OREANDA-NEWS. In this A.M.BestTV episode, Robert Raber, A.M. Best senior financial analyst, and David Blades, senior industry research analyst, said the U.S. surplus lines industry experienced a downturn in underwriting results in 2015, with unfavorable prior-year loss reserve development on general liability business one of the key drivers.

The two analysts authored a Best Special Report on the industry, titled, “Surplus Lines Financially Sound Despite Market Pressures and Economic Challenges.”

Despite the down performance from 2014, Blades said surplus lines companies did see an increase in net investment income, which helped companies’ record positive net income in 2015.

“When you look at the overall operating performance from the standpoint of the operating ratio, a metric that looks at underwriting and investment activities, the operating ratio for the surplus lines market was a few points better than that of the total property/casualty industry,” said Blades.

Raber said the use of reinsurance has helped the surplus lines sector blunt the impact of excess capacity, noting that “reinsurance companies are very happy to support surplus lines companies as they have a real appetite for the surplus lines type of business.”

Both analysts believe that the opportunities for the surplus lines sector exists in unmanned vehicles, the type of exposures that robotics will bring and in various forms of individual home deliveries.