< PreviousAN ACCEPTED STANDARD AM Best is recognized throughout the world as a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Our 120+ years of experience provide a respected perspective that can help you make more informed decisions. 21.MK166E Our Insight, Your Advantage ™ Learn More: www.ambest.com (908) 439-2200View past Issues & Answers sections at www.bestreview.com/issuesanswersarchive.asp Special Advertising Section ISSUES & ANSWERS: Interviewed Inside: Gary Pearl One80 Intermediaries An industry expert discusses the new opportunities and the importance of technology in the affinity insurance market. NEW DEVELOPMENTS IN THE AFFINITY PROGRAM MARKETSPECIAL ADVERTISING SECTIONSPECIAL ADVERTISING SECTION Issues & Answers Share this edition at www.bestreview.com/issuesanswersarchive.asp. BEST’S REVIEW • NOVEMBER 202221 one organization and leverage each other’s strengths to better serve our respective clients. Our management teams have known and respected each other for decades—and are friends. How do you leverage technology and what it means to your end consumer? For the first 50 years of our company’s [Pearl Insurance’s] history, we were dependent on standard enterprise systems built for a broad sector in the insurance industry technology. We have never been able to get one of these vendors to build the type of functionality we have needed for our niche business. We ultimately decided we needed to invest in and build a more sophisticated, user-friendly technology built to support our specialized business. We’ve made those investments to a significantly greater degree than any of our competitors in this market—and that ultimately has paid significant dividends with us winning more accounts from our competitors as a result of the efficiency gains we’ve achieved and our ability to provide best-in-class digital shopping and self-service experience for our customers and their members. Gary Pearl, Affinity Groups Practice Leader, One80 Intermediaries, said the company will selectively grow its association life & health business through targeted acquisition of existing programs from competitors, along with driving organic growth within existing programs. Following are excerpts from an interview. How does One80 define an affinity practice? At One80, we define affinity as “a group of individuals or businesses formed around a shared interest or common goal.” We primarily focus on programs for professional associations and union groups, as well as insurance programs for business verticals such as small-to-midsize law firms, engineering firms, accounting firms and Realtors. There are additional opportunities that we’re beginning to explore where we will be able to successfully market and administer association group insurance products to online communities that are also bona fide associations. Additionally, there are broader affinity groups, such as members of other strong affinity organizations for example, frequent flyer program participants, Costco members—where we’re considering offering products and services that may work well for those consumers. What are the high-level trends you are seeing in the affinity insurance space? Clearly, we’ve seen many acquisitions of privately held broker/ administrators in the affinity market over the past couple of years– more so than we’ve seen since the early to mid-1990s. As a result of those acquisitions, affinity groups are paying more attention to the market now and beginning to determine whether they should explore their options for partners that can bring them more products and services for their members’ insurance programs. Many of the longtime players in the affinity space have not made the investments in their organizations. As a result, affinity organizations are realizing the current technologies that their members are missing out on. How will the consolidation strategy that One80 is deploying provide clients with competitive terms, conditions and pricing? At this point, One80 has acquired four businesses in the affinity program market over the past year. Although there is some overlap in markets served and programs managed within these companies, there are a lot of areas in which the four organizations complement each other with other affinity products and services. Pearl Insurance was acquired as a platform company for future growth in the affinity program space, and we are looking collaboratively at how we can be stronger working together under Affinity for Growth Gary Pearl Affinity Groups Practice Leader One80 Intermediaries “We will continue to work across our organizations on effective integration of our businesses and operations as well as potential acquisition of other brokers/ administrators in our markets to expand our affinity platform.” Visit the Issues & Answers section at www.bestreview.com to watch an interview with Gary Pearl.22BEST’S REVIEW • NOVEMBER 2022 Pie CEO Says $315 Million Fundraise Advances Expansion to Full-Stack Carrier Pie distributes direct, through wholesale and retail agencies and via partnerships with payroll and small and medium-sized businesses. by Renée Kiriluk-Hill I nsurtech delegated underwriting authority enterprise Pie Insurance, which operates as a managing general agent, plans to transition to a full-stack carrier, deepen its workers’ compensation business and expand to at least one other commercial line in 2023 following a $315 million fundraise, co-founder and Chief Executive