Insurance Journal

CONSUMER VOICES Credit Scoring and More

THE CARLET LETTER? N.J. Tags Teen Drivers

BEING PREPARED Lloyd’s CEO on Big RIsks

Inside This Issue May 4, 2009 • Vol. 87, No. 9 • East Region

EAST COVERAGE 12 | As Credit Scores Fall, Criticism of Insurers’ Credit Scoring Rises Consumer Advocates Focus on Treatment of Insureds in Difficult Economy

N12 SPECIAL REPORT:

6

| The Carlet Letter?

New Jersey Tags New Drivers with Decals

6

| Commissioner Says Insurers Violated Maryland Regulations Sixty-Seven Personal Auto Insurers Fined

6

| Forecaster WSI Reduces 2009 Season Hurricane Count to Six Cooler Waters Mean Fewer Storms

Salute to Super Regionals 2009 Super Regional P/C Insurers™ Leading Multi-State Carriers Revealed

NATIONAL COVERAGE N12 | SPECIAL REPORT: Salute to Super Regionals 2009 Super Regional P/C Insurers™ Leading Multi-State Carriers Revealed N18 | Risk Managers Report ‘Soft Landing’ for Market Pricing Survey Says Commercial Insurance Market Still Overcapitalized N18 | Bad Economy Not Impacting Essential Insurance Coverages Industry Study Says Most Keep Auto, Homeowners Insurance N22 | Closer Look: Agency Technology Social Networking, Web 2.0 Changing the Way the Industry Does Business N26 | Special Report: AAMGA Issue ‘Red Flags’ to Watch For When Choosing an MGA Partner N27 | Special Report: AAMGA Issue 50 Reasons Why Retail Agents Choose MGAs N30 | Spotlight: 2009 Premium Finance Directory

2 | INSURANCE JOURNAL-EAST REGION May 4, 2009

12 Consumer Advocates The Downturn Brings Criticism of Some Insurers’ Practices

IDEA EXCHANGE N1 | Don’t Expect Top Dollar if Your House is in Chaos Keep Financials, Book of Business in Order N6 | Minding Your Business How to Improve Productivity in a New Economy N10 | Survey: Regional Carriers Agents, Rate Your Regional Carriers in a New IJ Sponsored Survey

6 The Carlet Letter?

New Jersey Tries Unique Safety Approach: Tagging New Drivers with Decals

N36 | Closing Quote Being Prepared: Don’t Lose Sight of the Greater Risks We Face

DEPARTMENTS 11 | 8 | 8 | N24 | 4 | 10 |

Business Moves Declarations It Figures MyNewMarkets Opening Note People

N36 Closing Quote: Being Prepared Lloyd’s CEO Ward Talks about The Economy, and the Big Risks Ahead

www.insurancejournal.com

Idea Exchange Opening Note Publisher Mark Wells Chief Executive Officer Mitch Dunford

What Agents Want

EDITORIAL

M

oney is the lifeblood of any business. But when it comes to running insurance agencies, money isn’t the main thing that principals look for when they do business with a certain carrier.

Claims handling, it turns out, is the truly coveted prize — at least that’s according to a recent survey of more than 450 agency owners and senior executives, conducted by a regional affiliate of the Professional Insurance Agents of America.

The survey was directed at agents in New York, New Jersey, Connecticut and New Hampshire. PIA says those surveyed consistently ranked “adjust claims fairly” and “pays claims promptly” as the top two factors they look at when evaluating an insurer.

Of course it’s not the only thing that agents value most highly. Rounding out the top 10, in decreasing order of importance were: communicates clearly, honestly; resolves issues quickly; underwriter knowledge, experience; listens, responds to agents; easy, intuitive technology; stable markets; consistent underwriting; and competitive pricing.

Anecdotally, the comments from agents bore out the results of the survey. Ellen Kiehl, a senior research analyst for PIA, was kind enough to share some of those comments with Insurance Journal. Some of the more poignant ones: “When it is hard to work with a company, we don’t use them a lot.”

“A company can have bad enough service that no compensation will offset it.”

“Perhaps insurance companies should concern themselves more with customer service to their agencies... It is very frustrating to be unable to speak with a person and solve a problem in a timely manner.”

For readers of Insurance Journal, there are two reasons the results should stand out.

First is that agents’ answers very closely match a survey conducted by Insurance Journal last September – “How Independent Agents View Carriers” – which also found that quality claims service is valued above all else. Given the ways the market has changed in the ensuing period of time – an extended economic crash, the collapse of AIG, the persistent soft market, to name a few – one can infer that agents still place the highest premium on how their carriers will treat their customers.

Although hinted at in some of the comments, there’s another reason the survey results are so interesting: The absence of “compensation” as a top-10 item.

Its conspicuous absence did not go unnoticed by the PIA, whose members – particularly in New York, where agents’ pay is a heated issue – rightly or wrongly feel there is a perception in some parts of the country that agents’ sole area of concern is their paychecks.

Or as Jim Pittz, business issues director for the four state associations, put it: “Quality of service clearly overrides the ‘profit-only’ motive that agents are falsely accused of being driven by.”

If nothing else, the survey lends some scientific weight to the knowledge that anyone who has worked in this business has known for years: When it comes to dedication, independent agents’ biggest concern is that their clients are happy and well taken care of when they have a loss.

Then again, the agents out there didn’t need a survey to tell them that.

Kenneth J. St. Onge East Editor kstonge@insurancejournal.com

Editor-in-Chief Andrea Ortega-Wells | awells@insurancejournal V.P. Content/ and Interim Midwest/Southeast Editor Andrew Simpson | asimpson@insurancejournal.com East Editor Kenneth J. St. Onge | kstonge@insurancejournal.com South Central Editor Stephanie K. Jones | sjones@insurancejournal.com West Editor Patricia-Anne Tom | ptom@insurancejournal.com MyNewMarkets Associate Editor Chris Boggs | cboggs@insurancejournal.com International Editor Charles E. Boyle | cboyle@insurancejournal.com Columnists Catherine Oak, Bill Schoeffler Contributing Writers Daniel Price, Richard Ward, Nicole Bissett

SALES V.P., Sales & Marketing Julie Tinney (800) 897-9965 x148 jtinney@insurancejournal.com West Dena Kaplan (800) 897-9965 x115 dkaplan@insurancejournal.com South Central Eric Jeter (281) 655-0234 ejeter@insurancejournal.com

Midwest Lauren Knapp (800) 897-9965 x161 lknapp@insurancejournal.com Southeast Howard Simkin (800) 897-9965 x162 hsimkin@insurancejournal.com East Dave Molchan (800) 897-9965 x145 dmolchan@insurancejournal.com

MARKETING Marketing Administrator Gayle Wells | gwells@insurancejournal.com Advertising Coordinator Erin Burns | eburns@insurancejournal.com (619) 584-1100 x120 New Markets Sales Manager Kristine Honey | khoney@insurancejournal.com Classified and Ancillary Sales Manager Nicola Coghill | ncoghill@insurancejournal.com (619) 584-1100 x125 New Media Producer Chad Reese | creese@insurancejournal.com

DESIGN/WEB Vice President/Design Guy Boccia | gboccia@insurancejournal.com Vice President/Technology Joshua Carlson | jcarlson@insurancejournal.com Graphic Designer Jamie Bethell | jbethell@insurancejournal.com Web Developer Jeff Cardrant | jcardrant@insurancejournal.com Web Developer Chris Thompson | cthompson@insurancejournal.com

A D M I N I ST R AT I O N Accounting Manager Megan Sinclair | msinclair@insurancejournal.com Admin./ Marketing Asst.

Kristina Delavega | kdelavega@insurancejournal.com Cover designed by: Jamie Bethell

Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semi-monthly by Wells Publishing, Inc., 3570 Camino del Rio North, Suite 200, San Diego, CA 92108-1747. Periodicals Postage Paid at San Diego, CA and at additional mailing offices. SUBSCRIPTION RATES: $7.95 per copy, $12.95 per special issue copy, $195 per year in the U.S., $295 per year all other countries. DISCLAIMER: While the information in this publication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended to be legal, accounting, tax, technical or other professional advice. Readers are advised to consult competent professionals for application to their particular situation. Copyright 2009 Wells Publishing, Inc. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. Insurance Journal is a publication of Wells Publishing, Inc. POSTMASTER: Send change of address form to Insurance Journal, Circulation Department, PO Box 9049, Maple Shade, NJ 08052

4 | INSURANCE JOURNAL-EAST REGION May 4, 2009

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East Coverage News & Markets

The Carlet Letter? New Jersey Tags New Drivers with Decal

By Beth DeFalco

W

ould you drive any differently if you knew there was a teenager behind the wheel of the car in front of you?

You might find out soon. A first-in-the-nation law in New Jersey will require new drivers ages 21 and younger to display identifying decals on their vehicles.

Gov. Jon Corzine signed the law last month; it takes effect next year.

The decals will probably be a small reflective rectangle attached to the front and rear license plates to help police enforce restrictions on probationary drivers, motor vehicle officials said.

Police will use them to determine whether teens are violating the state driving curfew and passenger restrictions, said Pam Fischer, director of the New Jersey Division of Highway Safety. Authorities will not use the decals to target young drivers or pull them over for no reason, she said.

The decals are long overdue and will save lives, said Ron Gesualdo, owner of Gene’s Driving School in Matawan. “The parents are for it,” he said. “The kids don’t say anything, but you know what they’re thinking.”

One of those kids thinks the decals will only mean more trouble for teenagers.

“That’s going to mean police are going to be bothering us even more,’’ said Tebvon Mcneil, 18, of Paterson. “They see that sticker on the car, they’re just going to be pulling us over for no reason. Are there drugs in the car? That’s the first thing they’re going to think, because we’re teenagers.”

Officials are considering using Velcro to attach the decals, so they can be removed by other drivers using the same car. “It will probably be nondescript and simple, and the public at large is probably not even going to notice it,’’ Fischer said.

The decals were among a slew of new driving restrictions Corzine signed for young adults with probationary licenses, which allow them drive unsupervised under certain conditions.

Other restrictions include changing the driving curfew to 11 p.m. from midnight; allowing only one other teenager in the car; and banning the use of cell phones, even hand-free ones.

New Jersey is the first state to require the decal, although Delaware and Connecticut have toyed with the idea, said David Weinstein, spokesman for AAA Mid-Atlantic. The Delaware Department of Transportation is considering offering residents a voluntary, reflective orange magnet that says, in black: “NOVICE DRIVER.’’ IJ Copyright 2009 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

6 | INSURANCE JOURNAL-EAST REGION May 4, 2009

Commissioner Says Insurers Violated Maryland Regulations

A

year-long investigation by the Maryland Insurance Administration has found that 67 of the state’s 119 car insurers underpaid claims, Commissioner Ralph S. Tyler said State regulators have fined the companies a collective $235,000 and ordered an additional $442,590 in restitution that was paid to roughly 4,000 policyholders.

