By James Thaler

April 2 - (The Insurer) - Axis has pulled its admitted capacity for management liability MGA AllDigital Specialty in the state of California, largely due to a deterioration in small business employment practices liability conditions in the state, but will continue to support AllDigital’s offerings elsewhere.

AllDigital was launched by former Munich Re, Willis Re and QBE North America executive Athula Alwis in 2019 and has admitted capacity backing from Axis in 45 states and nonadmitted Lloyd’s support in all 50 states from RenaissanceRe and Greenlight Re.

The MGA wrote around $36 million in premium in 2024, split between $26 million written by Axis on an admitted basis and $10 million written through Lloyd’s on an E&S basis.

AllDigital’s suite of management liability products include primary and excess D&O for private firms and non-profit entities, as well as EPL and fiduciary coverages for insureds with up to $250 million in revenue and up to 250 full-time employees.

Axis originally struck a capacity and investment deal with AllDigital through its Axis Digital Ventures arm in a partnership that was originally announced in August 2020.

The Bermudian’s withdrawal covers all products written in California, which is believed to amount in the single-digit millions of dollars in premium volume. The exit from California is effective on July 1, 2025.

AllDigital will continue to write its suite of management liability products in California, but given market conditions, would proceed with caution in writing EPL risks even on a non-admitted basis in the state, where it plans to reduce its exposure.

Sources familiar with Axis’ management liability strategy said that it continues to be in the market in California, writing D&O business on both a direct and delegated basis.

It will also continue to support AllDigital’s management liability products in states outside of California.

A spokesperson for Axis could not immediately be reached for comment.

The MGA, which labels itself as an insurtech, currently offers $3 million primary limits and $2.5 million in limit for excess business above a $3 million attachment point.

‘CALIFORNIA EPL IS UNPROFITABLE’

It wrote $5 million in premium in 2021, its first full year of operations, $14 million in 2022, and $25 million in 2023 and has expanded its distribution footprint to 17 wholesalers as well as two retailers.

“California EPL is unprofitable, so I have no issues with Axis pulling out,” Alwis told Program Manager.

Alwis said the average premium AllDigital charges for small business private D&O coverage ranges between $5,000 and $10,000 and between $1,500 and $2,000 for non-profit entities.

“I was an actuary once (and) you at least need 40 to 50% price increase to justify putting resources and capital [behind it],” he commented, saying that California small business EPL pricing currently averages around $5,000 to $6,000 per million of coverage.

He argued that rate adequate pricing for California EPL business is closer to $8,000 to $10,000 per million of coverage.

“But with EPL (in California), I'm totally with Axis, fully supportive. It is not profitable. And unless there's a 40% to 50% price increase, I can’t see how we would offer that,” he added.

Despite Axis exiting its support for the AllDigital admitted program in California, Alwis said he and his management team view EPL as a specific challenge in California, while the MGA maintains its confidence in the state’s market for other management liability coverages.

He noted that EPL claims frequency and severity in California surged in 2022 and 2023, but has since improved, though not enough for AllDigital to grow its EPL writings in the state.

“AllDigital is fully committed to the D&O and fiduciary countrywide and will continue to put resources to work [and] work with other insurers. In EPL, we are going to be focused on non-California business,” Alwis explained.

AllDigital’s headcount currently sits at 12 employees and Alwis told Program Manager that the company is cash flow positive and is aiming to write $50 million in premium in 2025, and looks to bring aboard additional capacity to support further growth and potential limit expansion.

In addition to operating as an MGA, AllDigital has been building out a twin-track offering that also includes technology as a service product, which the company is gearing up to launch in the coming months.