Officer John Swigart said. The company is working on acquiring a second carrier, a shell company that will Renée Kiriluk-Hill is an associate editor. She can be reached at renee.kiriluk-hill@ambest.com. Workers’ Compensation23 BEST’S REVIEW • NOVEMBER 2022 bring 50 state licenses, he said. Last year, subsidiary Pie Carrier Holdings acquired Western Select Insurance Co. and its three licenses—since expanded to 19—and renamed the company Pie Casualty Insurance Co. Pie isn’t yet directly writing business on Pie Casualty, but it is taking balance sheet risk, assuming 24% of premium from partner SiriusPoint, said Swigart. It will acquire a second shell to give Pie a base for differentiated offerings across the spectrum, he explained. “We write a very broad range of customers—Main Street retail, offices, restaurants up through general contractors, trades, transportation risks, lower- to middle- and high-hazard risks. We need multiple insurance companies.” It is building out an in-house claims organization after hiring Chief Claims Officer Dimitrius King, who formerly held leadership roles in personal and commercial lines at Liberty Mutual and Hartford, in May. The frequency of claims in the workers’ compensation space has returned to pre-pandemic levels and severity is slightly higher, said Swigart. During the pandemic, injured workers had less access to medical care, delaying appointments, elongating issues and making for a slower return to work. The situation is improving but hasn’t fully resolved, he said. The Workers’ Compensation Insurance Rating Bureau of California sought a 7.6% increase this year on advisory pure premium rates that was rebuffed by regulators. “It usually starts in California then shows up in other places,” said Swigart. “I don’t know where the inflection point is. I do see a stability and leveling” in the near term. The Series D fundraise was the largest round of financing for any U.S.-based property/casualty insurtech company this year, Pie said. Overall, Pie has raised more than $615 million. “The real key is having a business that’s performing well … strong underwriting results, loss ratios that aren’t three digits,” said Swigart. The round was led by Centerbridge Partners and Allianz Group’s digital investment arm, Allianz X. White Mountains Insurance Group joined as a new investor. Another goal is to near profitability within two years, Swigart said. He was with Esurance from 2003-2013, helping to build the direct automobile insurance company that was acquired by Allstate, along with sister company Answer Financial, from White Mountain Insurance Group Ltd. for $1 billion in 2011. “I was involved in building one of these businesses before. I understand where you can get out over your skis. Growth is phantom growth when it’s underpriced,” he said. Until a business reaches sufficient scale, an insurtech’s expense ratio will run too high, said Swigart, but growth isn’t sustainable “if you’re charging less than they should be paying.” Becoming EBITDA—earnings before interest, taxes, depreciation and amortization—positive would head off another fundraise, he said. Pie distributes direct, through wholesale and retail agencies and via partnerships with payroll and small and medium-sized businesses. It is working to expand each channel, said Swigart. With the changes underway at Pie, Swigart said hundreds of people have joined the company since the end of last year. Even so, he said it remains “selective. We’re not hiring too far in advance” of needs. Managing generating agent operations will continue as a financially distinct company from Pie carriers, according to Swigart. BR “We write a very broad range of customers—Main Street retail, offices, restaurants up through general contractors, trades, transportation risks, lower- to middle- and high-hazard risks. We need multiple insurance companies.” John Swigart Pie Insurance24BEST’S REVIEW • NOVEMBER 2022 Travelers Group and Hartford Insurance Group retain the No. 1 and No. 2 spots in a ranking of workers’ compensation direct premiums written, as just six of the top 25 carriers remained unchanged in a 2021 marked by shifts in virtually all levels, according to AM Best research. by Terrence Dopp T ravelers Group held onto the top spot in AM Best’s ranking of the top workers’ compensation writers by direct premiums written despite posting a 5.1% decline in 2021 to about $3.55 billion, in a year marked by a reshuffling of the top carriers in the business segment. Only six of the top 25 remained unchanged in the ranking, which was marked by shifts in virtually all levels even as the No. 1 and No. 2 spots, held by Travelers Group and Hartford Insurance Group, held steady. Even those companies showed the divergences that were common in the rankings: Hartford’s $3.29 billion in DPW was up by 10.1% over the previous year. The U.S. workers’ compensation insurance market totaled about $52.25 billion in 2021 based on direct premiums written, a gain of 2.1% from the prior year. AmTrust Group, which jumped to No. 3 from the seventh-place position a year earlier, saw its DPW in the workers’ compensation line jump 25.2% to about $2.45 billion at the close of 2021. The company’s performance, which was the largest gain among the list, sat well above the industrywide growth of 2.1% during a year dominated by the COVID-19 pandemic and a jump- starting economy. Just five of the top 25 workers’ compensation carriers saw