The botched claims calculations stem from changes to the taxes and fees associated with the total loss of a vehicle. Sales taxes and Motor Vehicle Administration fees increased in January 2008, resulting in an increase to the actual cash value of a vehicle

in settlements.

Tyler’s office also found that many companies were failing to pay tag transfer fees, which they were required to do.

On average, the claims were underpaid by about $100.

“The industry as a whole seemed to miss the implication of these legislative changes,” Tyler said in a statement. “We found widespread violations.” IJ

Forecaster WSI Reduces 2009 Season Hurricane Count to Six

By Jim Looney

T

he 2009 Atlantic hurricane season will produce 11 tropical storms, of which six will become hurricanes, WSI Corp predicts. The Andover, Massachusetts, private forecaster reduced its forecast from the one it issued in December, when it said the six-month season starting on June 1 would see 13 tropical storms, including seven hurricanes.

The lower forecast was due to cooler water temperatures in the tropical Atlantic Ocean and a fading La Nina cool-water event in the eastern Pacific, the forecaster said.

WSI predicted that two of the six hurricanes would be “major” storms of Category 3 or higher on the five-step Saffir-Simpson scale of hurricane intensity. Such storms are the most destructive type, with sustained winds winds of greater than 110 miles per hour.

Another prominent storm forecaster, Colorado State University, also reduced its forecast recently. The CSU research team founded by forecasting pioneer Bill Gray predicted the season would see 12 tropical storms, including six hurricanes.

IJ

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East Coverage Snapshot

It Figures

Declarations

$52.5 Million

Column as You See ‘Em

Amount of settlement reached between Babcock & Wilcox Co. and a group of residents who live near a former nuclear fuel plant in western Pennsylvania. The settlement ends the final claim brought by 365 people who live in the Apollo area, about 35 miles northeast of Pittsburgh. The same group last year got $27.5 million to settle claims against Atlantic Richfield Co. that plant emissions and groundwater pollution caused an unusually high cancer rate, other illnesses and property damage. The case concerns the former Nuclear Materials and Equipment Corp. plant, which B&W bought in 1971. It’s been cleaning up the site since it shut down in the 1980s.

$3.2 Million Amount awarded to a Virginia woman whose pelvis was crushed when more than 350 pounds of countertops suddenly fell on her at Ikea. A stack of four countertops and a door collapsed on the woman as she stopped near a section of bargain items at the Potomac Mills store in July 2006. Her lawyer says the countertops were stacked incorrectly and poorly restrained.

$750,000 Amount that must be paid by a truck driver who waved a car into traffic just before it collided with a motorcycle in New Jersey, a jury has ruled. The verdict centered on a June 2006 crash, which occurred after the truck driver waved a car into a doughnut store lot. The car collided with a motorcycle, severely injuring the rider.

The verdict reflects a provision in state law that holds drivers liable if they negligently wave others into traffic.

“The insurance companies that wrote credit default swaps were happy not to be regulated.”

— Comments by Allstate Chief Executive Tom Wilson in a New York Times op-ed column that claimed his company “played only a small role in unregulated insurance markets.’’ New York regulators are now looking into Allstate’s role in these markets.

The Cost of Maturity “Keeping customers on board is absolutely critical for the longterm profitability of an insurance carrier.”

— Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates, commenting on a new report which found that in the past 12 months, 30 percent of households with annual incomes below $50,000 shopped for a new insurance carrier and 45 percent of those customers eventually switched carriers.

Plan Ahead for Flu “Evaluating specific risks and planning well beforehand for a variety of potential emergencies that could disrupt day-to-day business is critical, no matter how big or small a company may be. Fortunately, most catastrophes can be managed with advanced, effective preparation - and that means having a wellthought out action plan with specific, appropriate policies, resources and contingencies.”

— Julie Rochman, president and CEO of the Institute for Business & Home Safety, which is advising businesses to prepare now for closures or other impacts a swine flu pandemic could have.

Near Bottom

Minimum acreage destroyed by a forest fire in southern New Jersey’s Pinelands National Reserve, which runs along the border of Galloway Township and Egg Harbor City. No injuries or damaged homes were reported.

“Over the next quarter, our view points toward a continuing favorable market with the realization that we are at — or very near — the bottom of the pricing cycle.

— Mark Moreland of Lockton’s Risk Management team commenting on the casualty insurance market. He noted that most casualty buyers have still seen favorable renewals, but that may soon change.

160

Threatened Coasts

Number of arrests made by The Insurance Frauds Bureau of New York State through the first three months of 2009, according to the New York Insurance Department. The total number of arrests was down from the 230 that the bureau made in the same quarter last year, but up slightly more than the 154 arrests the department posted in the first three months of 2007. The 101 convictions obtained in the first three months of the year were a big jump from the 51 convictions in the same period in 2008.

“Our coasts are threatened, there are reasonable steps to counter those threats, and we as a nation are not yet taking them. … Evidence shows we can reduce our risks and our costs by 50 percent or more.”

— Statement from the Resilient Coasts Blueprint, which outlines policy changes and common sense actions that could reduce economic losses from future storms and rising sea levels by as much as half along U.S. coastlines. The initiative is endorsed by a coalition of insurers, public officials, risk experts, builders and conservation groups.

300

8 | INSURANCE JOURNAL-EAST REGION May 4, 2009

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Beyond Security®

“Safe Landing”

Mike Davis Executive Vice President U.S. Risk Underwriters Skydiver General Star Broker

“Even with 250 successful jumps, there’s always a risk jumping out of airplanes. But with great training and the best equipment, I’m always confident of a safe landing.

“I manage my clients’ risk the same way—nothing but the best. With an A++ rating and Berkshire Hathaway backing, there’s no stronger E&S market than General Star.

“Whether I’m free falling at 10,000 feet or working on a challenging account, I’m always confident of a safe landing with General Star behind me and my clients.”

To find the General Star broker nearest you, visit our website at www.generalstar.com. © 2007 General Star Management Company, Stamford, Connecticut. Certain coverages may be written on a nonadmitted basis. Specialty underwriting through designated surplus lines brokers.

Atlanta 404 239 6777 Chicago 312 267 8600 Los Angeles 213 630 1930 New York 212 341 8200 Stamford 203 328 5700

A.M. Best A++ XV

S&P AAA

A Berkshire Hathaway Company

East Coverage People Manchester, New Hampshire based Aspen Insurance Agency has named Patrick Martell as an account executive.

Martell has held several key positions in his 20-year insurance career, most recently in a sales capacity for a local insurance agency. He previously worked as an underwriter for a national insurance carrier.

Patrick Martell

Robert Race

Kathleen McCann

William Krivoshik

Joseph Tracy

Joseph Colwick

The Boston office of risk and reinsurance specialists Guy Carpenter & Co. has appointed five new five new senior brokers. Kathleen McCann has been named managing director. She joins Guy Carpenter from Aon Benfield, where she served as senior vice president, account executive and team leader responsible for property and casualty placements in the company’s Boston office.

Robert Race has also been named managing director. He brings more than 30 years of underwriting and intermediary experience to Guy Carpenter. Previously, he was executive vice president and branch manager of Aon Benfield’s Boston office, where he managed a number of key client accounts and was also responsible for market relations in the United States.

Thomas Perkins, who has been named senior vice president, joins Guy Carpenter after nearly 20 years at R.K. Carvill & Co., where he was most recently senior vice president.

Perkins spent 12 years managing Carvill America’s commercial program business in Manchester, New Hampshire, and has more than 28 years of experience in the reinsurance industry.

John Reid, who has also been named senior vice president, previously spent 12 years at Aon Benfield, most recently as senior vice president. At Aon Benfield, he was an account executive and team leader, responsible for property and casualty placements in Aon Benfield’s Boston office.

Valerie O’Hearn has been named vice president. She formerly served as a vice president at Aon Benfield, where she spent the last seven years as a team member on property, casualty and surety placements in the company’s Boston office.

has also held senior technology positions with Citigroup, Travelers and American International Group, where he was chief information officer.

Bermuda-based specialty insurer Ironshore Inc. has appointed Anthony Mammolite as executive vice president of its U.S. Property unit. Mammolite, who will be based in New York, will oversee strategy for the unit, which focuses on broker-sourced specialty commercial business. He has more than 35 years of experience in underwriting and field marketing, including over 20 years in property lines.

Mammolite most recently served as senior vice president of Property for Lexington Insurance Co. Prior to that, he held various senior level management positions for AIG in the greater New York region.

Joseph Tracy has been named president of Travelers Inland Marine business unit. Tracy, who joined Travelers in 2006, most recently served as chief underwriting officer for the Inland Marine business unit. Prior to joining Travelers, Tracy was the head of OneBeacon Insurance’s Inland Marine operations. He also has held positions with the Chubb Group of Insurance Cos. and Kemper Insurance Cos. Tracy succeeds Richard Rowley, who founded Travelers Inland Marine in 1982. Rowley will continue as a senior adviser with the organization.

WKF&C Agency, a Melville, New York-based managing general agent, has named Christine Ingraham as its New England-based vice president of marketing. Ingraham, who will be based in Georgetown, Massachusetts, will concentrate on serving the property & casualty marketing needs of agents and brokers in the region. She is tasked with assessing the needs of WKF&C Agency’s brokerage community and with helping to improve carrier-agency relationships.

Eight employees from Jacksonville, Fla.-based The Main Street America Group received the company’s highest honor when they were recently inducted into its Circle of Excellence. The winners were selected for their individual efforts in going “above and beyond” while helping the super regional property/casualty insurance carrier achieve success in 2008. Last year, the company achieved a 94.9 combined ratio, one of its best ever, leading to a $43.6 million underwriting profit, the largest in Main Street America’s 85-year history.

The 2008 Circle of Excellence honorees are: Theresa Beauregard, senior business systems analyst, information technology, Keene, N.H.; Julia Devine, commercial lines product supervisor, Jacksonville, Fla.; Brian Fancher, senior commercial lines team underwriter, Syracuse, N.Y.; Lingmin Jiang, actuarial analyst, Jacksonville, Fla.; Doug Lehr, bonds quality assurance manager, Keene, N.H.; Paul Maestri, claims field unit manager, Syracuse, N.Y.; Nancy Murdough, state filings specialist, law, Jacksonville, Fla.; Melanie Young, technical lead, policy processing, integrated customer solutions, Keene, N.H.

