David Nelson, the executive vice president of Excess and Surplus (E&S) Wholesale at Nationwide, recently shared insights about the growing importance of the E&S property insurance market. This sector, once seen as a niche for unusual risks, is now becoming essential as the traditional insurance market struggles with increasing natural disasters and regulatory challenges.
In an interview, Nelson highlighted the rising frequency and severity of natural disasters, such as hurricanes and wildfires, as major factors pushing businesses back into the E&S space. He explained that the costs associated with reinsurance, driven by these catastrophes, have made it difficult for traditional carriers to provide adequate coverage. As a result, gaps in coverage are widening, and E&S is stepping in to fill those voids.
Nelson emphasized that the agility of the E&S market allows Nationwide to offer specialized coverage for high-risk properties, particularly in areas prone to disasters. However, he stressed that this agility must be balanced with caution. "It’s not about writing everything," he said, pointing out that Nationwide focuses on growth that aligns with its brand and trusted partnerships.
Affordability remains a significant concern, especially in states like Florida and California, where the risk of catastrophes is high. Nelson advocates for collaboration among all stakeholders, including consumers, regulators, and carriers, to address the issue of insurance affordability. He believes that this involves not just pricing but also risk mitigation and regulatory reform.
Data and technology play a crucial role in the growth of the E&S market. Nelson stated that using data effectively is vital for accurate risk pricing, which is essential for the long-term sustainability of the business. He noted that technology is foundational for supporting specialized underwriting talent, allowing underwriters to have both flexibility and expertise.
Looking ahead, Nelson sees the E&S market as a permanent fixture in the insurance landscape rather than a temporary solution. He described it as a pressure-release valve, absorbing risks that traditional insurers can no longer manage. Regulatory changes, particularly in high-risk states, are being closely watched, with hopes that reforms will benefit consumers and clarify the market.
Beyond natural disasters and regulations, Nelson pointed out that broader economic factors, such as tariffs and commodity price fluctuations, are reshaping underwriting assumptions. These factors pose additional challenges for pricing accuracy, and Nationwide is actively monitoring their impact.
Ultimately, Nelson made it clear that Nationwide’s involvement in the E&S space is not merely a response to current market conditions. Instead, the company aims to build a stable and viable business model that effectively matches risk with price, ensuring a sustainable future in the insurance industry.