growth in the double digits and 11 actually saw a drop. CopperPoint Insurance Group, which took the 25th spot on the ranking, had the largest decline with its $478.24 million in DPW for 2021 down by 16% from the prior year. It moved down from the 22nd slot at the close of 2020. The Arizona-based company specializes in workers’ compensation and Terrence Dopp is a senior associate editor. He can be reached at terry.dopp@ambest.com. Workers’ Compensation Top Workers’ Comp Ranks See Movement Upon Emerging From COVID Unemployment SpikeWorkers’ Compensation 26BEST’S REVIEW • NOVEMBER 2022 commercial property and casualty coverage. Rounding out the top five, Zurich Insurance US PC Group moved down one spot to No. 4 with DPW of $2.35 billion, which was a 5.7% drop from the prior year. Chubb INA Group also dropped one spot to fifth with $2.2 billion in DPW, down 4% from 2020, according to the ranking. Aside from Travelers and Hartford, Old Republic Insurance Group, Great American Property & Casualty Insurance Group, W. R. Berkley Insurance Group and Fairfax Financial (USA) Group were the only carriers to retain their positions in 2021. Old Republic, ranked 10th, saw a 0.8% drop to $1.29 billion in DPW. No. 12 Great American saw a 1.3% increase to $1.18 billion and 13th-ranked W. R. Berkley was up 4.8% to $1.14 billion. Fairfax, which took the 18th spot, saw a 7.5% increase to post DPW of $752.8 million. Workers’ compensation is the third-largest component of the commercial market behind (general) liability and auto, according to the Best’s Market Segment Report: Workers’ Compensation Generates Solid Profits but the Future Remains Uncertain . That research found that while concerns persist, the impact of the pandemic was largely muted even as growth was impacted in 2020 and 2021 by the rise in unemployment and rate pressures. Premium volume rebounded in 2021 as people returned to work following COVID-19 lockdowns, yet recent years have seen it declining compared to pre-pandemic years, according to the AM Best report. According to the report, the workers’ compensation line remained the most profitable among the key property/casualty lines of coverage in 2021—especially long-tailed P/C lines—and it experienced favorable loss-reserve development. The growth in written premium for 2021 marked the first year-over-year increase since 2016. “Despite the increase in 2021, overall, yearly premiums continue to decline, due mostly to downward pressure on rates and pricing owing to competition because of the segment’s profitability,” the report said. “The premium increase in 2021 was not sufficient to offset the drop in 2020, and direct DPW remains below even 2014 amounts.” BR Best’s Rankings US Workers’ Compensation – 2021 Direct Premiums Written – 2022 Edition ($ Thousands) 2021 Rank 2020 RankCompany/GroupAMB# 2021 Direct Premiums Written % Change in Premiums Market Share (%)Adjusted Loss Ratios % of Company Premiums 202120202019202120202019 11Travelers Group018674$3,547,060-5.16.87.37.551.462.650.311.5 22Hartford Ins Group0000483,293,68910.16.35.96.046.449.748.624.3 37AmTrust Group0185332,449,89625.24.73.83.945.935.042.244.1 43Zurich Ins US PC Group0185492,354,376-5.74.54.94.751.748.652.915.7 54Chubb INA Group0184982,203,827-4.04.24.54.343.323.243.28.1 65Liberty Mutual Ins Cos0000602,086,375-6.74.04.44.654.954.444.95.0 76Berkshire Hathaway Ins0008111,927,849-3.53.73.94.145.643.141.93.7 89State Ins Fund WC Fund0040291,733,1047.63.33.23.666.889.070.4100.0 98AF Group0186801,667,442-0.13.23.33.152.956.152.174.6 1010Old Republic Ins Group0007341,292,040-0.82.52.62.555.154.754.625.1 1114State Compensation Ins Fund0040281,235,45114.72.42.12.176.880.538.8100.0 1212Great Amer P & C Ins Group0048351,179,9821.32.32.32.339.940.939.315.5 1313W. R. Berkley Ins Group0182521,139,4014.82.22.12.252.448.745.813.8 1411Amer Intl Group 0185401,103,342-7.22.12.32.690.055.641.47.5 1516TX Mutual Ins Co011453923,4490.01.81.81.947.954.152.3100.0 1617CNA Ins Cos018313842,9703.41.61.61.542.048.540.86.7 1715ICW Pool002967835,665-13.31.61.91.947.243.347.791.1 1818Fairfax Financial (USA) Group003116752,8017.51.41.41.528.931.431.77.9 1920Arch Ins Group018484655,8353.81.31.21.145.644.051.612.3 2019Starr Intl Group018756589,005-11.11.11.31.266.737.125.712.9 2124Markel Corp Group018468585,00617.51.11.01.046.840.638.97.9 2221Employers Ins Group018602582,6082.11.11.11.246.239.044.3100.0 2323Pinnacol Assur 003471539,4245.41.01.01.166.860.257.4100.0 2427SAIF Corp003480521,96413.91.00.90.9138.470.790.8100.0 2522CopperPoint Ins Group018724478,237-16.00.91.11.043.842.847.980.8 Top 25 Writers$34,520,7981.166.166.767.852.749.947.112.8 Total U.S. P/C Industry$52,247,1982.1100.0100.0100.051.148.947.66.5 Reflects Grand Total (includes Canada and U.S. Territories). Source: — State/Line (P/C Lines) - P/C, US; data as of June 9, 2022.22.BNRS18DF Our Insight, Your Advantage ™ Learn More: sales@ambest.com 333Ȑ ) !/0Ȑ +)ˏȼˏȬȏȅȎȭˏȊȈȏȥȇȇȅȅ STAY UP TO SPEED WITH BEST’S NEWS & RESEARCH SERVICE Get a fresh perspective on the global insurance industry with AM Best’s comprehensive news and research service. With a new name and a new look, this streamlined resource delivers fast, efficient navigation to the real-time news, research and thought leadership you need to make informed decisions. Best’s News & Research Service was formerly known as Best’s Insurance News & Analysis. Contact customer_support@ambest.com with subscription questions.Next >