Boom or bust: What MGAs are seeing in commercial lines

With many people still working from home, one marine underwriter has seen the pleasurecraft line of business “take off.”

But that doesn’t mean it’s smooth sailing for marine underwriting. It can still be difficult finding capacity for small- or mid-sized commercial risks, said MaryKate Townsend, manager and senior underwriter at Pacific Marine Underwriting Managers (PMU). “Large cargo and things like that is maybe not as challenging.”

It can be difficult to place a risk for a smaller contractor who, for example, is located in remote northern Ontario and needs to take their tools and employees to an island property to do work, or one who offers towing, or operates a vessel rental business.

“Risk appetites are becoming more specific, more selective,” Townsend told Canadian Underwriter. “Smaller, less attractive risks are much tougher to place as a result of the hard market where underwriters have capacity constraints and insurers are tightening their underwriting criteria in an attempt to increase profitability. With these issues in mind, some insurers have implemented minimum premium thresholds that have to be met, and many of these smaller commercial risks don’t meet that criteria.”

That makes these risks “tricky to place,” said Townsend, who oversees PMU’s eastern region operations, as well as underwriting the pleasurecraft business for brokers in Saskatchewan, Manitoba and Ontario. She is also the new president and a board member of the Canadian Association of Managing General Agents (CAMGA).

“There’s a lot of business being displaced in the market on the commercial line side of things,” Townsend said. “I know a lot of brokers are struggling to find insurers that will take on some of these risks.”

Townsend spoke with Canadian Underwriter Friday about what’s on the agenda for her as the new CAMGA president, as well as how the hard market is affecting MGAs from a capacity perspective.

There seems to be limited capacity for higher-value vessels because sustaining a loss on that one high-value risk can have a significant effect on an MGA. “It’s important to maintain balance,” by spreading the risk, she said.

And with Lloyd’s and other markets hit pretty hard from hurricanes in the United States over the past several years, fewer and fewer markets are willing to provide some coverages such as named windstorm or hurricane.

“That’s become increasingly challenging,” Townsend said of finding markets for coverage. “I’ve seen some people being creative having to find American insurers to take those risks on.”

Closer to home, there was a bit of a silver lining for MGAs during the COVID-19 pandemic. For example, with many large event cancellations, some MGAs were able to insure a drive-in event where a certain number of people were able to gather. “We may have that flexibility to be able to come up with a valid solution where the regular carrier may not have that opportunity, or may not have that expertise to be able to accommodate these types of requests,” Townsend said.

This was particularly true in the pleasure-craft line of business. With more people staying home, boating is becoming a “newfound hobby,” as people buy boats or get their boats out of storage.

As a result, the limited inventory for new and used boats available this year has created an effect of inflated vessel prices, much like the current housing market. This in turn creates “a little bit of extra underwriting because we want to make sure we’re insuring everything to value.”

A number of underwriting questions have to be considered, such as:

• Who is in control at the helm of the vessel?
• What kind of experience do they have with what type of boat?
• Do they have appropriate boating experience?
• What is the condition of the boat? And how old is it?

“So, we’re really trying to ask a lot of questions and make sure that we understand the risk entirely,” Townsend said. “It’s essential that we ask the right questions to dissect the risk, which allows us to provide the best coverage for the client.

“Some of the guidelines are a little bit tighter and that’s across the board with carriers and MGAs. People are just being really careful about what they’re writing, and really having to be thorough in their underwriting.”

 

Feature image by iStock.com/Elenathewise