Pat Ryan: Prolonged hard E&S market driven by cyclical and structural factors

The hard E&S market has a way to run because it is driven by structural as well as cyclical factors as an increasing number of risks have found a long-term home in the sector, according to Ryan Specialty Group chairman, president and CEO Pat Ryan.

Speaking to The Insurer TV in the latest in our series of Leading Voices interviews, the industry veteran said: “It is undoubtedly the hardest, the most robust and prolonged E&S market growth rate I’ve seen in my career.

“Now we don’t know how long it’s going to last, but it seems to have legs here.”

Ryan, who founded the eponymous wholesale broker and MGU platform in 2010 and took it public earlier this year after a decade of strong growth, said he could not have predicted that the market would take off at the pace it has over the last three years.

But he said there were many signs that indicated a cyclical market change was on the horizon through the earlier part of the last decade.

Pat Ryan

“It is common after a prolonged soft market to have a hardening … it was clear that with climate change, with cyber, with social inflation, the world was going to continue to get riskier, and you needed the rate and form to meet those risks,” Ryan commented.

The executive pointed to London and the admitted market taking on “a lot of risk that hadn’t worked out very well” in the mid-2010s, and that the market had “got very aggressive and there was going to be some pain coming down the road”.

He said the innovative nature and opportunity inherent in insurance broking is especially apparent in the E&S market because of the freedom of rate and form.


And at the same time there were tailwinds that presented the serial industry entrepreneur with the opportunity to build a “very strong position” as a wholesale broker and MGU in the E&S market.

There was consolidation among retail brokers – including by private equity-sponsored capital providers – that in turn led those retail brokers to get bigger and look to consolidate their own wholesale panels.

Then, there was great impetus for growth in the delegated authority space with the MGU model becoming increasingly popular among entrepreneurial underwriters and carriers looking for a variable cost model.

“So it all came together as a confluence of events that I actually felt were going to happen. I’m not prescient, but I’ve been around the business long enough to connect the dots to know that if this is happening and that is happening, then it’s likely these things are going to happen,” said Ryan.

Structural changes

For Ryan, the current market conditions are not just driven by cyclical factors, but structural ones too.

“What I think is structural is that certain risks – I’d say cyber, a lot of climate change and a lot of casualty products where you’re going to be going to trial on issues – have found a long-term home in the E&S market and they won’t be bouncing back as readily [to the admitted market],” he said.

And he added that the role of the E&S market and its ability to be innovative and use the freedom of rate and form means that it should be able to capitalise on opportunities in a world where complex risks continue to emerge.

Pat Ryan – 2

But the executive said that Ryan Specialty did not need to rely on hard market conditions to prosper.

“For the first seven years of being in business we were in a soft market and we grew at double digits all the way through. We grew at double digits because we had the expertise that was required at the time and even though it was a soft market and was competitive they still needed the intellectual capital.

“We don’t go out of business when the market softens – the needs are still great to differentiate ourselves and help the retail broker, they’re just on a different scale and a different degree of intensity,” he explained.