TO EACH HIS OWN: E&S ROLE IN NEW YORK HOMEOWNER'S MARKET.

• Position: [COVER]

This study of New York's $3.7 billion dollar home owners insurance market was underwritten by the Excess Line Association of New York. It was initiated to determine if the excess line market competes with the admitted market for homeowners insurance business in New York State. All analysis, findings and conclusions are solely those of NovaStance Analytics.

The study was by conducted by NovaStance Analytics of Hartford, CT. Primarily responsible for the design, execution and writing of the study was Frederick O. Yohn, Jr. Dr. Yohn has 30 years of experience researching the property-casualty insurance industry, including positions at Aetna Life & Casualty, Conning & Co., Insurance Services Office (ISO)/Verisk Analytics and MarketStance LLC.

Dr. Yohn holds B.S. degrees in Engineering and Economics from the Massachusetts Institute of Technology, and MA and Ph.D. degrees in Economics from Princeton University. Prior to his career in the insurance industry, Dr. Yohn served as a Senior Economist at the Board of Governors of the Federal Reserve in Washington, D.C.

EXECUTIVE SUMMARY

Excess and Surplus lines ("E&S") placements in New York's homeowners insurance market represent a very small - less than 1 % - share of New York's entire homeowners insurance market. 1 Nevertheless, these E&S policies fill two crucial niches in this important market, providing coverage for: homes with high coastal proximity, and/or homes with very high insured values. The clear differentiation between these niche markets and New York State's core homeowners insurance market confirms the importance of separately evaluating each market.

In each of the two niche segments, the E&S market's share is material, reflecting admitted market carriers' traditional reluctance to accommodate unusually high value or higher risk coverage, specifically proximity to coastline for the latter. Conversely, admitted market carriers' dominant share of the much larger core homeowners market - which is estimated to account for 2.6 million policies - attests to the virtual absence of direct competition from E&S carriers in this core market. A close examination of the admitted and E&S markets clearly demonstrates that they do not compete for homeowners insurance business and instead serve distinctly different insureds.

OVERVIEW

E&S Policies in New York's Homeowners Insurance Market About 20 thousand homeowners policies were placed in New York's E&S market in 20172. These placements represent less than 1% of that year's 2.86 million NY homeowners policies, and account for $66 million in direct written premium, less than 2% of the $3.7 billion in written homeowners premium.3

While the average premium on homeowners policies placed in the E&S market - at $3,264 - was greater than the average for all New York state homeowners policies, the bulk of this difference is due to significantly higher average insured value of homes covered in the E&S market as well as to higher risk...