State of the E&S Market with CRC Group's CEO, Dave Obenauer

Visit TheInsurer.com for more information about this interview.

Recently, CRC Group's CEO Dave Obenauer sat down with David Bull from the Insurer to discuss the state of the E&S Marketplace.  It was a great conversation, and we're happy to share it with you.

"Strong growth in the E&S market shows no sign of letting up as a confluence of loss events, and a greater awareness of risk drives demand for products and solutions that are best innovated in the sector, according to CRC Group CEO Dave Obenauer.

With record levels of business flowing through the wholesale channel, data from the US Surplus Lines Service and Stamping Offices for the first half of 2021 shows that premium soared 22 percent to $24bn.

Speaking to The Insurer TV in the latest of our Leading Voices series, Obenauer said the current E&S market is the best he’s seen in terms of demand and supply."

Visit REDYIndex.com for critical pricing analysis and a snapshot of the marketplace.

Do you want to take your career to the next level? Join #TeamCRC to get access to best-in-class tools, data, exclusive programs, and more! Send your resume to resumes@crcgroup.com today!

Transcript

Dan Wentz: 0:22

Recently CRC group CEO Dave obon hour sat down with David bull from the insurer to talk about the state of the wholesale insurance marketplace. It was a great conversation, and we're happy to share it with you today. If you'd like to learn more about the insurer TV or their leading voices series, which is the source of this interview, visit them at the insurer.com check the show notes for the link.

David Bull: 0:45

Hello, and welcome to the latest installment of our leading voices series of one to one interviews with industry leaders. We're joined by CRC group CEO Dave over now who I'm sure will give us some great insights on a marketplace that has been thriving in recent years, as well as well as prospects are going forward. Now all wholesalers such as his company are positioning themselves to address the continued opportunities. Welcome, Dave.

Dave Obenauer: 1:06

Thank you, David. It's great to be with you.

David Bull: 1:07

Dave. I want to start off by having you talk about the market as you see it at the moment. DNS market grew by another 20% plus in person based on surface line staffing office data. And of course, wholesaler has been reporting rapid growth over the last couple of years, would you say this is the best market you've ever seen in your career?

Dave Obenauer: 1:24

Yeah, from the perspective of the US market, in terms of demand and supply, quite frankly, for sure. It's a market that most people a few years ago predicted would never happen again. But food for thought just a few years ago to have the confluence of events of the pandemic social unrest, social inflation, core inflation, and a number of natural catastrophes over 100 year plus events. So all that's really impacted both the supply and the demand for our products in DNS. And it's put a lot of opportunity in our laps around solving for challenging needs. And the bigger picture is that, you know, risk clearly is a growing factor in our world. And if anything, DNS marketplace, in particular, is the best position, I think to help address those risks. As we think about the the world going forward. You've got pricing data at your fingertips. Dave, what are you currently seeing across different lines of business? And how do you see price momentum through 2021? And beyond? Yeah, great question. We keep a very close look at that. We have detailed information by product by industry and by geography for a number of areas for sure. In general, I would comment that is still a rate increase environment, the pace of rate increases is decelerating this year, but still a pretty healthy rate over rate environment this year versus last year. If you don't get access and umbrella, for example, it is up still comfortably in the teens, it was up in close to the 20% range last year. So it is compounding its growth for sure even this year. Private DNO is up around 10%. This year, coming down a bit from the mid teens we saw last year. And then interestingly enough, as you might expect some coverages cyber being the most notable, perhaps, is under a lot of pressure, given the underwriting results and concerns around ransomware. That's actually up 40%, which is an increasing trend from the last year. And we'll see that I think continuing that marketplace in particular. So overall, I think it will mean that pricing positive environment for the US marketplace this year and likely into next year from everything we see. And we hear.

David Bull: 3:35

Do you think the the growth we've seen in the ns market over the last couple of years is a cyclical phenomenon driven by the ebb and flow between the standard and in its market? Or would you say it's more of a structural or permanent shift?

Dave Obenauer: 3:48

I think it's both David, I think there's been a long go long term ongoing trend of growth of the US business as a percentage of the overall property and casualty business. And I think that does reflect your point, your point around risks becoming greater and us being the market to help solve those risks as we evolve as a society. So there's been that ongoing trend for sure underlying what we see. But then clearly, in the last year or two, there's been significant kind of temporal events that don't always happen pandemic being one of them. I think the risks around ransomware certainly are spiking very significantly. And some of the things like social unrest and natural catastrophes that I mentioned before, are unusual in terms of our history in the industry, and even the last 10 years. So I think there's a clearly a point in time that we're seeing increased demand and need for DNS, along with the ongoing trend of us becoming a bigger part of the property and casualty insurance business within the US.

