New entrants’ success in excess and surplus lines will depend on several factors, including when they entered the market, the layers in which they operate and the availability of secure but reasonably priced reinsurance, brokers and other experts say. 

While some will thrive in what remains an attractive market for insurers, others may find it tougher going, they say.

“Some of them will be successful, and some of them won’t,” said Liz King Kramer, New York-based president of excess and surplus lines at Munich Re Specialty Insurance. 

There have been about two dozen new entrants in the market over the past few years. They include Ategrity Specialty Insurance Co. in Scottsdale, Arizona; San Francisco-based Resilience Cyber Insurance Solutions LLC; London-based Inigo Ltd. and Helix Underwriting Partners Ltd.; and Vantage Group Holding Ltd. in Bermuda.

“We’ve seen a number of new entrants over the last few years attracted by the market, but anecdotally there’s evidence that the number of new entrants has slowed,” said Nick Davies, West Hartford, Connecticut-based CEO of managing general agency Aurenity, which began operations in January 2022.

Mr. Davies said given reinsurance capacity constraints, it is tough for both MGAs and insurers “to get off the ground.”

Reinsurance rates have soared for many cedents this year. 

“It’s beginning to slow down in terms of new (managing general underwriters) and new players in the E&S space,” said Timothy W. Turner, president of Chicago-based Ryan Specialty LLC. “It’s much more difficult to start an MGU than it was a year ago,” because of capacity constraints. 

In addition, concerns have arisen over those companies associated with the fraudulent letter of credit scandal surrounding Vesttoo Ltd., with some rushing to replace reinsurance capacity that had been secured via the online reinsurance intermediary. 

“The industry is waking up to fronting companies,” with managing general underwriters having “some real challenges and difficulties,” Mr. Turner said. 

Generally, though, new entrants will enjoy the benefits of the hard market, experts say.

“I think they all intend on staying for a period of time as long as rates continue to increase,” said Joel Cavaness, president of Rolling Meadows, Illinois-based Risk Placement Services Inc., a unit of Arthur J. Gallagher & Co.

“I haven’t seen anybody leave the marketplace,” he said. “So far, the new entrants are sticking around,” and he said he expects that to continue. 

For the most part, companies that have entered the market are “here for the long term” and have been disciplined in their underwriting approach, said Dave Obenauer, CEO of wholesaler CRC Group in Mendham, New Jersey. 

“As long as the demand’s there,” and there is expertise on the managing general agency side, “that’ll continue to be a growth story,” he said. 

But some established insurers say the new entrants could face challenges.

Sanjay Godhwani, Boston-based president of Berkshire Hathaway Specialty Insurance Co. North America, said that in most cases, new capacity is usually deployed in the excess layers, so, depending on rates, discipline and losses, “it can end up good or bad.” 

Matt Dolan, president of North America Specialty at Liberty Mutual Insurance Co. and its Ironshore unit, distinguished between the new entrants of 2020 and 2021 and those who came later. 

The relatively older entrants “have a little bit of traction and I think some of them have gained some momentum and a level of credibility” compared with those that entered later in the cycle, he said. 

Mr. Davies of Aurenity said the outlook will be specific to the MGAs entering the market, “but those focused on underwriting profit over underwriting scale” have a better chance of success. “We certainly count ourselves as having a much better chance of making it through a difficult time” in terms of rate and capacity, he said.

Eventually, the point of having too many new markets will be reached, said Jayson Taylor, Denver-based head of excess casualty at Argo Group, said. “There’s only so much business to go around,” he said.