New York-based brokerage Marsh & McLennan Cos. has named William Krivoshik as chief information officer and senior vice president for the firm. In the newly created position, Krivoshik will oversee MMC’s technology strategy and architecture. Krivoshik most recently served as the chief technology officer at Thomson Financial, where he oversaw the company’s technology and information operations. He

Joseph D. Colwick has joined TD Insurance Inc. as an account executive based in Wethersfield, Connecticut.

Colwick will be responsible for employee benefits sales to business customers throughout the Nutmeg State. He has 13 years of experience in the insurance industry. Prior to joining TD Insurance, he worked as a senior underwriting consultant at Aetna, Inc. in Hartford. IJ

10 | INSURANCE JOURNAL-EAST REGION May 4, 2009

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East Coverage Business Moves AIG, AIU American International Group, Inc. (AIG) has taken the first step to position the rebranding of its insurance units as an independent entity, AIU Holdings. AIG has transgered the company to a special purpose vehicle (SPV) in preparation for the potential sale of a minority stake in the business, which ultimately may include a public offering of shares, depending on market conditions.

This is the first step in the process that was announced on March 2 that will result in AIU Holdings’ having a board of directors, management team and brand distinct from AIG. AIU Holdings will serve as the holding company for AIG’s Commercial Insurance, Foreign General Insurance and Private Client Group units.

AIG also intends to purchase from AIU Holdings its equity interests in International Lease Finance Corp., United Guaranty Corp., and Transatlantic Holdings, Inc. The sale of these interests to AIG further separates the property/ casualty operations from AIG and its other affiliates.

Farmers, AIG Los Angeles-based the Farmers Insurance Group of Companies is buying American International Group’s (AIG’s) Personal Auto Group, which includes 21st Century Insurance Co, for $1.9 billion.

Under the agreement, 21st Century Insurance Group, the wholly owned subsidiaries comprising AIG’s U.S. personal auto insurance business, will be sold to Farmers Group Inc., a subsidiary of Zurich Financial Services Group. Farmers Group Inc. will sell the underlying insurance entities to the Farmers Exchanges, which Farmers Group Inc. manages, but does not own.

FGI will pay AIG $1.5 billion in cash and $400 million in face amount of subordinated, euro-denominated capital notes backed by Zurich Insurance Co. FGI will also assume 21st Century’s outstanding debt of $100 million.

The acquisition is expected to close no later than by the third quarter of 2009 pending customary regulatory approvals. This acquisition by the Farmers Exchanges will position Farmers as the third-largest overall, www.insurancejournal.com

personal lines insurer in the U.S. and as the largest auto insurer in several states, including California.

21st Century, which includes the former AIG Direct business and Agency Auto business, operates in 49 states and Washington, D.C. 21st Century has more than 2.4 million customers and insures more than 4 million vehicles across the country.

Narragansett Bay Pawtucket, Rhode Island-based Narragansett Bay Insurance Co. said it’s been granted a license to write property and casualty insurance in New Jersey.

New Jersey would be the fourth state where the company can write coverage — including Rhode Island, Massachusetts and New York. News of the expansion into New Jersey follows statements last year by company execs of plans to expand Narragansett’s presence on the Atlantic Seaboard.

Over the last few months, Narragansett has added several new execs, including a former Massachusetts insurance commissioner who the company said could help it navigate its expansion efforts. Last year, Narragansett received a $200 million injection of private equity funding to fund its growth. The company plans to begin underwriting in the state by July 1.

The Gowrie Group Westbrook, Connecticut-based insurance, employee benefits and finance company The Gowrie Group as officially rebranded itself.

The company says it will no longer use its former name, Gowrie, Barden & Brett, effective immediately.

Gowrie, which has offices in Connecticut and Rhode Island, is making the name change, along with a new logo and message, to reflect the consolidation of the increasing number of services it offers.

Over the years, as its services have grown, so had the names and identities of Gowrie’s linked companies and programs: Gowrie Barden & Brett, Gowrie Brett & Young, Fisher & Fisher Associates, Brewer Preferred Insurance, The Burgee Program and Customer One Financial. IJ May 4, 2009 INSURANCE JOURNAL-EAST REGION | 11

East Coverage News & Markets

As Credit Scores Fall, Criticism of Insurers’ Credit Scoring Rises Consumer Advocates Focus on How Insurers Treat Insureds in Difficult Economic, Credit Climate

By Patricia-Anne Tom

W

ith consumers’ credit scores dropping as lenders tighten credit terms, insurance consumer advocates are stepping up their criticism of the use of credit scores by insurance companies.

They are also warning insurers that they could lose business and consumer confidence if they don’t treat consumers fairly in today’s economic climate.

“We have already seen credit scores having an impact on interest rates charged to consumers on their credit cards and loans. If insurers continue to use credit scores in determining risk levels, premiums will increase and consumers may be forced to reduce the insurance carried to protect their financial assets,” according to Karroll Kitt, associate professor at the University of Texas at Austin.

Pamela J. Bolton, director of research for Texas Watch, thinks the credit crisis is taking its toll. “The credit crisis has already lowered the credit scores of thousands. As lenders lower credit limits and increase rates, consumers are seeing their credit scores suffer through no fault of their own,”

12 | INSURANCE JOURNAL-EAST REGION May 4, 2009

Bolton said. She said the “grave” situation has been documented by the Wall Street Journal, Fox News, Bloomberg, and others.

Bolton, who supports a ban on credit scoring, has her doubs but hopes the insurance industry will take into account differences between changes in credit scores due to a consumer’s own actions versus economic conditions or changes by lenders.

“This crisis presents the industry with a very important choice: Will it choose to act in the best interests of its customers, rather than its bottom lines, by embracing fair practices that don’t unfairly penalize policyholders, or will it be business as usual?”

Bolton asked. “Only time will tell.”

Recession Problems If insurers don’t somehow adjust, consumers and insurers both “will be worse off,” warned Brenda Cude, professor of housing and consumer economics at the University of Georgia in Athens.

“It is already very difficult to explain to consumers how their credit score could be related to their access to insurance and the price they pay,” she said. “It will be even more difficult to explain that when the

drop in the credit score is due to, for example, their credit card company lowering their credit limit when the consumer’s behavior hasn’t changed in any way.”

Insurers taking advantage of insureds’ credit plight could pay a price. “One outcome will likely be a continued erosion of consumers’ faith in financial institutions,” Cude said.

Cude and other consumer advocates will be watching how the economic recession affects consumers’ buying habits.

“The question is how many consumers and which ones will drop insurance coverage and which coverage? And, if consumers have lost confidence in financial institutions, the impact will be greater,” Cude said.

“The problem is compounded by the fact that, I believe, consumers already don’t understand what they’re buying when they buy insurance and how rates are set. If that’s true, they don’t know what they’re giving up when they drop their insurance coverage,” said Cude.

Kitt said that consumers are trying to do the best with what they have and want to trust providers. “Consumers are experiencing fear regarding their money and how to protect what money they currently have,” said Kitt. They are guarded in spending their money and want to feel confident that they can trust who is selling a product. This is reflected in purchasing less and only what is felt to be essential, foregoing luxury items.”

Cude thinks some consumers who have to make hard choices about which bills to pay will choose other items over insurance.

“There’s already an indication that this is happening — there’s a Safe Auto ad in which the major point is that if you miss a few payments, SafeAuto will take you back.

The ad doesn’t say whether you come back at the same rate as before, however.”

Bolton, too, has concerns about how insurers will treat consumers in the current economy. “Insurers have the vast majority of their funds in the bond market, which has been much less affected than the stock market,” Bolton said. “Despite this, I think insurance companies are likely to use the www.insurancejournal.com

economic crisis as an excuse to increase rates.”

Cude, Bolton and Kitt are in a position to have their views on credit scoring and other consumer issues heard. They are three of the 17 consumer liaisons to the National Association of Insurance Commissioners (NAIC) for this year. The NAIC has announced it will begin public hearings to review credit scoring.

Insurance Journal spoke with some of the NAIC liaisons and found that in addition to credit scoring, their issue lists include Internet sales of insurance; the effectiveness of current insurance regulation; insurance fraud and agent compensation and disclosure.

sumers in our increasingly complex insurance marketplace,” Bolton said.

But Daniel Schwarcz, associate professor of law at the University of Minnesota Law School, is concerned that contingent commissions can compromise the value of independent agents.

“When it comes to contingent commissions and any sort of differential compensation paid to an agent I think is independent, I think there needs to be closer regulatory scrutiny to that,” he said.

Schwarcz thinks the problem is deeper than many recognize and that simple disclosure is not a solution.

Internet Sales Consumer advisors see pros and cons to shopping for insurance on the Internet.

“The Internet is a great option for many consumers in the purchase of many prodState Vs. Federal Regulation ucts. It has the potential to vastly increase Birny Birnbaum, executive director for the transparency of the insurance marketthe Center for Economic Justice, said his place,” Cude said. group is interested in the debate over state Yet there is a downside. versus federal regulation with an eye to see“Unfortunately, many consumers probably ing where consumers can get the best reguuse it simply to find the lowlatory treatment. “Right est price — which does not now, the federal proposals always mean they have found ‘Consumers don’t are very anti-consumer,” he the best insurance product said. necessarily to meet their needs.”

While state-based regulaCude said she wants to understand what tion has its problems, work with regulators to Birnbaum said “consumers they’re buying improve consumer informastill have better protection tion about insurance prod[with state-based regulawhen they buy ucts. “I will do this through tion] than with any hypoinsurance’ revisions to NAIC buyer’s thetical federal approach guides as well as other that we’ve seen.” opportunities that may arise to communiThere is a way to design a national regulacate with consumers, including through tory scheme that is better than what constate insurance department Web sites,” Cude sumers get now with the state-based treatsaid. ment, according to Birnbuam. “But that doesn’t seem to be on the table just yet.”

Independent Agent Value Amy Bach, executive director for United Some consumer liaisons believe that indePolicyholders, is not afraid to take a side on pendent insurance agents play an important the state versus federal question. “At NAIC, role in insurance. Because they sell products we’ll lend our support to commissioners representing multiple insurers, “consumers that want to preserve the state regulations can benefit from having more choice in their system,” she said. “We think the optional insurance protection, that is several policies to federal charter will be a huge mess.” review for their insurance needs,” Kitt said.

Bach suggested that disaster programs “A trustworthy, ethical and truly indeshow that a state or regional perspective has pendent agent who offers unbiased advice advantages over a national perspective. Her and guidance is an invaluable tool for conorganization works closely with the www.insurancejournal.com

California Earthquake Authority and she hopes to share some of the best practices learned in California with the NAIC. “We want to help export our success to other states as best we can, and brainstorm how to resolve failures,” Bach said.

