{"id":106,"date":"2020-10-20T21:21:17","date_gmt":"2020-10-20T21:21:17","guid":{"rendered":"http:\/\/www.slameeting.com\/bodoct2020\/?page_id=106"},"modified":"2021-03-02T14:40:22","modified_gmt":"2021-03-02T14:40:22","slug":"market-outlook","status":"publish","type":"page","link":"https:\/\/www.slameeting.com\/bodoct2020\/market-outlook\/","title":{"rendered":"Market Outlook"},"content":{"rendered":"\n
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2020 Market Outlook<\/h1>\n\n\n\n\n\n

Overview<\/h2>\n\n\n\n

Using two different models, the data implies that we will bring in $29.1M in stamping fees by the end of 2021<\/strong>, based on a submitted premium of $11.7B<\/strong>. This is an 8.1% increase over 2020<\/strong>. We also expect transaction counts to come in at 820,000 (7% increase)<\/strong>. The data suggests the overall Surplus Lines market will grow consistently over the next three years, peaking in 2023\/2024 and then starting to flatten with a gradual downturn.<\/p>\n\n\n\n

2021 Prediction<\/h2>\n\n\n\n

2021 Looks strong from all models thanks to Q3 2020.<\/strong><\/p>\n\n\n\n

  1. Fortunately, the market is very strong as 2020 winds down, which positively influences all models going into 2021.  While growth is not as extreme as seen in 2020, several models indicate around an 8% increase in premium with a 7% increase in transactions in 2021.<\/li>
  2. There were some industries that substantially pulled up overall 2020 premium.  This increase from 2019 was primarily due to catastrophic events and Covid-19.  Industries such as Utilities, Transit, Municipalities, Insurance, and Communications saw triple-digit increases in premium.<\/li>
  3. There were some industries that declined in overall 2020 premium.  This increase over 2019 was primarily due to Covid-19.  Industries such as retail, ridesharing, entertainment, and services saw nearly 50% reductions in premium.<\/li><\/ol>\n\n\n\n

    Future Market Outlook and Industry-specific Observations<\/h2>\n\n\n\n

    California market in 2022 and beyond<\/strong><\/p>\n\n\n\n

    1. The overall California Surplus Lines market appears to have some nice growth in 2022 and for the foreseeable future.  In 2022, the data implies that the overall market in California can expect a 9.4% increase in premium with a modest 5% growth in activity (transactions).<\/li>
    2. It looks like the market will begin to soften in 2022, as average premium per transaction begins to slow down in 2021, staying nearly flat that year with a slight increase in 2022 by 4.3%.  This may be the last year of increases in average premium, as one model predicts a downward trend going into 2023 and beyond.  Luckily, the increase in activity will keep the overall market on the plus side into the foreseeable future.<\/li><\/ol>\n\n\n\n

      Industry-specific observations<\/strong><\/p>\n\n\n\n

      1. Exhibits in appendix B show growth and decline of premium in significant industries comparing 2020 to 2019 for the same month.  The data predicted into 2021 and beyond.  This information is based on the NAICS codes of the insured\u2019s company (or personal lines) and rolled up for illustrative purposes.<\/li>
      2. Without using statistical models, one would assume that recent high growth industries will plateau in the upcoming years and possibly only renew existing policies but not add any additional coverage.  One can speculate that these industry upticks are a direct result of recent catastrophic events and Covid-19, and may not be due to organic growth or emerging risks affecting the surplus lines markets.<\/li>
      3. It is also worth noting that current legislation (California Assembly Bill 5 and Proposition 22) could materially affect premium in 2021 and beyond for ridesharing\/livery based businesses.  In 2020, these business made up 5.5% of the premium. Should these result in a non-favorable result for the livery companies, they may pull out of the State, and we would see this noticeable, but not devastating decline in premium.  However, the \u2018domino effect\u2019 could result in further negative impacts.<\/li><\/ol>\n\n\n\n

        Effect of Inflation on the Surplus Lines Market<\/strong><\/p>\n\n\n\n

        1. California has roughly a 1.8% annual inflation rate over the national average in 2020 of 1.3%.  Despite the negative effect on the residents and businesses in California of this higher than average inflation rate, it will induce price increases for surplus lines policies covering risks in the State.  It should be noted that the premium growth seen over the last 9 years can in part be attributed to inflation.  As we\u2019ve seen, when the annual numbers are adjusted for inflation, the California surplus lines industry still hasn\u2019t recovered from the recession of 2010.  Source: US Bureau of Labor Statistics.<\/li><\/ol>\n\n\n\n\n\n

          Market Outlook Exhibits<\/h2>\n\n\n\n

          A-1: FUTURE TRANSACTIONS AND PREMIUM FORECAST<\/strong><\/h6>\n\n\n
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          A-2: TOTAL PREMIUM BY EFFECTIVE\/SUBMITTED YEAR (2005-2020) IN $M<\/strong><\/h6>\n\n\n