Monday, November 19, 2012

The State of the Longshore Market

If you are not in the Longshore market frequently you may not have noticed that almost overnight we have switched to a hard market, for virtually every significant traditional Longshore carrier.
It is worthwhile to catalog here some of the issues that are developing because of this.

The vast majority of Longshore accounts are being remarketed right now and the number of submissions on every underwriters desk (electronically or paper) has increased exponentially since the beginning of the year. Realistically that means EVERY underwriter is now more backlogged than they have ever been. Thus getting middle market risks turned around in less than a week is practically impossible. Larger or more complex risks could be 2 weeks or more.  

ACTION… Start earlier and manage the client expectations to reality.

INFORMATION: The number of submissions is making the underwriters more selective, that requires information to be more TIMELY and more important to sell the story of your client. For all accounts a narrative is useful, but for middle market account, it is critical today. Gone are the days of the acord application and some loss runs. Many underwriters will not even start working a risk until such time as all the information is in hand. 
Watch out for the website – we had one recently for a marine contractor that said they built bridges and had a picture of the Golden Gate in San Francisco.  In reality all they built were little wooden bridges for carts at a golf course or a marina!  If possible sanitize the website, if not at least explain the reality of the exposure in your narrative before the underwriter reads it online.  
Add some relevant photos to the submission, especially if the operation is not the norm.

Pricing is up, 10-15% on decent accounts, more on risks with poor loss ratio or other issues. “As expiring” is only an option for the very best accounts. Prepare client early for this, AND check their mods early… add 10% to the rate and 10% to the mod and you are looking at big dollars overall.

Some carriers are pulling back out of particular states or areas, and whilst we have yet to find an area that does not at least have one or two markets, options are disappearing fast in some cases and even larger accounts and risks that have traditionally been relatively easy to handled are now heading to Assigned Risks/JUA or state funds!  Never a good idea long term.

Why is all this happening? Simply, the Longshore market has always been small, so the changes by two or three carriers who had significant books of work comp trigger are having a huge effect on our market.
Why the change for them?  Most of them are not making money in WC so instead of correcting the price, they simply withdraw. Longshore is one of the first to go in states with bad state act loss ratios, even though the Longshore books are often profitable.
Non-renewals are frequent, not the exception. Every day we receive more submissions saying “this has been non-renewed” and give a reason which is rarely specific to the client or their results.

So bottom line is:
    Start Early
    Understand mod revisions early
    Expect pricing increases for many accounts and prepare the client
    Manage expectations, no one is quoting very far out and rarely quickly
    Create a narrative, sell your client, add photos
    Make sure any website hyperbole is removed or explained.  

There is an ancient Chinese curse, may you live in “Interesting Times”.  We really are in “Interesting Times” in Longshore!