Howard Goldblatt, director of government affairs for the Coalition Against Insurance Fraud, is in a unique position among the NAIC consumer representatives since his group is industry-supported. But anti-fraud efforts benefit consumers as well as insurers since everyone shares in insurance fraud costs.

“Having someone on the liaison committee with a background that understands insurance fraud issues and how it impacts consumers is a benefit when [the NAIC] discusses issues,” Goldblatt said. IJ Insurance Journal editors Stephanie Jones and Andrew Simpson contributed to this story.

May 4, 2009 INSURANCE JOURNAL-EAST REGION | 13

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Idea Exchange Agency Management

Don’t Expect Top Dollar if Your House is in Chaos Get the Highest Bid When Selling Your Agency by Keeping Financials, Books in Order Price

By Daniel B. Price agreements that serve to protect business assets.

W

hether one is looking to sell, buy or grow organically, the preparation and organization of an agency’s financial, book of business and corporate information as if a sale is imminent should start today.

In reality, a sale may not be in the cards right now. However, running the agency today as if it were going on the sales block will inevitably improve management practices and overall efficiency and effectiveness; thus translating into higher earnings and undoubtedly increasing long-term shareholder value. In short, the one surefire way to increase shareholder value is to get your house in order. This is something that can be started today that does not require selling a thing.

Get your books and records in order. In an actual transaction, the amount and detail of information a particular acquirer will request varies. But one thing is for sure — the quality of information a seller is able to provide goes directly to the overall quality of the agency itself and its management team. When it comes to the sale of www.insurancejournal.com

Financial Statements Historical financial statements are often one of the best indicators of future performance of a business. To these ends, buyers will put your financial information under a microscope. Audited financial statements provide the highest level of assurance that the financial picture of an agency is in fact as it has been presented to be. The greater reliability a buyer can place on the financial statements, the more likely it is that a seller will receive additional purchase consideration either through a higher overall price and/or through a more favorable transaction structure (i.e., more upfront or an earn out with lower performance metric thresholds). This is simply the an insurance agency, all things being equal, old risk/reward trade off: By having quality the higher the perceived quality of inforfinancial statements, you are helping to mation the higher the ultimate purchase reduce the buyer’s perceived level of risk price and/or greater likelihood of improved and thus he or she is more likely to provide transaction terms. Buyers want to see that you with more return. a business is being run like a business.This It is a fact that historical financial statemeans mimicking professional standards ments of closely held businesses rarely often found within publically traded organreflect the true profitability izations and best practices industry leaders.

The one sure-fire of the business without certain adjustments. Whether Such beneficial stanway to increase the adjustments would be dards and practices to eliminate owner perks include: shareholder such as country club dues • The routine developvalue is to get or personal automobiles, or ment of accurate and to remove one-time expenstimely financial stateyour house in es related to moving or ments complete with all order. sponsorship of a local charisupporting schedules ty event, it is of no matter. and documentation; The key to getting a buyer to sign-off on • Full implementation of a first class any suggested financial statement adjustclient management system that includes ment is the amount of tangible support drill down and custom query capabilities; and justification a seller can provide.

• Thoughtfully developed business and Simply saying that 25 percent of this strategic plans, complete with budgets and expense line item and 50 percent of that management projections; and • In force and updated requisite legal continued on page N2 May 4, 2009 INSURANCE JOURNAL-NATIONAL REGION | N1

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Idea Exchange Agency Management

Chaos, continued from page N1

expense line item are “personal” and therefore these line items should be adjusted will not suffice. If a buyer is expected to give “full credit” in the purchase price for discretionary items, extensive and detailed records are required.

Buyers will only recognize and pay for earnings that are easily discernable and clearly documented. On a related note, buyers become more skeptical with each “normalizing” adjustment required to arrive at the true economic run rate of a business.

Bottom line: even if all of the supporting documentation is available, it does not always make sense to make adjustments for every little immaterial non-business item.

Revenue adjustments are related but can also sometimes come under the guise of a slightly different animal.

You may have the usual non-recurring agency and it is not required for ongoing revenue adjustments, such as a one-time operations, then mechanisms for removing gain from the sale of equipment, and these it from the balance sheet should be considadjustments are understandable. However, what is clearly unacceptable to most buyers ered.

An example of this type of adjustment is is revenue that has not been recorded on automobiles owned by the agency (includthe financial statements and tax returns.

An unrecorded revenue adjustment is clear- ing the accompanying debt), that are in reality personal automobiles of the agency ly straddling the line between tax avoidowners. By cleaning up the balance sheet a ance, which is perfectly acceptable, and tax more accurate picture of the true financial evasion, which is obviously not acceptable. position of the agency is often revealed.

This type of situation should be cleaned up Most likely a buyer is going long before contemplatto uncover the true finaning a sale, or do not Buyers will only cial picture of the agency expect a buyer to give recognize and pay at some point during his or you credit for this revher review, so you might as enue. for earnings that well approach it honestly Effectively, Uncle Sam are easily discern- right from the start. has already compensated you for this revenue able and clearly First Class Client through reduced taxes. If documented.

Management System a buyer gets wind of this I cannot tell you the type of situation the deal number of times I have asked for something will likely be stopped in its tracks as this as basic as a production report by line of type of a situation goes right to the integrity of management and the underlying quali- business and been looked at as if I were from another planet. If you cannot provide ty of the agency. reports that at least break down the book The removal of non-operating assets and of business by general and specific line of liabilities from the balance sheet is another business, producer and underwriting marimportant aspect of cleaning up financial ket, then you have substantial work to do. statements. Their presence will just comAt the same time, just because you can plicate and confuse matters if and when provide these basic reports does not mean you decide to sell. If an asset is not conthat they are accurate. Too often, records tributing to the earning power of the N2 | INSURANCE JOURNAL-NATIONAL REGION May 4, 2009

in an agency’s client management system do not reconcile to what is presented by the financial statements or payroll reports.

All accounting and agency management systems should be communicating and reflecting the same information. There is nothing more frustrating to perspective buyers than to be provided with numerous reports generated from varying systems and to have the reports not reconcile with each other.

Business and Strategic Plans – Budgets and Projections You may have considered developing a business or strategic plan in the past but decided to hold off as it was determined that such planning and strategizing was unnecessary given the size of the agency and its relative level of complexity. To this I say no way — if for no other reason than the existence of a well-thought out business plan and a thorough strategic plan reflect well on an agency’s management.

What are the short and long-term goals for the agency? What are the tactics that are being employed to reach these goals?

Acquirers want to know that there is a plan and that the agency is being proactively managed for future growth. Buyers almost always request budgets and management projections. Unfortunately, these continued on page N4 www.insurancejournal.com

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Idea Exchange Agency Management

Chaos, continued from page N2

requests tend to fall on deaf ears as most agencies do not prepare such information on a regular basis. When a buyer requests reasonable information and the seller comes back with “we don’t prepare that,” the buyer gets an immediate window into the sophistication level of the seller’s management team and business acumen.

Remember, more than likely the seller will be joining the acquirer for a period of time post transaction, so the entire selling process should be looked at as a prolonged job interview.

Establish and Update Requisite Legal Agreements Time and time again, sellers present themselves to the market without having property leases, employment agreements, first updated their legal agreements and underwriting market contracts, confidenlicensing files. Frankly, it is a prerequisite to sale that can easily go overlooked. When tiality agreements, compensation disclosures, etc. It is also very important to codiis the last time you updated your articles of incorporation or operating agreement, or fy and formalize any relationships your agency has with external parties such as reviewed your “standard” restrictive cross referral agreements or third-party covenant agreements (e.g., non-solicits, non-competes, confidentiality) in regard to producer arrangements.

If you take too long to gather requested current case law? Perhaps a previous shareinformation, or it is not available, the stage holder was bought out a few years ago and has been set for your corporate documents agency to be viewed as and the stock ledger If you take too long not well-organized and were never updated. not on top of its busiWhatever it may be, to gather requested ness. Remember, a there is often a need information, or it is buyer has to factor in to update legal docuthe future costs of ments in the middle not available, the organizing your busiof a transaction, stage has been set ness if you have not which does two things. for your agency to be already done so. An investment in time and One, it slows down viewed as not welldiligence today making the process as an additional element is organized and not on sure your agency is well-organized and added to the overflowtop of its business. capable of providing ing pile of things to standard information is do. And two, it raises an investment in the future value of the a red flag to buyers with respect to the business. Planning and preparation sellers’ overall organization and business throughout all stages of ownership are acumen. essential if one is to realize an agency’s full All legal documentation should be value at the time of disposition. IJ reviewed to make sure they are available and in good order prior to speaking with any potential buyers. This includes articles Price is a vice president with Hales & Co., located in Hales’ of incorporation or operating agreements, Harrisburg, Pa., office. Email: dprice@halesgroup.com. Phone: corporate and individual producer licenses, 717-541-9300, ext. 102. Web site: www.halesgroup.com.

N4 | INSURANCE JOURNAL-NATIONAL REGION May 4, 2009

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Idea Exchange Minding Your Business

How to Improve Productivity in a New Economy Agencies Must Stop Money Wasting Financial Leaks

By Bill Schoeffler and Catherine Oak

T

he economy is in the tank and so is the stock market. Thousands are unemployed and many people do not know where to turn. No one is setting up charities for insurance agents just yet, but the industry is at the end of the economic wave. Even within the ranks of the agents there is a sliding scale of growth, profitability and future potential. Those that focus in certain niches, like construction are reeling and it seems that the smaller the agency, the tighter the financial squeeze.

The long-term soft market has wreaked havoc for the typical agency owner. Commission dollars earned to sell and service accounts have dropped. The problem is the client and the companies expect more and more out of the agents for less and less.

Typical agency profitability levels have dropped from 25 percent of revenue or more 20 years ago, to today’s typical profit margin range of just 15 percent to 25 percent.

The growth in expenses has outpaced the growth in revenue.

Personnel, the biggest single agency expense, typically costs 52 percent to 73 percent of revenue. In general, owner and producer compensation costs between 25 percent and 35 percent of revenue, while office staff compensation ranges from 20 percent to 28 percent of revenue, and benefits and taxes cost 7 percent to 10 percent of revenue.

Automation did not turn out to be the productivity panacea that was expected.

How many agencies have cut staffing after they bought a new computer system?

Sometimes staff was increased to add on an automation person or data entry person. Besides, automation expenses did not exist 30 years ago.

Other expenses are going up as well. Office rent has shot through the roof in many areas. Advertising, office supplies, travel and automobile expenses all have gone up.

N6 | INSURANCE JOURNAL-NATIONAL REGION May 4, 2009

Oak

Schoeffler

How to Help So can anything be done to help the typical agency owner stop the erosion of profits? The answer is yes.

