Excess & Surplus Industry Trends with CRC Group

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ANDREW: Here with me today is Dave Obenauer, CEO of CRC, one of the leading excess and surplus wholesalers. And Dave, great to have you here.
DAVE OBENAUER: Andrew, great to be with you, as always. And look forward to today's discussion.
ANDREW: Excellent. Now, I'm going to go through five areas. And why don't we start with the cycle and E&S durability? Excess and surplus premium has tripled over the past decade, roughly from $40 billion in 2014 to $130 plus in '24, with commercial share now near 26%. So Dave, where do we see that share in 5 years, in 10 years, and what's the core driver of the next leg?
DAVE OBENAUER: Yeah, actually, when you think about the share gains, it actually goes back for more than 10 years. In fact, if you go back over the last 25 years and you normalized out the impact of the Great Financial Crisis on AIG, in particular, the E&S market grew faster than the overall P&C commercial market four out of every five years, so 80% of the time.
That, I think, is largely driven by the riskier world that we're all in and those risks being more effectively placed in the E&S channel. And then along with that, you've had an increased professionalization, in my view, of the distribution side of the channel through larger firms that are focused on it. And also on the underwriting side, the carrier side, a real focus around building channel-specific underwriting platforms to support the space. So all that's kind of led to where we are today, to the 26% you've currently mentioned.
I do believe that the E&S market will continue to grow faster overall than the standard market, not at the pace of the last 10 years, but I think we'll continue to see more risks fall into this space. And we're seeing that already in many new risk categories, whether it's AI, or the reemergence of cyber as a more complicated field given AI, and the number of other areas that include risks that are still very much prone to the impact of excess inflation on loss costs. So all that, I think, plays into ongoing growth of E&S both on an account basis and a dollar basis.
ANDREW: Got it. And in CRC's book today, where are admitted carriers leaning back in? What part of E&S share gain is structural versus simply cycle-driven?
DAVE OBENAUER: Yeah, I think it's worth noting, at least for us, and I think this is pretty consistent across our industry, is we do more than just E&S. In other words, we also provide distribution and underwriting for standard lines products that are admitted. And that's roughly a third of what we do. So it's pretty material to our overall business.
We are seeing more traditional standard lines carriers play more actively in smaller, less complicated risks. But even with that, we're still seeing growth in those channels and those categories of risks with flow into the space net still increasing quarter over quarter.
ANDREW: Got it. And maybe just fleshing that out, the second topic would be near-term organic growth at CRC. One of your peers, one of your leading peers, just posted low double-digit organic growth in the first quarter, which was great. But the company is guiding to 0% in the second quarter on the pressured property pricing, and then mid-single-digit for the whole year on more actually SME casualty competition. So with that as a backdrop, how is CRC's organic growth shaping up in 2026? And what's driving the puts and takes?
DAVE OBENAUER: Yeah, we also see the impact of property pricing on our portfolio. It's certainly in line with what you've heard from that peer. And we see mid-single digit as a pretty reasonable expectation for the marketplace and for ourselves this year overall. In the back half of the year, we think will be less weighted to the property market that we have in the first half.
And also, we think some of the pricing that we've seen decelerate so actively in the first half will likely begin to decelerate in the second half on property, just given the many-- now three years in a row-- of rate reduction for property insurance.
ANDREW: Does mid-single-digit feel pretty reasonable for next year as well? I know it's a far ways off.
DAVE OBENAUER: Yeah. On property, depends on what happens with losses this year, for sure. I think absent losses, I think mid-single digits or even maybe on the upper end of that is a reasonable guess for next year, in my view.
ANDREW: Great. And then maybe moving to our third topic, AI, both the offense and the defense, AI could shape the E&S value chain with each layer trying to capture more of the economics. On offense, where can AI make CRC meaningfully better? What do you think the key areas are that would be aiding you from AI?
DAVE OBENAUER: Yeah, I think before I jump to that, I think what's interesting from our perspective-- we're doing a lot in this space currently-- is it's not easy to do well. And what I mean by that is having the ability to actually effectuate the benefits you're trying to achieve requires a fair bit of institutional commitment and investment capacity.
And a lot of it comes back to data. And so being able to gather data of a high enough quality to be effective is very important, and then also, then, to be able to use the data that you have. All that requires, again, real commitment, both financially and strategically, to pull that off.
So since we are in the category of being very committed to it, I do think we're going to see some incredible benefits from it from a client value perspective on the-- being able to deliver unique solutions and even faster solutions.
And then on the cost side, there are also material benefits there to be had, especially in the back and middle office areas as we begin to automate more and more activities that had before been in the domains of either offshore partners or our own more clerical, functional tasks across the organization.
ANDREW: Got it. And on the defense, where does AI create real risk for CRC's model? Do you see retailers using AI to bypass wholesale on standard E&S risks? And if so, which classes would go first?
DAVE OBENAUER: Yeah, the history of our business in industry is that it's very hard for other firms, whether it's de novo start-up wholesale firms, or even retail clients of ours, to actually effectively build products, programs for our channel.
