Apparently, someone (up there) thinks I like roller-coaster rides, because that’s what this year has felt like!
When my kids were younger, we hit quite a few amusement parks. My favorite is Idlewild Park, which happens to be only a few miles from my home. It really is one of the most beautiful and family-friendly parks in the country. You don’t go there for the thrills, but if you want to spend a really pleasant day with your ‘younger’ kids, Idlewild is the park to visit. Of course, as my kids got older, the real draw to an amusement park became the roller-coasters. We’d have to seek out the fastest, upside-downiest and spinniest. The 100 year-old wooden roller-coaster at Idlewild was definitely the ricketiest, but that wasn’t the thrill they were seeking!
It is natural for economies to trend up and down and even get derailed because of unnatural circumstances. I believe good governance can help us get back on track. Though in the midst of a global pandemic and a U.S. presidential election, the stage is set for lots of people to have opinions. I have learned to only share mine while I am drinking and that is usually only in the comfort of my own home! Instead, I prefer to stay focused on what’s happening in the insurance market. I am no Warren Buffett, but if you were desperate enough to ask me, I would advise you to Stay Calm and Write More Excess and Surplus Lines business!
It’s no exaggeration to say this year has been a gut-clenching roller-coaster of a ride. We started the year with a lot of momentum. When March and COVID hit the bottom dropped out, and we went barreling down the tracks, barely able to breathe. Since June our economy has been on a roller-coaster ride of a lifetime battered by the impact of COVID-19, the terrible storms and wildfires in the south and west, and dare I say it, the political landscape. Team Tuscano has been affected just as you have, but I am proud to say that they have done a fine job of adapting and moving forward. Here we are heading into the home stretch of the year, and we’ve hired several new staff members. We are gradually working our way back into the office, and we are reaching as many or more customers through our online webinars and CE than we did in the face to face world. Still, I’d rather have face to face AND more customer interactions. Basically, I’ll take cotton candy and a caramel apple!
I’d like to finish up this letter with a few comments about the state of the insurance market. We’ve all heard that premiums are going up, though I’ve not seen any instability in the market or lack of capacity. Rather, I believe whatever hard market we see in 2021 will be due to poor underwriting results and losses. Premium increases will be necessary to offset the losses we’ve seen in this year and in anticipation of the years to come (wishful thinking won't magically stop hurricanes and wildfires from happening). In this year hurricane losses will be over $6 billion and wild fires losses will be more than $2 billion. On top of that, the numbers they are throwing around for losses attributable to COVID 19 blow me away. Whether these losses are being paid or just defended, they are affecting the in-force premium and making a significant impact on the insurance market.
Even without these CAT losses to deal with, there is also the matter of social inflation, something I’ve been seeing all too much of – paying multiples of what we would have paid to close a claim only a few years ago.
I hear from my underwriting staff that prices are going up in the P&C classes. On some of the tougher classes the increases can be dramatic. Some companies do this better than others, but we know a premium increase can be a hard pill to swallow. The bottom line is we want to help and we will work with you. If the renewal pricing needs a second look, then call us. Give us a last look on your new business; if we can help you sell our quote we will. No matter what, we are on this roller-coaster together!