Plugging the financial leaks in an agency can add up to sizable savings. Performing an efficiency study is the first step to understanding where these leaks exist.

The place to start is with the people doing the work.

Employees know what works and what does not Plugging the work. Management’s role is to determine which is financial leaks the most cost effective in an agency solution, if any. To start, management should ask can add up to employees the following sizable savings. question: What three things can be done to make your job more efficient?

Bring the staff together to discuss the suggestions.

Brainstorm on the issues. Map out workflow on a wall chart. See if there are any roadblocks to getting the job done.

Is the staff double entering data? Is the agency paperless?

Is the layout of the office efficient? Does the staff have to go long distances or are they impeded when retrieving commonly used files, copy or fax machines, etc. Is the office too small?

Does the agency have enough properly functioning and up-to-date office equipment? Sometimes one extra fax machine or printer can make a big difference in productivity. Is the telephone system efficient?

Delegate some of the problem solving to the staff and have follow-up meetings. The best suggestion should win a reward, perhaps $100 or more depending upon the savings. This process should be repeated annually.

Other Areas to Review Next, the owners and management should explore other areas that might be causing financial leaks.

Compare the agency’s productivity to peer groups using one of the published benchmark studies. Is the agency overstaffed or understaffed? If overstaffing exists, why and what can be done? Get rid of under-performing employees and reward the high performers. continued on page N8 www.insurancejournal.com

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Idea Exchange Minding Your Business New Economy, continued from page N6

Has management provided the employees with a clear direction for the agency?

Employees need to be pointed in the right direction and told what their purpose is.

Having a purpose will prevent employees from getting bogged down in the minutia.

How is employee morale? Any number of

things can cause poor morale. Often it is related to perceived unequal treatment.

Make sure all employees are expected to meet the same high standards. Be consistent with your relationship. The annual performance review is the time to clearly communicate performance expectations

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N8 | INSURANCE JOURNAL-NATIONAL REGION May 4, 2009

and past results.

Is the staff properly trained? On the job training is convenient, but it perpetuates the same old inefficient ways of working.

When possible, it is better to send the employees outside the agency for new ideas. Have the employee inform the rest of the staff on what they learned after they return from trainings.

Does the agency cross-sell on its accounts? Relationships are strengthened when an agency sells more than one coverage to its clients. Efficiencies are gained by earning more commission per account and spending less time generating the sale since they are already familiar with the firm.

Does the agency have any program business? Selling a unique product that is slot rated can be an incredible income generator. Usually these sales require less work to sell and service. The similarity of the book of business can create high productivity.

Do the producers pre-screen their prospects? Pre-screening will help eliminate business that the firm cannot write or should not write. Know the price, product and politics needed to close the sale as soon as possible. It is best to find out the quality of the prospect in the phone call before the visit, than to find out during the marketing process.

Summary Starting this process will take a commitment on the part of all owners, managers and employees. Keep in mind the first step is the hardest. Sometimes it helps to bring in an outside partner to get the process started. Oak & Associates can assist an agency in performing a Management & Organizational Efficiency study.

Small gains when compounded over time result in enormous savings. The goal is to work smarter not harder. Implementing the ideas that are laid out in this article will take some time, but will change the way you do business forever. IJ Oak and Schoeffler are partners at the international consulting firm Oak & Associates, providing services for mergers, acquisitions, management and financial consulting.

Contact: 707-935-6565. E-mail: bill@oakandassociates.com.

Web site: www.oakandassociates.com. www.insurancejournal.com

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Idea Exchange Survey Regional Carriers

Agents, Rate Your Regional Carriers in a New Insurance Journal Sponsored Survey C

hannel Harvest Research and Insurance Journal have announced a major new study in the independent agency system that will probe agents’ attitudes toward carrier relationships and the insurance companies they represent — with a special focus on larger regional carriers, often called “Super Regionals.”

The survey is designed for carriers seeking to understand in an unbiased fashion what agents look for from carriers, and how specific carriers and their competitors are rated by agents. The survey will provide strategic, actionable information for: • Super-regional carriers (about their peer companies).

• Smaller regionals (that are growing and/or competing with larger regionals).

• National carriers competing head-to-head with regionals in certain areas of the country.

The syndicated research — with multiple

subscribers sharing the cost — will provide an objective complement to any proprietary surveys carriers may do. This project will provide hard data and a strategic roadmap for carriers looking to boost their business in the challenging year ahead. The survey will address such key questions as: • What are the most important characteristics in agency benefits and service from carriers when agents choose those to place business with?

• How do agents rate regional carriers they have worked with — on 20 different factors?

• How do agents rate specific carriers overall compared with the industry?

• And many other important issues.

To participate in this survey of independent insurance agents, sponsored by Insurance Journal, visit: http://www.insurance journal.com/carriersurvey2009.

The survey takes just 15 minutes to com-

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NAS Insurance Services is an independent Underwriting Manager with full binding authority to underwrite on behalf of highly rated carriers.

For over 30 years, NAS has remained a product-oriented company, ever on the leading edge of innovation with a constant commitment to the development of specialty products.

To participate in a survey about agents’ attitudes toward regional carriers, which is sponsored by Insurance Journal, visit: http://www.insurancejournal.com/ carriersurvey2009. plete — and survey participants will receive a summary of the findings if an e-mail address is provided when taking the survey.

All agent responses are anonymous to any carrier purchasing the report of survey findings.

Data are reported only in the aggregate.

The findings also will be released in a special report, “How Independent Insurance Agents View Business with Large Regional Carriers,” in an upcoming issue of Insurance Journal.

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Special Report Salute to Super Regionals

T

he original criteria and objective definition for Super Regional P/C Insurersâ&#x201E;˘ were established in the Feb. 12, 2007 issue of Insurance Journal. Prior to the establishment of an industry-wide definition, a number of property/casualty insurers had referred to themselves as Super Regionals. Demotech Inc., the official research partner of Insurance Journal, has been called on to examine the criteria, make changes to the composition of that criteria and update the list of Super Regionals.

To continue the discussion on the subject of what constitutes a Super Regional and to give definition to this important group of

insurers, Demotech, an actuarial services firm based in Columbus, Ohio, analyzed year-end 2008 data. This data was utilized to classify and stratify those insurers reporting data to the National Association of Insurance Commissioners (NAIC).

Company Classification System The experts at Demotech have refined their classification system for property/casualty insurance companies. The Demotech Company Classification System categorizes all property/casualty insurers into one of 11 categories based on an analysis of data reported by the companies to the NAIC.

N12 | INSURANCE JOURNAL-NATIONAL REGION May 4, 2009

The 11 categories that comprise the system are: Nationals, Near Nationals, Super Regionals, Regionals, State Specialists, Coverage Specialists, Strategic Subsidiaries, Risk Retention Groups, Surplus Lines Carriers, Reinsurers and companies with less than $1 million in direct written premium.

A company cannot be assigned to more than one category. Therefore, a company not designated as a Super Regional is given another classification, perhaps Near National, Regional, or State Specialist.

Super Regional Criteria and Thresholds To select the companies for the Super www.insurancejournal.com

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Regional Property/Casualty Insurer™ list, Demotech used these specific, objective qualifying criteria and thresholds: • Active, individual companies not under regulatory supervision at Dec. 31, 2008; • Reporting data to the NAIC using the property/casualty annual statement format; • At least $1 million of direct written premium in each of two to 34 states at Dec. 31, 2008; • Less than 90 percent of Dec. 31, 2008, direct written premium in any one state; • Less than 90 percent of Dec. 31, 2008 direct written premium in any one line of

business; • Policyholders surplus of at least $100 million at Dec. 31, 2008; • Net written premium of at least $50 million at Dec. 31, 2008; • Direct written premium of at least $25 million at Dec. 31, 2008.

2009 Property & Casualty Insurance Cos. Demotech Company Classifications Direct Premium Written Less than $1 million 5.2%

Nationals 1.6% Near Nationals 2.4%

Reinsurers 2.3%

Super Regionals 5.4% Surplus Lines Carriers 4.8% Risk Retention Groups 8.0%

In general, a Super Regional Property/ Casualty Insurer™ is an individual company writing multiple lines of insurance in multiple states. Risk retention groups, surplus lines insurers and reinsurers are not eligible for the Super Regional category.

Regionals 10.7%

Strategic Subsidiaries 15.9%

State Specialists 31.3%

Coverage Specialists 12.4%

continued on page N14

2009 Super Regional Property/Casualty Insurers™ Alphabetical Listing Acuity a Mutual Insurance Co. AIG Centennial Insurance Co. AIG Premier Insurance Co. AIU Insurance Co. Alaska National Insurance Co. All America Insurance Co. American Commerce Insurance Co. American Family Home Insurance Co. American Family Mutual Insurance Co. American Hardware Mutual Insurance Co. American International Insurance Co. American Mercury Insurance Co. American Road Insurance Co. Amerisure Insurance Co. Amerisure Mutual Insurance Co. Atlantic States Insurance Co. Auto Club Insurance Assn.

Auto Owners Insurance Co. Automobile Insurance Co of Hartford CT Bankers Standard Insurance Co. Berkley Regional Insurance Co. Bituminous Casualty Corp.

Bituminous Fire & Marine Insurance Co. Brotherhood Mutual Insurance Co. Builders Mutual Insurance Co. California Casualty Indemnity Exchange Cambridge Mutual Fire Insurance Co. Canal Insurance Co. Capitol Indemnity Corp.

Central Mutual Insurance Co. Century-National Insurance Co. Chicago Insurance Co. Citizens Insurance Co. of America Columbia Mutual Insurance Co. Companion Property & Casualty Insurance Co. Concord General Mutual Insurance Co. Cornhusker Casualty Co. Country Mutual Insurance Co. Courtesy Insurance Co. Cumberland Mutual Fire Insurance Co. Cypress Insurance Co. Daimlerchrysler Insurance Co. Darwin National Assurance Co. Delos Insurance Co. Donegal Mutual Insurance Co. Erie Insurance Co. Erie Insurance Exchange Farm Bureau Mutual Insurance Co. Farm Family Casualty Insurance Co. Farmers Alliance Mutual Insurance Co.

www.insurancejournal.com

Farmers Automobile Insurance Assn.

