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Surplus lines insurer executives are tackling the challenges of 2010 with a broad range of strategies, but whatever individual approaches they may adopt, all say their main focus is on strengthening wholesaler relationships.
In fact, adoption is actually one of the new approaches being instituted at Admiral Insurance Company, where underwriters are literally welcoming brokers to the insurance company family by personally adopting them, according to Jim Carey, president and chief executive officer of the Cherry Hill, N.J.-based insurer, who identified two broker-focused initiatives.
“‘Adopt a broker’ and ‘shadow a broker’ are designed to help us bring real focus—underwriter by underwriter—to the needs and requirements of our producers,” Mr. Carey said. “Adopt a broker also allows Admiral underwriters’ to connect early in the career of new producers, providing literally a lifetime of returns as new talent comes into our producers’ offices,” he said.
Elsewhere, E&S insurance company executives described business strategies that range from simply conducting business as usual to totally overhauling their operational frameworks.
David Leonard, president of RSUI in Atlanta, observed that market conditions that persist in 2010 are not very different from conditions that have prevailed throughout most of the history of the industry, explaining why strategies at his company are unchanged this year.
“Looking back at historical results of the property and casualty insurance business, most of the time we operate in what could be called ‘other than hard market’ conditions,” he said. “That is, an environment of other than increasing rate.”
That means “the things RSUI has to do to be successful are the same—all the time,” Mr. Leonard said.
Echoing other E&S carrier executives, Mr. Leonard said these activities include:
• Providing fast, responsive service to brokers.
• Handling claims efficiently, effectively and fairly.
• Making sure to maintain and utilize financial resources to the best benefit of the carrier’s parent company.
“And, the most important in our view [is to] maintain and build close working relationships with our chosen distribution source—the wholesale broker,” he said.
At Admiral, Mr. Carey said his company has also recently created a dedicated professional liability insurance team and the company made “significant financial investments to bring [recent] initiatives to fruition,” referring to investments in people and technology.
Company management believes that when fully implemented, technology upgrades will “cut quote time in half for professional liability alone,” he said.
“Our investment in people and focus on professional liability has begun to pay off with a 26 percent increase in new business policies in 2009,” he added. “However, these tend to be smaller risks that have only resulted in modest [premium] growth in this line of business.”
“Importantly, we believe we have begun to lay the groundwork that will give us a favorable advantage when the industry begins to grow again,” he said.
“It is our strategy to take a long-term, common-sense approach,” he concluded. “We took advantage of some of the churn in the marketplace to bring some new talent into Admiral, which we believe will bring significant value in the long run.”
“This is not a short-term view of the world, but a long-term view which has served us well for more than 30 years.”
Like Admiral, business strategies at RLI Corp. in Peoria, Ill., are a combination of tried and true approaches that have served the company for decades and initiatives to ramp up IT systems and diversify the insurance portfolio, according to CEO Jonathan E. Michael.
“Our focus this year is consistent with what we’ve done not only in the last couple of years, but even in the last soft market,” Mr. Michael said. “We look to maximize our profits over a cycle regardless of whether we’re in a soft or a hard environment.”
Toward that end, Mr. Michael said RLI seeks to ensure that its underwriters exercise discipline at all levels. “That’s really been our hallmark,” he said. “Our underwriting is driven by a culture of accountability and by a compensation system that rewards underwriting profit, while not discouraging some prudent contraction when the market is soft like this,” he said.
Mr. Michael explained that RLI’s unique compensation scheme actually pays underwriters a portion of the underwriting profits they generate, adding that the company has reported 14 consecutive years of combined ratios under 100.
He also said the company continues to pursue process efficiencies “through IT initiatives, working with…agents and brokers to become more responsive to insureds’ needs, and to help [RLI’s] own cost structure.”
“We’re proud to be able to bring a product to market very quickly through our IT systems,” he said, describing a “plug-and-play” system that involves simply adding a few modules to an existing system to get a product up and running.
On the new product front, Mr. Michael said RLI consistently pursues “multiple initiatives that tend to have small footprints initially, but [that] are designed to be able to be scaled when the market improves.”
