“Insurance is very old and changes slowly, and for a reason”

Jett Abramson (pictured), executive vice president of casualty insurance and national construction leader for Amwins Group, has seen firsthand how construction insurance trends and growth drivers have shaped the new reality for the industry.

Reflecting on the unique perspective of an E&S broker, Abramson said growth in their segment does not necessarily correlate with overall industry expansion.

“The industry could theoretically shrink in terms of premiums while our segment grows,” he explained. “I’m a casualty broker, so from that narrow perspective, we’ve seen a change since the 10-1 renewals in 2019, when the surplus market went crazy.”

A significant change was the reduction of capacity by larger carriers, both on standard lines and in E&S markets.

“We used to build $100 million umbrella towers with four operators, sometimes three. Now, if you do $100 million, you’re bringing in 10 operators, sometimes more,” Abramson explained. Retailers, once accustomed to direct coverage for the first $10 million to $25 million, are now turning to E&S markets because of reduced direct operator capacity.

“We started seeing transactions that we wouldn’t normally see in the E&S market four or five years ago,” he added.

Sharing an anecdote that highlights this inconsistency in carrier capacity decisions, Abramson recalls that one carrier’s insurer admitted that it initially reduced capacity under the agreement but fully restored it two years later.

“I called him right after the renewal and said, ‘When did you act stupid? Yesterday or two years ago?’” Abramson told IB. The insurer acknowledged that the decision to restore capacity was driven by growth goals, not a risk assessment that Abramson criticized as shortsighted.

Reinsurance also became too expensive, leading to a change in risk management strategies.

“Our market has become so efficient that we operate as if there was no reinsurance available at an appropriate price anymore,” Abramson noted.

The growth in casualty insurance is primarily due to increased litigation funding. “Litigation funding has led to an increase in the severity and frequency of claims,” Abramson explained. “Claims that used to be $300,000 are now $3 million, and those that used to be $3 million are now $10 million.”

Turning to the construction sector, Abramson noted a revival after a period of stagnation caused by rising interest rates.

“Rising interest rates have made mortgages more expensive, and construction costs have also gone up,” he explained. While some regions, such as California’s Central Valley and metropolitan areas like Denver and Nashville, are booming, developers who rely on debt financing have faced significant challenges.

Abramson also discussed challenges in the hospitality sector as it recovers from the COVID-19 crisis. “Many Americans have already burned through the money they saved during COVID, which has led to a temporary boom in the hotel industry,” he noted.

The gig economy, particularly micromobility companies like scooter services, are facing regulatory challenges and losses. “They have been hit hard by regulatory environments and high losses,” he added.

Addressing regulatory challenges, Abramson points to the impact of COVID-19 on project execution in the construction industry.

“City inspectors have been less efficient during and after the COVID pandemic, which has delayed the issuance of occupancy certificates and complicated project implementation,” he said.

When it comes to innovation in the insurance industry, Abramson is skeptical of rapid change.

“Insurance is very old and slow to change for a reason — predictability,” he explained. “If some insurance company or MGA said they were going to revolutionize the industry, they didn’t. And if they did, it’s going to take a lot longer than they think. At least people are pushing for change — because if you don’t push, they never will.”