Farmers Mutual Hail Insurance Co. of IA Farmers Mutual Insurance Co. of NE Farmington Casualty Co. Farmland Mutual Insurance Co. FCCI Insurance Co. Federated Service Insurance Co. Fidelity National Insurance Co. Fire Insurance Exchange First Colonial Insurance Co. Frankenmuth Mutual Insurance Co. General Casualty Co. of WI General Fidelity Insurance Co. Grange Insurance Association Grange Mutual Casualty Co. Guideone Mutual Insurance Co. Harco National Insurance Co. Harford Mutual Insurance Co. Harleysville Mutual Insurance Co. Harleysville Preferred Insurance Co. Harleysville Worcester Insurance Co. Hartford Insurance Co. of IL Hastings Mutual Insurance Co. Hudson Insurance Co. IMT Insurance Co. Mutual Indiana Insurance Co. Insurance Co. of North America Insurance Co. of the West Jewelers Mutual Insurance Co. Keystone Insurance Co. Lightning Rod Mutual Insurance Co. Lititz Mutual Insurance Co. Lyndon Property Insurance Co. Memberselect Insurance Co. Merchants Mutual Insurance Co. Mercury Casualty Co. Merrimack Mutual Fire Insurance Co. MHA Insurance Co. Mid-Century Insurance Co. Mid-Continent Casualty Co. Middlesex Insurance Co. Milbank Insurance Co. Mitsui Sumitomo Insurance Co. of America Motorists Mutual Insurance Co. Motors Insurance Corp.

Mountain West Farm Bureau Mutual Insurance Co. Mutual of Enumclaw Insurance Co. Nationwide Mutual Fire Insurance Co. Netherlands Insurance Co. New York Marine & General Insurance Co.

NGM Insurance Co. North River Insurance Co. North Star Mutual Insurance Co. Occidental Fire & Casualty Co. of NC Old Republic General Insurance Corp.

Old United Casualty Co. OneBeacon Insurance Co. Owners Insurance Co. Pacific Specialty Insurance Co. Peerless Insurance Co. Penn National Security Insurance Co. Pennsylvania General Insurance Co. Pennsylvania Manufacturers Assn. Insurance Pennsylvania National Mutual Casualty Insurance Preferred Mutual Insurance Co. Preferred Professional Insurance Co. Progressive Gulf Insurance Co. Progressive Northwestern Insurance Co. Protective Insurance Co. Public Service Mutual Insurance Co. Quincy Mutual Fire Insurance Co. Republic Indemnity Co. of America Republic Underwriters Insurance Co. Safeco Insurance Co. of IL Secura Insurance a Mutual Co. Selective Insurance Co. of America Selective Way Insurance Co. Seneca Insurance Co. Inc Shelter Mutual Insurance Co. Sompo Japan Insurance Co. of America State Auto Property & Casualty Insurance Co. State Automobile Mutual Insurance Co. Stonebridge Casualty Insurance Co. Technology Insurance Co. Inc. Tower Insurance Co. of NY Toyota Motor Insurance Co. Trinity Universal Insurance Co. Triton Insurance Co. Unigard Insurance Co. United Fire & Casualty Co. Utica Mutual Insurance Co. Vanliner Insurance Co. Vermont Mutual Insurance Co. Virginia Surety Co. Inc. West Bend Mutual Insurance Co. Western National Mutual Insurance Co. Westfield Insurance Co. Westfield National Insurance Co. Yosemite Insurance Co.

May 4, 2009 INSURANCE JOURNAL-NATIONAL REGION | N13

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Special Report Salute to Super Regionals Super Regionals, continued from page N13

The 2009 Super Regional Property/Casualty Insurers™ Utilizing these quantitative criteria, Demotech identified 149 Super Regional Property/Casualty Insurers™ for 2009, based upon year-end 2008 annual statement data. They are presented in this exclusive Insurance Journal Special Report both alphabetically and by size as ranked by direct premiums written as of Dec. 31, 2008.

Also included in this special report are the 14 companies that are new to the Super Regional list, as well as 17 insurers that are no longer classified as Super Regionals, but have been reclassified into another one of Demotech’s categories based on year-end 2008 information.

“Super Regional insurers are critically important to the insurance industry and to

their agents, producers and insureds,” said Joseph Petrelli, president, Demotech.

“These companies are strong, stable markets that have been working hard for their agents and insureds. This is why Insurance Journal initially expressed interest in quantifying and identifying what criteria can be used to define an insurer as a Super Regional.”

Insurance Journal and Demotech want this year’s report to continue the discussion on the role of Super Regionals, as well as the definition and criteria used in determining the classification, so that future reports can continue to refine an industry definition of Super Regional Property/Casualty Insurers™.

“Insurers and interested readers are encouraged to examine the selection crite-

NEW 2009 Super Regionals Company Name All America Insurance Co. American Road Insurance Co. Auto Club Insurance Assn.

Bankers Standard Insurance Co. Canal Insurance Co. Daimlerchrysler Insurance Co. Occidental Fire & Casualty Co. of NC Republic Indemnity Co. of America Tower Insurance Co. of NY Toyota Motor Insurance Co. Triton Insurance Co. Netherlands Insurance Co. Safeco Insurance Co. of IL Westfield Insurance Co.

2009 Demotech Company Classification

2008 Demotech Company Classification

Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional

Regional Coverage Specialist Coverage Specialist Strategic Subsidiary Near National Coverage Specialist Regional Coverage Specialist State Specialist Regional Coverage Specialist Strategic Subsidiary Coverage Specialist Near National

ria and thresholds used to determine the list of 2009 Super Regionals. Our selection criteria are quantitative and transparent.

We remain committed to setting benchmarks at levels that accurately categorize the industry,” said Barry J Koestler II, CFA, senior financial analyst and chief ratings officer, Demotech.

The authors stress that this is an objective stratification of the companies that comprise the industry, not ratings of the individual insurers. Inclusion on the list of Super Regionals is not meant to suggest that a company is superior to companies not categorized as Super Regionals.

Future issues of Insurance Journal will report on State Specialists, Coverage Specialists, Regionals and other classifications created and defined by Demotech.

Since 1985, Demotech Inc. has been providing independent Financial Stability Ratings® of property/casualty insurers and title 2007 Demotech insurance underwriters. Its services Company Classification also include statements of actuarial Regional opinion and pricing assistance. For Coverage Specialist Coverage Specialist more information, visit Strategic Subsidiary www.demotech.com.

Near National Coverage Specialist Please send suggestions, comSuper Regional ments and criticisms to Joseph Coverage Specialist Petrelli at e-mail: State Specialist Regional jpetrelli@demotech.com, or Andrew Coverage Specialist Simpson, vice president of editorial Strategic Subsidiary Coverage Specialist for Insurance Journal at e-mail: Super Regional asimpson@insurancejournal.com. IJ

RECLASSIFIED 2008 Super Regionals Company Name Alfa Insurance Corp.

Central States Indemnity Co. of Omaha EMCASCO Insurance Co. Everest National Insurance Co. Hartford Steam Boiler Inspection & Insurance Co. Lumbermens Underwriting Alliance Michigan Millers Mutual Insurance Co. National Farmers Union Property & Casualty National Liability & Fire Insurance Co. Navigators Insurance Co. OneBeacon America Insurance Co. Pennsylvania Lumbermens Mutual Insurance Providence Mutual Fire Insurance Co. Travelers Casualty Insurance Co. of America Truck Insurance Exchange Trumbull Insurance Co. US Fidelity & Guaranty Co.

2009 Demotech Company Classification

2008 Demotech Company Classification

2007 Demotech Company Classification

Reason Not 2009 Super Regional

Strategic Subsidiary Regional Regional Near National Coverage Specialist Regional Regional Regional Near National Near National Near National Regional Regional Near National Near National Regional Coverage Specialist

Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional

Super Regional Super Regional Regional Super Regional Near National Regional Super Regional Regional Super Regional Super Regional Super Regional Regional Regional Coverage Specialist Super Regional Super Regional Near National

PHS, NPW NPW PHS States > 34 LOB > 90% PHS PHS PHS States > 34 States > 34 States > 34 PHS PHS States > 34 States > 34 PHS LOB > 90%

PHS = Policyholders’ Surplus; LOB = Line of Business; NPW = Net Premium Written N14 | INSURANCE JOURNAL-NATIONAL REGION May 4, 2009

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2009 Super Regional P/C Insurers

TM

As Developed by Demotech Inc. for Insurance Journal, Ranked by Direct Written Premium as of 12/31/08.

Company

12/31/08 DPW 000’s omitted

Group Name

1

American Family Mutual Insurance Co.

5,272,230

American Family

WI

2 3

Erie Insurance Exchange AIU Insurance Co.

3,146,696 2,770,742

Erie American International

PA NY

4

Nationwide Mutual Fire Insurance Co.

2,576,627

Nationwide

OH

5

Mid-Century Insurance Co.

2,461,429

Zurich

CA

6

Auto Owners Insurance Co.

2,119,833

Auto Owners

MI

7 8

Fire Insurance Exchange Westfield Insurance Co.

1,686,491 1,460,344

Zurich Westfield

CA OH

9

Safeco Insurance Co. of IL

1,352,538

Liberty Mutual

IL

10

Owners Insurance Co.

1,198,095

Auto Owners

OH

11 12

Country Mutual Insurance Co. Peerless Insurance Co.

1,146,917 1,073,459

Country Ins./Financial Liberty Mutual

IL NH

13 14 15

Shelter Mutual Insurance Co. Citizens Insurance Co. of America Netherlands Insurance Co.

931,235 927,098 790,738

Shelter The Hanover Liberty Mutual

MO MI NH

16 17 18 19 20 21

Farm Bureau Mutual Insurance Co. Acuity a Mutual Insurance Co. Mercury Casualty Co. Grange Mutual Casualty Co. West Bend Mutual Insurance Co. Automobile Insurance Co. of Hartford CT

787,823 783,483 756,465 704,217 668,505 636,607

Iowa Farm Bureau N/A Mercury General Grange Mutual Casualty West Bend Mutual Travelers

IA WI CA OH WI CT

22 23

NGM Insurance Co. State Auto Property & Casualty Insurance Co.

623,471 612,395

Main Street Amer State Auto Mutual

FL IA

24 25 26 27 28 29 30

Farmers Mutual Hail Insurance Co. of IA Central Mutual Insurance Co. Progressive Northwestern Insurance Co. Selective Way Insurance Co. Tower Insurance Co. of NY Pennsylvania National Mutual Casualty Ins. Harleysville Mutual Insurance Co.

555,396 525,862 507,064 505,944 469,578 462,920 433,462

Farmers Mut Hail Central Mutual Progressive Selective Tower Pennsylvania National Harleysville

IA OH OH NJ NY PA PA

31

State Automobile Mutual Insurance Co.

427,502

State Auto Mutual

OH

32 33

Motorists Mutual Insurance Co. American International Insurance Co.

