How one wholesale broker is getting ready to take advantage of additional resources
The Amwins Group collaborated on this article.
Gia Snape of Insurance Business interviewed Korbin Holck, senior vice president, personal lines at Amwins Access Insurance Services, on the problems and potential in the California insurance industry.
The California insurance market has faced significant challenges in the last two years, principally as a result of the acknowledged marketplace impact. This upheaval has had a substantial impact on the Excess and Surplus (E&S) market, especially in areas prone to wildfires.
With capacity constraints, large submission volumes, and difficulty placing high-value wildfire risks, the market is under great strain. The issue has been compounded by the frequency and severity of wildfires, which have resulted in significant insured losses.
But there are signs of positive change on the horizon, according to Korbin Holck, executive vice president, personal lines, at Amwins Access Insurance Services.
“We are anticipating an influx of capacity in the next 12 months, bringing innovative and tailored solutions to address the ever-evolving landscape,” said Holck.
This anticipated increase in capacity will provide insurers with more flexibility in their underwriting practices and allow for greater creativity in risk management. Wholesale brokers and retail agents must remain vigilant and embrace opportunities coming to the market over the coming months.
California wildfires – what’s the impact on insurance?
California has always been susceptible to wildfires due to its unique topography, climate, and vegetation. However, the past few years have seen a marked increase in the frequency and intensity of these fires. In 2023, the state experienced over 7,100 wildfires, which burned more than 324,000 acres of land, according to the California Department of Forestry and Fire Protection.
The financial damage has been tremendous, with insured losses totalling more than $12 billion. This has created a difficult climate for insurers, who are compelled to manage an increasing number of claims with a limited pool of resources.
The admitted insurance market in California has struggled to keep up with the increased risks linked with wildfire. Many insurers have lowered their capacity or exited the market entirely, unable to absorb the financial losses associated with underwriting these high-risk products. This has put enormous strain on the E&S market, which has become a last resort for many property owners in high-risk zones.
Three main challenges have emerged as the market adapts to this new reality:
- Capacity constraints: Insurers in the E&S market are facing significant capacity constraints. As the number of high-risk properties seeking coverage increases, insurers must carefully manage their risk exposure to avoid becoming overextended. This has led to a more selective underwriting process and increased scrutiny of potential policyholders.
- High submission volumes: The fallout in the admitted marketplace has resulted in a surge of submissions to the E&S market. Insurers are being inundated with requests for coverage, many of which involve properties with a high wildfire risk. This has created a backlog, slowing down the underwriting process and increasing the time it takes to provide coverage.
- Difficulty placing high-value risks: Properties with high values in wildfire-prone areas are particularly challenging to insure. These properties often require specialized coverage and higher policy limits, which can be difficult to place given the current market conditions. Insurers must balance the need to provide coverage with the necessity of managing their exposure to potential losses.
Innovative solutions in California’s challenging market
Amwins, for its part, is well-positioned to capitalize on the changes in California. With the creativity and expertise of its local team, Amwins is leading the charge in underwriting by layering risk and crafting unique strategies to meet the market’s demands.
By implementing a strategic approach to wildfire risk coverage that includes the deployment of innovative aggregation control tools and new products tailored to manage high-value risks in wildfire-prone areas.
For Holck, effective communication is key to this process. By maintaining open lines of communication with their retail agents, Amwins stays informed about the evolving needs of their clients and the market as a whole.
“Our strong suits are understanding the specifics of each account, prioritizing time to uncover intricate details and premiums, and supporting our partners in closing sales,” Holck said.
There are a few key strategies that have helped Amwins navigate the complexities in California:
- Deployment of innovative aggregation control tools: Amwins has invested in state-of-the-art aggregation control tools that help underwriters better understand and manage their risk exposure. These tools allow for more precise modeling and forecasting.
- Development of tailored products: Recognizing the need for customized solutions, Amwins has developed new products specifically designed to address the unique challenges of insuring high-value properties in wildfire-prone areas. These products offer flexibility in terms of coverage and pricing, allowing for a more tailored approach to risk management.
- Relaxation around modeling and aggregation control: The ability to relax certain constraints around modeling and aggregation control has allowed Amwins to deploy aggregate in meaningful ways, providing better tools for underwriters, better technology, and improved methods for managing aggregating risk.
“We concentrate on identifying important details, premium types, and growth opportunities by comprehending our retail agents’ needs and the particulars of each account,” stated Holck. “This proactive approach strengthens our mutual growth and drives success by empowering our partners.”