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AIG holds firm atop E&S rankings in Q2 even as market share slides

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AIG holds firm atop E&S rankings in Q2 even as market share slides

American International Group Inc. is still leading the pack in the excess and surplus insurance segment, but its share of the market continues to decline, according to an S&P Global Market Intelligence analysis.

The collective market share of the top 20 U.S. E&S insurance writers also fell in the second quarter to 72.77% from 73.66% a year earlier. That group did, however, record a significant increase in direct premiums written, up to $7.88 billion from $6.94 billion in the prior-year period. Among the 20 largest E&S writers, 18 saw premiums written rise year over year.

AIG has seen its share of the E&S market fall to 9.15% from 12.43% in the second quarter of 2017. The company recorded written premiums of $991.5 million in the second quarter versus $1.06 billion a year ago.

CFRA Research analyst Cathy Seifert said AIG's risk management appetite waned when it was dealing with the fallout from the financial crisis. But now that it has recovered, the insurer may be poised to hang onto its leadership position in the E&S marketplace.

Sandler O'Neill analyst Paul Newsome expects AIG's E&S premiums to "continue to shrink in the near term," but that is not necessarily a bad thing for the company.

"What you do, when you're trying to do that, is let other people have your least profitable business," he said.

Markel Corp., at No. 2, has narrowed the gap with AIG over the last two years. Markel's share of the E&S market ticked up to 7.38% from 7.19% a year ago and 7.05% in the second quarter of 2017.

Although the company has reported higher numbers year over year and maintained its ranking, RBC Capital Markets analyst Mark Dwelle does not believe the company aspires to dominate the E&S market.

"I think Markel's focus has always been on niches where they have an advantage and believe they have an underwriting edge," he said.

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The quarter also saw Zurich Insurance Group AG slide several notches from the prior year and the full-year 2018 rankings. The Swiss insurer recorded premiums of $260.1 million in the period from $279.0 million a year earlier, pulling it down to No. 14.

James River Group Holdings Ltd. jumped to the No. 12 spot, up from 18th a year ago and 17th as of the close of 2018. The insurer's premiums increased to $268.0 million from $165.2 million in the prior-year period.

CFRA's Seifert said it would be interesting to see the impact, particularly on some of the property-based covers, of climate change and related environmental issues.

"What I anticipate we will see is perhaps the surplus lines market having to step in and cover some risks that standard lines underwriters may be taking another look at and thinking that [those risks are] sort of outside of their risk tolerance," she said.