413,035 412,201

Motorists Mutual American International

OH NY

34 35 36 37

Erie Insurance Co. Selective Insurance Co. of America Frankenmuth Mutual Insurance Co. General Casualty Co. of WI

407,630 407,016 399,711 399,301

Erie Selective Frankenmuth Mutual QBE

PA NJ MI WI

38

Virginia Surety Co. Inc.

399,183

Warranty

IL

39 40 41 42

Amerisure Mutual Insurance Co. Memberselect Insurance Co. Farm Family Casualty Insurance Co. Technology Insurance Co. Inc.

398,301 389,425 380,728 359,553

Amerisure Automobile Club MI American Natl. Financial Amtrust

MI MI NY NH

43

Bituminous Casualty Corp.

345,575

Old Republic

IL

www.insurancejournal.com

State of Domicile

Number/States with Greater Than $1 Million DPW 12/31/2008 18 - AZ,CO,ID,IL,IN,IA,KS,MN,MO,NE,NV,ND,OH,OR, SD,UT,WA,WI 10 - DC,IL,IN,MD,NC,OH,PA,TN,VA,WI 25 - AL,AK,CA,CO,CT,DE,GA,KS,LA,ME,MD,MI,MO, NJ,NY,OH,OR,PA,TN,TX,VT,VA,WA,WV,WI 31 - AL,AZ,AR,CA,CT,DE,DC,FL,GA,IL,IN,KY,ME,MD,MI, MS,NH,NY,NC,OH,OK,OR,PA,RI,SC,TN,TX,VT,VA,WA,WV 30 - AL,AZ,AR,CA,CO,ID,IL,IN,IA,KS,MI,MN,MO,MT, NE,NV,NM,ND,OH,OK,OR,SD,TN,TX,UT,VT,VA,WA,WI,WY 25 - AL,AZ,AR,CO,FL,GA,ID,IL,IN,IA,KS,KY,MI,MN, MO,NE,NC,ND,OH,SC,SD,TN,UT,VA,WI 14 - AL,CA,CO,MI,MO,MT,NE,NV,ND,SD,TX,UT,WI,WY 34 - AZ,AR,CO,DE,FL,GA,ID,IL,IN,IA,KS,KY,LA,MD,MI,MN,MS, MO,MT,NE,NM,NC,ND,OH,OK,PA,SC,SD,TN,TX,VA,WA,WV,WI 29 - AL,AK,AR,CA,CT,FL,GA,ID,IL,IN,KY,MD,MI,MN,MS,MO, MT,NE,NV,OH,OR,PA,TN,TX,UT,VA,WA,WI,WY 24 - AL,AZ,AR,CO,FL,GA,ID,IL,IN,IA,KS,KY,MN,MO,NE,NC,ND, OH,SC,SD,TN,UT,VA,WI 14 - AK,AZ,CO,IL,IA,KS,MN,MO,NV,ND,OK,OR,WA,WI 32 - AR,CA,CT,DE,DC,GA,IL,IN,IA,KS,KY,LA,ME,MD,MA,MI,MN, MO,NE,NH,NY,NC,OH,OK,PA,RI,SC,TN,TX,VT,VA,WI 13 - AR,CO,IL,IN,IA,KS,KY,LA,MS,MO,NE,OK,TN 15 - CT,GA,IL,IN,ME,MA,MI,NH,NJ,NY,OH,PA,RI,VA,WI 32 - AR,CA,CT,DE,GA,IL,IN,IA,KS,KY,LA,ME,MD,MA,MI,MN,MO, NE,NH,NJ,NY,NC,OH,OK,PA,RI,SC,TN,TX,VT,VA,WI 8 - AZ,IA,KS,MN,NE,NM,SD,UT 17 - AZ,CO,ID,IL,IN,IA,KS,KY,MI,MN,MO,NE,ND,OH,SD,TN,WI 5 - AZ,CA,NV,NY,VA 6 - GA,IL,IN,KY,OH,TN 7 - IL,IN,IA,MI,MN,OH,WI 34 - AL,AZ,AR,CO,CT,DC,GA,ID,IL,IN,KS,KY,LA,ME,MD,MI,MN, MS,MO,MT,NV,NH,NY,NC,OH,OK,OR,PA,SC,TN,UT,VA,WA,WI 16 - CT,DE,FL,ME,MD,MA,NH,NY,NC,PA,RI,SC,TN,TX,VT,VA 26 - AL,AZ,AR,FL,GA,IL,IN,KS,KY,MD,MI,MN,MS,MO,NC,ND, OH,OK,PA,SC,TN,TX,UT,VA,WV,WI 15 - AR,CO,IL,IN,IA,KS,MI,MN,MO,NE,ND,OH,OK,SD,WI 18 - AZ,CO,CT,GA,IL,IN,MA,NH,NJ,NM,NY,NC,OH,OK,SC,TN,TX,VA 17 - AK,AZ,AR,CT,HI,ID,IN,KS,ME,MO,MT,NV,NY,ND,RI,VA,WA 10 - DE,DC,GA,MD,MI,NJ,NY,PA,SC,VA 17 - AZ,AR,CA,CT,FL,GA,ID,IL,MA,MN,NV,NJ,NY,PA,SC,TX,WA 12 - AL,DE,GA,MD,NJ,NY,NC,PA,SC,TN,TX,VA 21 - AL,AR,CA,CT,DE,DC,FL,GA,LA,MD,MA,MS,NJ,NC,OH,PA, RI,SC,TN,TX,VA 24 - AL,AZ,AR,CO,GA,IL,IN,IA,KS,KY,MD,MI,MN,MS,MO,NC,OH, PA,SC,TN,TX,VA,WV,WI 5 - IN,KY,OH,PA,WV 34 - AL,AK,AZ,AR,CO,DE,DC,FL,GA,ID,IL,IN,IA,KY,LA,MD,MA, MI,MN,MS,MO,MT,NE,NV,NH,NM,NY,OK,PA,RI,SC,TX,UT,WA 10 - IL,IN,MD,NY,NC,OH,PA,TN,VA,WI 11 - CA,DE,DC,GA,HI,MD,NJ,NY,PA,SC,VA 9 - GA,IL,IN,MI,NC,OH,SC,TN,WI 20 - AR,CO,CT,IL,IN,IA,KS,KY,MA,MI,MN,MO,NE,NY,ND,OH, PA,SD,TX,WI 30 - AZ,AR,CA,CT,DE,DC,FL,GA,IL,IN,IA,KS,LA,MD,MA,MI,MN, MO,NE,NY,NC,OH,OK,PA,SC,TN,TX,VA,WA,WI 19 - AL,AR,CA,FL,GA,IL,IN,KS,KY,LA,MI,MS,MO,NC,OK,SC,TN,TX,WI 7 - IL,IN,IA,MI,NE,ND,OH 10 - CT,DE,ME,MA,NH,NJ,NY,RI,VT,WV 26 - AL,AZ,AR,CT,DE,FL,GA,ID,IL,IN,KS,MD,MA,MN,MS,MO, MT,NH,NY,NC,PA,SC,TN,TX,VT,VA 31 - AL,AZ,AR,CO,FL,GA,IL,IN,IA,KS,KY,LA,MD,MI,MN,MS, MO,MT,NE,NM,NC,OK,OR,PA,SC,TN,TX,UT,VA,WI,WY

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Special Report Salute to Super Regionals Company

12/31/08 DPW 000’s omitted

Group Name

44

Pennsylvania Manufacturers Assn. Ins.

337,846

PA Manufacturers

PA

45

Delos Insurance Co.

319,717

Lightyear Delos

DE

46 47 48 49

Auto Club Insurance Assn.

Mutual of Enumclaw Insurance Co. Indiana Insurance Co. United Fire & Casualty Co.

302,054 300,844 298,040 297,973

Automobile Club MI Mutual of Enumclaw Liberty Mutual United Fire & Casualty

MI WA IN IA

50

Motors Insurance Corp.

296,305

GMAC Insurance Holding

MI

51 52

Hastings Mutual Insurance Co. Guideone Mutual Insurance Co.

291,534 286,655

N/A Guideone

MI IA

53 54

Merrimack Mutual Fire Insurance Co. Hudson Insurance Co.

286,580 269,567

Andover Fairfax Financial

MA DE

55 56 57 58

Progressive Gulf Insurance Co. Harleysville Worcester Insurance Co. Quincy Mutual Fire Insurance Co. Farmington Casualty Co.

269,379 264,127 263,152 261,958

Progressive Harleysville Quincy Mutual Travelers

MS PA MA CT

59 60 61

Insurance Co. of the West Westfield National Insurance Co. Old Republic General Insurance Corp.

258,771 257,473 257,086

ICW Westfield Old Republic

CA OH IL

62

California Casualty Indemnity Exchange

256,312

California Cas Mgmt

CA

63 64 65 66

Companion Property & Casualty Insurance Co. Unigard Insurance Co. Secura Insurance a Mutual Co. Triton Insurance Co.

252,624 252,292 239,263 231,299

BCBS of SC QBE Secura Citigroup

SC WA WI TX

67 68

FCCI Insurance Co. Utica Mutual Insurance Co.

228,471 227,234

FCCI Mutual Utica

FL NY

69 70 71

Amerisure Insurance Co. Vermont Mutual Insurance Co. AIG Centennial Insurance Co.

225,241 215,176 212,890

Amerisure Vermont Mutual American International

MI VT PA

72 73 74 75 76

Mid-Continent Casualty Co. Western National Mutual Insurance Co. Preferred Mutual Insurance Co. Farmers Automobile Insurance Assn.

Brotherhood Mutual Insurance Co.

211,459 211,280 208,502 208,013 207,725

American Financial Western National N/A Pekin N/A

OH MN NY IL IN

77 78 79

Donegal Mutual Insurance Co. Farmers Mutual Insurance Co. of NE American Road Insurance Co.

207,332 204,169 199,326

Donegal N/A American Road

PA NE MI

80 81

Alaska National Insurance Co. Canal Insurance Co.

196,913 196,538

N/A Canal

AK SC

82

American Family Home Insurance Co.

191,855

Munich Re

FL

83

Courtesy Insurance Co.

189,417

JM Family

FL

84

Sompo Japan Insurance Co. of America

187,516

Sompo Japan

NY

85

Mitsui Sumitomo Insurance Co. of America

185,003

Mitsui Sumitomo

NY

86

North River Insurance Co.

182,574

Fairfax Financial

NJ

87 88

American Commerce Insurance Co. Stonebridge Casualty Insurance Co.

179,965 179,672

Commerce Aegon US Holding

OH OH

89 90

North Star Mutual Insurance Co. Vanliner Insurance Co.

175,720 172,041

North Star N/A

MN MO

91

New York Marine & General Insurance Co.

