By: Jefferey S. Lejfer, CPCU, Chief Executive Officer, New Day Underwriting Managers LLC

I’m about to celebrate my 42^nd year in the insurance industry.  In that time I have seen quite a few ups and downs.  Anecdotally it seems that we are in a constant state of a “down” market with rate erosion and increased competition.  In the world that I live in – environmental and construction related professional liability – we have never seen a “hard” market in the traditional sense.  When I moved into this space in 1991 there were two markets – AIG and ECS/Reliance.  Zurich started in 1992 and then we had a relative static environment until 1998 when Kemper jumped in.  New entrants followed gradually – in 2005 when New Day started there were 11 markets and I am proud to say that we had been appointed by all of them.  In the true contractors professional world there was only one predominate market – Zurich, however both London/Lloyd’s and Lexington played a lesser role in the true contractors professional.  Both were significant players in the architects & engineers (A&E) world.
I discuss this as we enter the end of 2016 – I am bit disheartened by the bullishness of ALL of the carriers.  While the market has grown in the environmental world to over 50 carriers and in the construction professional world to about 15 – I just don’t think there is enough new business to support the grand plans of all of these carriers – especially in the environmental product lines.
The exit of AIG from the Pollution Legal Liability (PLL) product market spurred many of the carriers to expand their environmental staff.  We see some carriers that budgeted for a dozen new underwriters and many others are adding to their underwriting staffs.  While the AIG exit was expected to add about $100 million of PLL business in the marketplace in 2016 – many of these carriers had already added staff in contemplation of growth in 2016 and I am not sure that the $100 million split amongst the existing carriers will support the increase in staff.  This expansion was great for the PLL underwriting staff at AIG – many if not all have found new homes – will there be enough new business to support them on a going forward basis.
Of course, the underlying economy will support some growth – which I believe is the primary source of growth for our marketplace.   We are still seeing economic growth – the May 27, 2016 of Kiplinger’s discussed a GDP growth of 2% for 2016 albeit down from 2.4% in 2015.  Job growth and real wage increases will drive a good portion of this and ultimately increase the demand for housing which in turn will spur new construction.  Leisure and hospitality will also see continued increases in spending.  FMI is still predicting a 6% growth in construction put in place in 2016.  So while the economy is still growing there will be some new business – enough for everyone to meet their budgets – we will have to see.
My concern is with all of the markets being bullish on their growth – I often get skeptical of the reality of all of them hitting their targets and feel that there may be some negative implications to the market.  While I am still bullish on our market as a whole – I feel that we are having net growth year over year as new customers enter the marketplace – primarily from contractual requirements for pollution and professional – individual components of the market may ultimately adversely affect the market by irrational behavior in pursuit of making their budget.
The good news of course is the net growth in the marketplace – the bad news is that it will be at the expense of price erosion as more companies and underwriters compete for that business.