The Cincinnati Insurance Companies have grown business for 75 years
through relationships with a carefully selected set of regional independent age
nts—and business in the surplus lines segment is no exception, executives report.
That sets the insurer apart from other E&S writers, according to Don Doyle, J
r., the architect of Cincinnati
Specialty Underwriters, an operating subsidiary of Cincinnati Financial Corporation he helped to start in 2007.
“If you look over the las
t 15 years, a lot has changed in the E&S market. Today, more than 75% of the E
&S market is controlled by three large wholesale brokers,” he told analysts an
d investors gathered for Cincinnati Financial’s first Investor Day.
“We distribute only through the agents of Cincinnati insurance. No wholesalers, no MGAs, managing general agents, or managing g
eneral underwriters,” he said, pointing out one of the characteristics that sets the company apart from competitors in the E&S business.
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Doyle, who led CSU for 17 years before turning the reins over to Dawn Chapel in a
dvance of his retirement later this year, believes that the distribution model and CSU’s control of the business has been one of the drivers of consistent profitability.
“Those three large wholesale brokers have a lot of control on where the business is going. They have a bit of control over the risk t
akers, yet they take no risk,” Doyle said without specifically identifying the big three.
Doyle spoke after President and Chief Executive Officer Steve Spray and several executives in sales and marketing descri
bed the processes of vetting quality appointed agencies for personal and commercial lines, which now number just over 2,000, and day-to-day activities that build intimate relationships between agents and their Cincinnati field representatives.
CSU was formed with a foundational philosophy of creating consistent and manageable growth, as well as consistent and manageable profitability, said Doyle, who reported that despite the ups and downs of E&S business, CSU has posted 12 straight years of combined ratio at 94 or better. The 94 combined ratio was actually the result for the latest full year, 2024, when CSU grew premiums by nearly 15%, according to Cincinnati Financial’s most recent financial report. CSU’s average combined ratio over the last 12 years is 81.8, with ratios averaging about 90 for the more recent years, 2020-2023.
Pointing to the distribution model as the first key driver of better-than-breakeven results, Doyle said “CSU does not cede underwriting authority to anyone,” referring to brokers, wholesalers and MGAs. “We are operating only through those independent agents…We want to eat our own cooking,” he said.
Technically, according to information in the group’s annual report, independent agents have access to Cincinnati Specialty Underwriters’ product line through CSU Producer Resources, the wholly owned insurance brokerage subsidiary of Cincinnati Financial Corporation. CSU Producer Resources has binding authority on all classes of business written through Cincinnati Specialty Underwriters and maintains appropriate agent and surplus lines licenses.
During the Investor Day, Doyle said another contributor to CSU’s E&S success is an underwriting appetite focused on accounts with a low risk profile while also maintaining a spread of risk that mirrors the rest of the company. He explained CSU’s typical risk has $1 million in limit or less, with the average policy size coming in at about $10,000 in classes of business removed from mass tort. In other words, CSU won’t write the toughest long-tail classes of the E&S world, like product liability for pharmaceutical manufacturers or medical malpractice, sticking instead to contracting-type risks or property management firms, hotels, motels, bars and taverns, as well as professional liability other than public company D&O. Doyle characterized the appetite as falling in the “low-to-moderate range in the E&S market.”
Exhibits contained in Cincinnati Financial’s 2024 10K annual statement filing reveal that the insurer marketed E&S products in each of the 44 states where it offers standard market commercial lines insurance, with the top five states—Illinois, New York, Ohio, Texas and North Carolina—accounting for roughly one-third of E&S premiums written by CSU.
