premium submitted in prior years).<\/li>
                • Premium registered from LASLI insurers is primarily from US ($7.3 billion) versus Non-US ($0.3 billion) companies. The count of LASLI insurers is up three from December 2018 to 129 as of December 31, 2019. Two Non-US companies are in the process of voluntarily withdrawing from the LASLI.<\/li>
                • Premium registered from Non-LASLI insurers continues to be dominated by Lloyd\u2019s syndicates ($2.0 billion, up 18% from $1.7 billion year over year).<\/li>
                • Outside of Lloyd\u2019s, the two largest Non-LASLI insurers by premiums registered are Associated Electric & Gas Insurance Services Ltd. (Non-US; $191.2 million) and Kinsale Insurance Company (US; $88.3 million). Other Non-LASLI insurers with significant premium registered include Amtrust International Underwriters DAC (Non-US; $22.7 million), PartnerRe Ireland Insurance DAC ($22.6 million), Trisura Specialty Insurance Company ($22.1 million) and Falls Lake National Insurance Company ($18.8 million).<\/li>
                • SLA Financial Analysis department monitors LASLI insurers closely\u2014a benefit to the broker community as well as to the California home state insureds. Non-LASLI insurers with a significant California market presence are monitored, though reviews are more cursory.<\/li><\/ul>\n\n\n\n
                  <\/div>\n\n\n\n

                  LASLI Applicants<\/h2>\n\n\n\n\n\n\n\t\n\t\n\t\n\t
                  Insurer<\/td>Domicile<\/td>Application Status<\/td>\n<\/tr>\n
                  Accident Fund General Insurance Company<\/td>Michigan<\/td>Pending CDI CAB's review<\/td>\n<\/tr>\n
                  AzGUARD Insurance Company<\/td>Nebraska<\/td>Pending CDI CAB\u2019s review of request for seasoning exemption<\/td>\n<\/tr>\n
                  Vault E&S Insurance Company\t<\/td>Arkansas<\/td>Added to the LASLI on 12\/13\/2019<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n\n
                  • Four companies added to the LASLI during 2019.<\/li>
                  • Review by CDI CAB in progress for Accident Fund General insurance Company (Accident Fund). CDI CAB is also reviewing AzGuard Insurance Company\u2019s (AzGuard\u2019s) request for a seasoning exemption. SLA review of Accident Fund and AzGuard on hold, pending CDI CAB\u2019s decision.<\/li><\/ul>\n\n\n\n
                    <\/div>\n\n\n\n

                    LASLI Withdrawals Since NRRA in 2011<\/h2>\n\n\n\n\n\n\n\t\n\t\n\t\n\t\n\t\n\t
                    Insurer Type<\/td>Total<\/td>Withdrew
                    Due to NRRA<\/td>                    		Withdrew from
                    Surplus Line Market<\/td>                    		Withdrew for
                    Other Reasons<\/td>\n<\/tr>\n
                    Non-US<\/span><\/td>18<\/td>10<\/td>7<\/td>1<\/td>\n<\/tr>\n
                    US<\/span><\/td>19<\/td>1<\/td>4<\/td>14<\/td>\n<\/tr>\n
                    SUBTOTAL<\/td>37<\/td>11<\/td>11<\/td>15<\/td>\n<\/tr>\n
                    Lloyd's Syndicates<\/span><\/td>78<\/td>78<\/td>0<\/td>0<\/td>\n<\/tr>\n
                    TOTAL<\/td>115<\/td>89<\/td>11<\/td>15<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n\n
                    • One company (Rockhill Insurance Company, or Rockhill) opted to withdraw from the LASLI in 2019. Rockhill\u2019s parent, State Auto, previously announced that they are exiting the surplus lines market. Rockhill ceased actively writing business in late 2018.<\/li>
                    • Two companies, Tokio Marine Kiln Insurance Limited and AXA Corporate Solutions Assurance, are in the process of withdrawing but are still included in the count of LASLI companies pending receipt of documentation and\/or CDI approval. Tokio Marine Kiln Insurance Limited is withdrawing retroactive to October 2019. Per company announcements, non-Japanese business has been placed into run-off and Japanese business will be transferred to an affiliate. AXA Corporate Solutions Assurance is withdrawing due to a merger into a sister company.<\/li>
                    • Most recent withdrawals have been due to company status changes (e.g., merger, run-off or US market withdrawal) as opposed to NRRA.<\/li><\/ul>\n\n\n\n
                      <\/div>\n\n\n\n

                      Premium Registered By AM BEST Financial Strength Rating 2019 (January through December)<\/h2>\n\n\n\n

                      Chart excludes premiums in suspense and other premiums that are not allocated to a company<\/p>\n\n\n