Ryan Specialty’s Emerald Underwriting Managers capitalizing on US casualty dislocation
Emerald Underwriting Managers has quickly gained traction since launching a year ago to capitalize on dislocation in the US casualty market, and according to a pair of its underwriting executives, the Ryan Specialty MGU is having success filling gaps on towers as other capacity providers have retrenched.
Emerald is led by industry veterans Dan Houska in the US and London-based Joe Murphy and has prided itself on bringing solutions to tough-to-place risks with gaps in their towers that brokers have been desperate to fill.
The MGU targets manufacturing risks, including those for industrial machinery, parts, component parts, electrical and mechanical components, along with construction practice and projects business as well as wraps.
It also writes business focused on the energy, services, real estate, hospitality and distribution sectors.
“We look for where there's a need in the marketplace and see if we can provide a solution for it,” said London-based assistant vice president and class underwriter Colm Sheedy.
Sheedy was speaking to Program Manager alongside his US-based colleague Kaitlin Schoch at this year’s WSIA Annual Marketplace in San Diego last month.
“We're seeing a period of real hardening that has maybe stabilized a bit, but we're still seeing capacity pull out of certain types of areas that is creating real opportunities for MGUs like Emerald,” Sheedy said in an interview.
Emerald writes primary general liability (GL) policies, along with lead excess and excess layers.
On a GL basis the MGU offers a max limit of $2mn/$4mn/$4mn.
The underwriting outfit writes business with a minimum of $10,000 and max $250,000 deductible or self-insured retention, and when sitting excess will offer $5mn in maximum lead excess capacity, and deploy up to $10mn of occurrence and aggregate limit further up the tower.
US and London footprints expand Emerald’s submission flow
Emerald has underwriting teams both in the US in Chicago and in London, which Sheedy and Schoch said give it the opportunity to “blend attachment points” and participate on different spots on the towers it underwrites.
“[The US team] gets to play lower down on towers and we can look at large excess towers, allowing for a blended approach to attachment across the overall portfolio and allowing us to see where the opportunities lie,” Sheedy commented, saying the transatlantic approach distinguishes Emerald from other MGUs.
Both the Chicago and London teams have the same underwriting guidelines, but their distinct geographies mean that both underwriting teams capture different opportunities.
“We tend to see different business than the US, and the US tends not to see the business that comes to London, so we make sure that we have two bites of the apple, so to speak.”
Opportunities emerging on lead, buffer layers
The executives said on the business their firm is seeing other markets are still scaling back limit deployment.
Sheedy described $5mn excess of $5mn layers as generally having more than sufficient capacity, but that brokers have found it challenging to place layers sitting immediately excess of primary layers.
“That might be born out of things like auto, which has ruined so many E&S books that people get a bit scared of it,” he said, adding that solutions have been found where layers immediately above an insured’s primary policy might get split up with a $2mn layer excess a primary policy and then a $3mn excess $2mn or a $2mn excess $3mn.
Treaty exclusions, Sheedy noted, have added to the capacity constraints facing the market.
“Excess of $5mn [a lot of carriers can do it], but the umbrella [layer] seems to be the toughest one to place,” he noted.
Schoch said increasing loss trends particularly for habitational risks in New York, Florida, and California have also created an additional demand for capacity.
“Once you get that lead – even if it’s a $1mn lead or buffer layer – to be able to build after that gets so much easier, but it’s just securing that first piece where [brokers] are really struggling,” Schoch explained, “so we’re trying to figure out how we can offer solutions.”
Insureds weighing affordability versus coverage
With loss costs on the rise, Schoch said a lot of deal negotiations have come down to insureds making decisions that center on trade-offs between securing coverage and affordability.
“The brokers are having to go to clients to give them ‘this or that’ option,” Schoch said of trade-offs buyers are having to make between premium costs and securing sufficient coverage.
Schoch said in cases where insureds have faced claims, there has tended to be a greater willingness on the part of the buyer to pay additional premium to secure needed coverage.
“[Buyers who have had losses] are starting to get more cautious, but brokers are also educating clients that these coverage terms and endorsements are important,” she said.
“Being new, you have to prove yourself,” Schoch explained, adding that with tough risks coming in the door, the MGU has been focused on being “smart and selective” with the business it is quoting.
“You just have to be smart about [difficult risks]. It's all about the terms and conditions and making sure that you're getting a price you think is reasonable and fair for what you're offering,” Schoch added.