Premium growth in surplus lines appears to be slowing, but still growing. The first quarter ended with $2.2 billion in premium, showing a first quarter premium growth of 10.01 percent compared with 2021. Last year’s first quarter premium growth was 20.1 percent over 2020, and 2021 ended with a 14.87 percent annual premium growth over 2020.
Items processed by the Surplus Lines Stamping Office of Texas for the first quarter are up by 2.3 percent, and policy count is up by 5.2 percent.
With a record-breaking $970.30 million in premium in March alone, the single month results saw 2022 exceeding 2021’s by 10.6 percent, surpassing SLTX Executive Director Greg Brandon’s expectations. Brandon told the board when it met on March 31 that he had expected filing delays triggered in February 2021 by the extensive freeze to have pushed much of the 2021 February reporting into March last year, making March a tough month to exceed. At the time, March 2021 set a March premium record. March 2022 exceeded not only the March record, but also every single month record in SLTX history. The previous record-setting month was last June when the single month reported premium was $947.48 million.
Premium reported in March broke out 57.3 percent for renewal policies, 38.3 percent for new business and 4.4 percent for non-policy transactions. March 2022 reflected an increase of 4.8 percent in overall transactions over March 2021.
In its April 11 eNews, SLTX said that Texas surplus lines premium continues to trend with existing hard market conditions.
As of the end of the first quarter, the average premium per policy was up by 4.58 percent. Average premium per policy was $13,028 in 2022, compared with $12,458 in 2021 when the increase had a much bigger bump. In 2020, the average premium per policy was $9,603, making the 2021 average increase per policy 29.73 percent.
At the end of the first quarter 2022, the largest dollar gain of $89.02 million was in Other Liability, which made up 46.27 percent of surplus lines premium in the first quarter. This represents a premium growth of 9.58 percent over the first quarter of last year. Last year ended with Other Liability up by 16.95 percent over year-end 2020.
The next highest dollar gain in premium was in Fire (including Allied Lines), which exceeded last year’s first quarter results by $43.01 million, an 8.00 percent gain. These top two lines combine to make up 72.64 percent of Texas surplus lines premium volume.
The next largest premium dollar increase came in a line that historically makes up a relatively small percentage of the surplus lines market, Homeowners Multiple Peril. The line was up by $37.18 million, or 86.77 percent. This nearly doubling of premium in the line pushed the coverage to be 3.64 percent of all surplus lines writings, up from 2.14 percent at the end of the first quarter of 2021 and 2.80 percent at year-end 2021.
Commercial Multiple Peril held on to its third place ranking in coverages sold in the Texas surplus lines market, with 6.32 percent of all surplus lines first quarter writings. At the end of last year, the line made up 4.36 percent of all surplus lines premium. Commercial Multiple Peril premium grew by $19.76 million, or 16.57 percent in the first quarter.
The next major dollar increase was in Other Commercial Auto Liability, which was up $17.51 million, or 19.15 percent. Other Commercial Auto Liability made up 4.95 percent of all first quarter premium reported to SLTX. Same time last year, the increase over prior year was 63.92 percent, and the line made up 4.57 percent of all surplus lines premium for the quarter.
Allied Lines, which made up 2.87 percent of total taxable premium reported to the stamping office during the first quarter, was down from 2021’s first quarter by $10.47 million, making it the largest line with a decrease as well as the line with the largest dollar decrease.
Declines in surplus lines premium were spread over nine lines which together made up 7.94 percent of premium reported for the quarter. These same lines made up 10.27 percent of surplus lines premium at the end of the first quarter last year and 8.51 percent at year-end 2021.
Besides Allied Lines, other lines showing year-to-year first quarter decreases of more than one million dollars of premium were Commercial Auto Physical Damage, down $9.35 million, or 15.07 percent; Ocean Marine, down $8.01 million, or 40.33 percent, and Products Liability, down $1.42 million or 17.00 percent. Of these four lines showing decreases in this first quarter, none showed a premium decrease in the first quarter last year or at year-end 2021.
Multi-state premium for the first quarter of 2022 was nearly $67.9 million, or 3.08 percent of the total taxable premium reported for the quarter, a 2.14 percent increase over the first quarter premium last year. Policy count of multi-state insureds was down by 4.96 percent. Policy count for the quarter was 632, compared with last year’s first quarter policy count of 665. Average premium per policy on the multi-state risks was $107,408, up from average premium per policy by the end of the first quarter last year of $99,941.
SLTX continues to receive mailed filings, but noted that as of the end of the quarter, 98.7 percent of all filings were made online.
As of the end of the first quarter, SLTX collected $1.7 million in stamping fees, which is less than 20 percent of the 2022 operating budget, indicating that SLTX plans to operate at a loss for the year. The planned operating loss is the result of a board of directors and staff strategy to reduce the excess unrestricted funds held by the agency, a strategy that did not produce a loss in 2021 because premiums and resulting stamping fees, even at the reduced rate, still grew at a rate greater than operating costs.
The transition to the lower stamping fee, said Brandon during the March 31 board meeting, had a delayed effect, since for the first two quarters last year, the office continued to receive filings with inception dates prior to Jan. 1, 2021, when the lower stamping fee became effective. The same delayed effect would occur when the stamping fee changes, up or down, in the future, Brandon added.