David Bull: 4:49

Now I'd like to talk a bit about how the wholesale broking landscape has changed the emergence and of course, now dominance of the Big Three firms. They what would you say has been the main drivers of that and any scale everything?

Dave Obenauer: 5:02

Yeah, I think the main driver is quite frankly, customer needs and expectations, customers that retail brokers want to deal with fewer wholesalers and those idea with they want those wholesalers to have the scale the expertise, expertise and depth of resources to handle all their needs across the country. So that's that's the driving force. It's been enabled for sure by the capital entering the US business on distribution side that allows for the consolidation we've seen and continues continues to happen on a weekly basis in what we see today. So it's really a customer driven need. Those customers want better analytics, they want more options, they want quicker service, they want more integration on technology, the kinds of things that to your point around scale, are, are very hard to accomplish without the scale, quite frankly, and is another driver behind the rationale as firms become larger are able to deliver better services and better quality of outcome to our clients.

David Bull: 6:01

So as one of the big three giant wholesalers, how do you ensure you don't lose that specialty focus? That's a hallmark of the US market and the wholesale broker.

Dave Obenauer: 6:11

It is absolutely a hallmark I agree entirely. Yeah, we think of ourselves as specialists, for sure. And the reason for that, quite frankly, is the people that that are the client facing experts that we have around the country remain specialists, our people tend to focus on an area or two. And that's what they're known for, in terms of their expertise and their delivery to clients. And that hasn't changed. They may all have the same business card brand. But they all have expertise series that cover the waterfront, quite frankly, when we think about the vast array of client needs. And also to our discussion earlier, as those needs change in a very quickly evolving world. Our folks are often the first to develop new solutions and deliver those to our clients.

David Bull: 6:56

Thanks, Dave, and how how would you say the relationship between retailers and wholesalers has evolved in the last decade? And how has that shaped your strategy?

Dave Obenauer: 7:05

It's interesting to think about over a decade or so, to your point, David, that far ago, or maybe 15 years ago, there really wasn't any sort of organized corporate relationship between the retail clients of a wholesale broker and a wholesale broker that changed over time. So our engagement with our clients at the CRC corporate level is very significant and a big part of our focus every day, that complements what happens transactionally every day and executing in the marketplace. But it was clearly before the current corporate model, pretty much a transactional relationship, one that solved the needs at the point in time, without any sort of corporate strategy development or joint business planning the kinds of things we now do routinely with our clients to build a business together that allows our clients to grow and grow profitably in the years that they're focused on that we can help them solve for

David Bull: 8:00

them. As we've reported, you've recently restructured your your business. Can you explain a bit about the rationale behind that and also how it sets you up to meet client needs and capitalize on current market conditions, particularly in light of that evolving relationship.

Dave Obenauer: 8:13

And we're very excited about the restructuring. In this case restructuring is really all about delivering more to clients on on a more consistent basis. We accomplish two things with a restructuring one. We've established a new vertical, a vertical we call life retirement benefits solutions that is headlined by a company we've had part of the family here for a long time, known as Crump. Crump is the largest wholesaler for life, annuity and related products in the US, and is a real solution for the wealth management and private client solution centers for our various retail clients. So that that new vertical allows us to get into a space that we've been, quite frankly, in already, but not really focused on in terms of delivering more consistently to our retail clients. So we're very excited about what that means as we build out that area further, both organically and through acquisition. They're part of our reorganization was to establish a much more significant programs operation, we recently closed on an acquisition of constellation affiliated partners. And we've got that combination along with what we already have within the family. We underwrite about $4 billion through our mga platforms each year. And that gives us an incredible depth of expertise and talent to help carriers underwrite risks, and then deliver those products consistently to our clients across the country. So we think about CRC group now we have the full scope of being able to solve for transactional wholesale needs for all sizes of clients across the country, able to get into life retirement benefit solutions for those same clients, and then offer mga bespoke products that we underwrite on behalf of various carriers to deliver to our retail clients. So we really think it rounds us out nicely and presents a platform within CRC group that, quite frankly, we think's unparalleled in the industry.