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Ironshore arrives in E&S top 10 as AIG stabilises

Ambitious US and international specialty insurer Ironshore made it into the top 10 list of US surplus lines carriers for the first time in 2011, a report by rating agency AM Best has revealed.

The Boston-headquartered group climbed to ninth place, leapfrogging QBE and Alleghany, as its direct premiums written (DPW) increased by 17 percent and its market share moved from 1.6 percent to 2 percent.

Meanwhile, American International Group arrested its decline in premium volume and reversed a vertiginous decline in its share of the $31.1bn US surplus lines market.

A year earlier the giant insurer, which sells surplus lines insurance through its Chartis and Lexington subsidiaries, had reduced its writings by 13 percent to $5.34bn. In 2011 the firm stabilised its DPW at this level, and since the overall market continued to shrink, the group's market share actually increased marginally from 16.8 percent to 17.2 percent.

Volume at market leader Lloyd's remained almost constant at $5.79bn while its market share increased slightly from 18.3 percent to 18.6 percent year on year.

The comprehensive report noted that the market had continued to contract over the period, shrinking 1.8 percent in volume to $31.1bn - the fifth consecutive year of decline.

However the rate of decline slowed notably from the 3.8 percent registered a year earlier and the agency noted positive commentary on rate rises in the US from players in the P&C sector in the first half of 2012.

AM Best said that many surplus lines insurers had reported lessening competitive pressure from standard admitted market companies, adding that while this trend had not signalled a decisive shift in the market, it was enough to help reverse the four-year decline in premium produced by surplus market specialists.

The agency explained that the surplus lines industry's growth and contraction largely tracks with the overall insurance market cycle, noting that when market conditions harden, standard market carriers tend to turn away from surplus lines risks to focus on their core business.

The report illustrated this phenomenon with a chart showing that improved pricing tends to produce outsized levels of surplus lines growth, perhaps indicating happier times on the horizon for the sector in 2012 and beyond.

The agency reported that market consensus was that rates firmed in some areas in 2011, particularly in workers' compensation and catastrophe-exposed property lines in response to recent adverse results.

AM Best said it expected to see further price hardening as a consequence of the diminished inventory of reserves from earlier accident years.

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