I don't think AI changes that at all. Honestly, I think AI certainly gives us an advantage as a firm to do that more effectively. But it's still very hard for firms not embedded in the space with the expertise and the connectivity across the organization into the industry, both on the client side and the capacity side, to actually pull that off.
So I really do think that even the defensive world, we're really well positioned to act on it before anyone else does. Doesn't mean we're ignoring that as a threat. It certainly is a potential threat. But I think our ability to execute around all that, even for simpler E&S risks, puts us in a place we can be a real value to our clients and our carriers in those efforts.
ANDREW: And as your margins improve with this AI, do you think clients and/or retail brokers will come after you on the margin to give it back? Or do you feel like the value is robust and worthy of your increasing margins?
DAVE OBENAUER: Yeah, I think the value is there. I think it's the latter. It's worthy of increasing margins. And the history, again, of our industry is we've all become more efficient. We've been able to drive enhanced margins. And we've been able to retain enhanced margins. And I think there's margin opportunity across the value chain through AI, and not just in our specific domain in distribution and underwriting, but also on the retail side and the carrier side.
ANDREW: Got it. So everybody's going to win, in that sense. So it sounds like net-net, wholesalers are going to be winners over the next 10 to 20 years. I think the answer you're getting at is value proposition, what you do so well in terms of placing these unique risks. But is that the big reason? Or is there another one-liner that kind of fits why wholesalers will be powerful in the next 10, 20 years?
DAVE OBENAUER: I think a lot of it comes back to the core of our industry and why it exists, and that's innovation. Our ability to innovate-- now with AI supporting that-- will keep driving our channel to be a valuable part of the distribution chain.
And if anything, I think now, firms like ourselves that are large scaled, and capable can now industrialize that innovation in a way that even we couldn't do 10, 15, 20 years ago. So, to me, it's innovation is what is going to drive this next wave of success for ourselves as a firm. And we are very leaned into it, for sure.
ANDREW: Interesting. That takes me to the fourth topic, business mix and underwriting economics. CRC has long had MGA-like economics with Tapco and binding, while Atrium adds Lloyd's underwriting exposure and Euclid deepens the underwriting side. So Dave, how do you want the mix to evolve over time across fee-based brokerage versus MGA versus underwriting P&L exposure? Where do you see the best risk-adjusted returns?
DAVE OBENAUER: Yeah, we think of our business in those two channels, distribution and underwriting services, essentially. We do not take any P&L risk from underwriting performance itself. And that's an intentional design of our firm.
So we really have those two businesses that we believe act together as a really valuable flywheel effect, where you can build products for the distribution side. And distribution can then be a source of production for those products. And that all comes through investing in scale. So my point being is that both together are very valuable, in my view. I like the mix we're at today. We're roughly 2/3-1/3 on a revenue basis between distribution and underwriting.
But I do see us growing more in underwriting, primarily because there's more acquisition opportunities in underwriting, and because I think that's, for us, a more likely international expansion area than the distribution side. So all that together is, I think we'll see underwriting become a larger part of what we do and still leveraging the benefit of the proximity to distribution that we have.
ANDREW: Super helpful. And then it gets me to our last topic, talent. Wholesaling talent is increasingly competitive. We saw the episode with Brown and Brown and Howden in late '25. That was a reminder. What's CRC's retention playbook for producers? And how do you weigh paying up for proven talent versus building and training internally?
DAVE OBENAUER: Yeah, this one's a topic very near and dear to my heart. And as a reminder, we've been owned-- prior to the last two years-- by a very large, successful bank, but not an owner that is the natural fit for our business. And as a result, because of that, we didn't have all the tools we now have around attracting and retaining talent, including a meaningful equity program, including being able to invest in things like AI and product development and that M&A activity.
So all that said, we've been able to have really strong retention even before all the things we're doing now because of our culture. And culture, for us, is really about enabling our people to be successful on our platform. And a lot of that comes down to what we do every day and how we collaborate.
So that, along with all the things we're doing now to invest to make that platform even more valuable to our clients, to our carriers, and to our people, is what really is driving inbound talent opportunities to ourselves. We've been very much a net importer of talent now for two or three years running, given our newfound kind of private company focus. And I expect that will continue as we continue to invest in our platform and we continue to build this ownership mindset.
It's also worth calling out, quite frankly, is our industry and our firm is limited by the talent available. We could grow more if we had more talent. So as a result, we're doing a lot of growing our own talent now and have had very good success in doing so. And we expect that to be a major driver of our success in the future years.
ANDREW: And I think in the past, Dave, we've talked about retention. It's very high at CRC. And that's a reflection of what you just described. right?
DAVE OBENAUER: That's right. We've had really strong employee retention even before having things like an equity program available to ourselves. It's only now stronger with things like that in place. And the excitement across the organization has never been higher.
We just actually completed a Great Places to Work survey and came out very well on that and been certified as a great place to work as a good evidence around both the firm that we are and the excitement of our people, which are-- was all the input to that survey in terms of the outcomes of it.
ANDREW: Dave, thank you so much for being here, great insights. Really enjoyed learning about the excellent strategies and operations at CRC. So until next time.
DAVE OBENAUER: Well, great to be with you, Andrew. Thanks for the time. And I hope you have a good balance of the week.
ANDREW: You too.
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