Recently added products he described to NAPSLO Daily include a fidelity operation as well as a professional liability insurance operation for design professionals.
“We’ve got a history of investing when the markets are soft,” Mr. Michael said, noting that RLI has added roughly 50 underwriters during this soft market, including seasoned underwriters looking to bring their skills and talents to a company that’s different. We allow skilled underwriters to do what they do best—underwrite.
Hiring experienced professionals to start up new products is part of the soft-market game plan at Markel Corporation as well, according to Vice Chairman Tony Markel.
Joining Markel recently, he said, are:
• Nathan Warde, a 30-year industry veteran formerly of Aspen Specialty, who joined in October 2009 as a director of property underwriting.
• Nick Bayliss, who came over from Arch in January as transportation product line manager with more than 20 years under his belt.
• Sal Pollaro from Zurich, who is going to open a D&O operation concentrating on the upper end of the Fortune 1000.
“We never really wrote the D&O before,” Mr. Markel said, noting that the focus of Mr. Pollaro’s group will be on medium- and smaller-size businesses among the Fortune 1000 (500-1000), and that the D&O products will be available for distribution through wholesalers. “We haven’t written any D&O other than condominium and association—the really small stuff. We haven’t written any for-profit D&O in 15 or 20 years.”
In the transportation segment, Markel is making a garage liability product available to its wholesaler partners—another first for the company. “Clearly, we’re looking for opportunities to broaden our wheels appetite, but it will not include long-haul trucking liability,” Mr. Markel said.
On the property front, he noted that Markel is already a pretty big player, but he described existing operations as “disjointed”—with one unit for property-catastrophe, a separate contract division that gave some binding authorities to producers for small low-valued commercial properties, and a separate large property brokerage operation. Mr. Warde is “redefining our appetite, and more importantly trying to effectively create one property team that is represented in all five regions with the ability to quote” all three types of property business, Mr. Markel said.
“In spite of the fact that we don’t think we’re going to get any artificial help from the market, we’re counting on some moderate growth this year,” he said, explaining that he expects growth to be generated from the product enhancements, coupled with “the tremendous effort to totally transform the company into One Markel,” he said, referring to a restructuring described in an article in yesterday’s edition.
Mr. Markel said both strategies are more directly aimed at strengthening ties with broker partners—a goal communicated by all the other carrier executives that described their plans to the NAPSLO Daily, including Christopher Timm, president of Century Insurance.
“In this market, we have to focus on the needs of our wholesale general agents and brokers,” Mr. Timm said, going on to delineate separate strategies for Century’s General Agency Group, dedicated to general agents, and its Special Risk Group, which is more focused on brokerage business.
In the GA group, headed by Nathan Voorhis, Mr. Timm said that agents “have been granted various levels of underwriting authority to allow them to quickly, efficiently and professionally service the needs of their retail agent producer base.”
“We believe that anything we do to help make them [GAs] more successful will generate success for us as well… Therefore we are increasing our efforts to develop and refine systems, broaden products and deliver new tools to help our GAs stand out from their competition when they are proposing Century to a retail agent.”
On the brokerage side, the Special Risk Group headed by Gregg Haver continues to build “focused, specialized underwriting divisions,” he said, listing marine, excess, programs, environmental and construction as the current divisions.
In each division, he said, Century “has retained and developed underwriting talent in an area where we believe our unique knowledge and experience contributes to our success,” adding that efforts to attract and develop Century’s underwriting talent continue into 2010.
“Overall, I would sum up our strategies as people, products, and value-added tools and processes to increase the value of a Century contract to our GAs and brokers,” Mr. Timm said.
The insurer has also stepped up its marketing and sales efforts—efforts that will be spearheaded by a recently hired director of marketing, Andrew Markley.
According to Mr. Timm, Mr. Markley is:
• Helping Century identify new products the company should be providing
• Assessing geographic penetration possibilities in areas where the company is underrepresented
• Developing new and exciting agency compensation programs