February 22, 2021
Rep & Warranty Insurance: Are Higher Premiums Here to Stay?
RWI premiums rose sharply in the second half of 2020. This Woodruff Sawyer blog reviews the changes in the market during 2020, and considers whether the significantly higher pricing environment experienced in recent months is here to stay. This excerpt suggests that while the rate environment remains frothy, there is the potential for stabilization and a return to lower rates during 2021:
So, new year, new capacity. Underwriters have new goals to hit in terms of written premium and a fresh amount of capital with which to underwrite. It’s early in the year, but we are already observing some trends. January is usually a quiet time, but not in 2021. We are seeing deal flow still unseasonably high and a market not yet sure of its response.
On risks we are sending to market, we are seeing a wide margin of pricing options come back. Minimum rates are 2.2%, while maximum rates are 4%. Sometimes we see that big of a range of pricing on a single deal.
In terms of deals being done, we have observed that they still trend toward the COVID “winners”: video games, gardening supply and home improvement, telemedicine, online media, online services, and the usual constant run of SaaS and tech deals.
We believe the market will continue to settle as 2021 progresses. Currently, our average premium rates are around 3.5% rather than the 2.5% of old. We expect to see this continue into the first quarter but hopefully return to pre-COVID rates by the second quarter.
– John Jenkins