164,797

New York Marine & General NY

92

Lyndon Property Insurance Co.

162,031

Protective Life

N16 | INSURANCE JOURNAL-NATIONAL REGION May 4, 2009

State of Domicile

MO

Number/States with Greater Than $1 Million DPW 12/31/2008 31 - AL,AZ,AR,CA,CO,CT,DE,FL,GA,IL,IN,KS,KY,MD,MA,MI,MN, MS,MO,NV,NH,NJ,NY,NC,PA,SC,TN,TX,VA,WV,WI 30 - AL,AZ,AR,CA,CT,DE,DC,FL,GA,HI,IL,IN,KS,LA,MD,MI,MN, MS,MO,NE,NV,NJ,NY,OH,PA,TN,TX,VA,WA,WI 5 - MI,MN,NE,ND,WI 4 - ID,OR,UT,WA 7 - IL,IN,KY,MI,NJ,OH,TN 22 - AL,AR,CO,FL,ID,IL,IN,IA,KS,LA,MN,MS,MO,NE,NM,ND,SD, TN,TX,UT,WI,WY 26 - AL,AR,CA,CO,FL,GA,IL,IN,IA,KS,LA,MI,MN,MO,NE,NJ,NM, NY,NC,OH,OK,PA,SC,TN,TX,WI 5 - IL,IN,MI,OH,WI 34 - AL,AZ,CA,CO,CT,DC,FL,GA,IL,IN,IA,KS,KY,LA,MD,MI,MN, MS,MO,NE,NJ,NY,NC,ND,OH,OK,OR,PA,SC,TN,TX,VA,WA,WI 8 - CT,IL,ME,MA,NH,NJ,NY,RI 30 - AL,AZ,AR,CA,CO,DC,FL,GA,HI,IL,IN,LA,MD,MA,MI,MN,MO, NV,NJ,NY,NC,OH,OR,PA,SC,TN,TX,UT,VA,WA 3 - GA,MS,VA 7 - CT,ME,MA,NH,NY,RI,VT 5 - CT,MA,NJ,NY,RI 26 - AL,CA,CO,CT,DE,DC,GA,IL,IN,IA,KS,KY,MD,MI,MN,MS,MO, NM,NY,NC,OK,OR,PA,SC,TN,TX 14 - AK,AZ,CA,CO,FL,ID,MS,MO,NV,OR,TN,TX,UT,WA 9 - CA,IL,IN,IA,KY,MN,OH,PA,TN 22 - AZ,CA,CO,CT,DC,FL,GA,HI,IL,MD,MA,MO,NV,NH,NJ,NY, NC,PA,RI,SC,TX,VA 22 - AL,AZ,CA,CO,CT,DE,GA,ID,IN,IA,KS,KY,MD,MN,NV,NM,OK, PA,TN,TX,VA,WA 17 - AL,FL,GA,IL,IN,KY,LA,MD,MS,NJ,NC,PA,SC,TN,TX,VA,WI 8 - AZ,CA,ID,MT,NV,OR,UT,WA 12 - AZ,CO,IL,IN,IA,KS,KY,MI,MN,MO,ND,WI 25 - AL,AZ,CA,CO,DE,FL,GA,HI,IN,IA,KS,MN,MO,NJ,NM,NC,OH, PA,SC,TN,TX,VA,WA,WV,WI 10 - AL,FL,GA,IL,IN,KY,MI,NC,SC,TN 25 - CO,CT,DE,FL,GA,IL,IN,KY,MD,MA,MI,MN,MO,NH,NJ,NY, NC,OH,PA,SC,TN,TX,VA,WA,WI 15 - AL,AR,FL,GA,IL,IN,KS,KY,MI,MS,MO,NC,SC,TN,TX 7 - CT,ME,MA,NH,NY,RI,VT 31 - AL,AZ,CT,DE,DC,FL,GA,IN,KS,LA,ME,MI,MN,MO,MT,NH, NJ,NY,NC,OH,OK,PA,RI,SC,TN,TX,VT,VA,WA,WV,WI 14 - AR,CO,FL,KS,MI,MO,MT,NM,ND,OK,OR,TX,UT,WY 5 - IA,MN,ND,SD,WI 4 - MA,NH,NJ,NY 4 - IL,IN,IA,WI 25 - AZ,AR,CA,CO,GA,IL,IN,IA,KS,KY,MD,MI,MS,MO,NM,NC,OH, OK,OR,PA,SC,TN,VA,WA,WV 5 - DE,MD,OH,PA,VA 2 - NE,SD 28 - AL,CA,CO,FL,GA,IL,IN,KS,KY,LA,MD,MA,MI,MN,MS,MO,NE, NJ,NY,NC,OH,OK,PA,SC,TN,TX,VA,WI 6 - AK,CA,ID,LA,OR,WA 29 - AL,AZ,AR,CO,CT,DE,FL,GA,IL,IN,KY,ME,MD,MS,MO,NV,NC, OH,OK,OR,PA,RI,SC,TN,UT,VA,WA,WV,WI 30 - AL,AZ,AR,CA,CO,FL,GA,IL,IN,KS,KY,LA,MD,MI,MS,MO,NV, NJ,NM,NY,NC,OH,OK,OR,PA,SC,SD,TN,VA,WA 21 - AZ,AR,CA,CO,FL,GA,IL,ME,MD,MN,MS,MO,NC,OH,OK, OR,PA,SC,TN,VA,WI 31 - AL,AR,CA,CT,FL,GA,IL,IN,IA,KY,LA,MD,MA,MI,MN,MS,MO, NH,NJ,NY,NC,OH,OK,OR,PA,SC,TN,TX,VA,WA,WI 28 - AL,AZ,CA,CO,CT,FL,GA,HI,IL,IN,KY,LA,MA,MI,MO,NV,NJ, NY,NC,OH,OR,PA,RI,SC,TN,TX,VA,WA 29 - AL,AZ,CA,CO,CT,DE,FL,GA,HI,IL,IN,KY,LA,MD,MA,MI,MN, MO,NJ,NY,NC,OH,OK,PA,SC,TN,TX,VA,WI 14 - AZ,CT,ID,IL,IN,KY,NJ,OH,OK,OR,PA,RI,TN,WA 29 - AL,AZ,CA,CO,CT,FL,GA,IL,IN,IA,LA,MD,MA,MI,MN,MO, NV,NJ,NY,NC,OH,OR,PA,SC,TN,TX,VA,WA,WI 5 - MN,NE,ND,OK,SD 32 - AL,AK,AZ,CA,CO,CT,FL,GA,IL,IN,KS,KY,MD,MA,MI,MN,MO, MT,NE,NJ,NY,NC,OH,OR,PA,SC,TN,TX,VT,VA,WA,WI 25 - AL,CA,CO,CT,FL,GA,IL,KS,KY,LA,MA,MO,NV,NJ,NM,NY,NC, OH,OK,PA,SC,TN,TX,VA,WA 27 - AL,AZ,CA,CO,CT,FL,GA,IL,IN,IA,KY,ME,MD,MI,MN,MO,NE, NJ,NC,OH,OR,PA,TN,TX,VA,WA,WI

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Company

12/31/08 DPW 000â&#x20AC;&#x2122;s omitted

Group Name

State of Domicile

93 94 95 96

Century-National Insurance Co. Concord General Mutual Insurance Co. Trinity Universal Insurance Co. OneBeacon Insurance Co.

161,406 159,637 156,401 153,157

N/A Concord Unitrin White Mountain

CA NH TX PA

97

Protective Insurance Co.

151,242

Baldwin & Lyons

IN

98 99 100 101 102 103 104 105

Hartford Insurance Co. of IL Fidelity National Insurance Co. Cypress Insurance Co. Merchants Mutual Insurance Co. Builders Mutual Insurance Co. Pacific Specialty Insurance Co. Public Service Mutual Insurance Co. First Colonial Insurance Co.

144,298 142,296 139,637 138,021 136,928 135,050 130,126 118,390

Hartford Fire & Casualty Fidelity Natl. Financial Berkshire Hathaway Merchants Mutual Builders Western Service Contract Public Service Allstate

IL CA CA NY NC CA NY FL

106 Jewelers Mutual Insurance Co.

117,289

N/A

WI

107 108 109 110 111

116,609 116,545 115,768 114,174 111,596

American Financial Mercury General N/A Andover N/A

CA OK WY MA MI

112 Harleysville Preferred Insurance Co 113 Grange Insurance Association 114 Preferred Professional Insurance Co

110,041 109,540 108,894

Harleysville Grange N/A

PA WA NE

115 Farmers Alliance Mutual Insurance Co. 116 Chicago Insurance Co.

105,693 103,396

Alliance Allianz

KS IL

117 118 119 120 121 122 123 124

101,957 101,255 100,747 99,651 96,326 93,110 92,474 90,926

Donegal Fairfax Financial Van Enterprises Cumberland IAT Reins Columbia Fincor Holdings Federated Mutual

PA NY KS NJ NC MO MI MN

125 Toyota Motor Insurance Co.

90,700

N/A

IA

126 IMT Insurance Co. Mutual 127 Harco National Insurance Co.

89,804 88,967

IMT Mutual Holding IAT Reins

IA IL

128 Darwin National Assurance Co.

85,574

Allied World Assur. Holding DE

129 Middlesex Insurance Co. 130 AIG Premier Insurance Co. 131 American Hardware Mutual Insurance Co.

84,259 83,715 83,062

Sentry American International Motorists Mutual

WI PA OH

132 Harford Mutual Insurance Co. 133 Farmland Mutual Insurance Co.

77,359 74,882

Harford Nationwide

MD IA

134 Capitol Indemnity Corp.

73,876

Alleghany

WI

135 136 137 138 139 140 141 142 143 144 145 146 147 148 149

72,396 72,194 70,472 68,797 62,652 57,090 56,782 56,231 53,558 43,608 41,419 39,350 38,521 31,353 29,209

Ace Ltd. White Mountain State Auto Mutual Western Reserve AAA Mid Atlantic Pennsylvania National Central Mutual WR Berkley Lititz Mutual Berkshire Hathaway American International Delek Old Republic Ace Ltd Bankamerica

PA PA SD OH PA PA OH DE PA NE IN TX IL PA SC

Republic Indemnity Co. of America American Mercury Insurance Co. Mountain West Farm Bureau Mutual Ins. Co. Cambridge Mutual Fire Insurance Co. Daimlerchrysler Insurance Co.

Atlantic States Insurance Co. Seneca Insurance Co. Inc. Old United Casualty Co. Cumberland Mutual Fire Insurance Co. Occidental Fire & Casualty Co. of NC Columbia Mutual Insurance Co. MHA Insurance Co. Federated Service Insurance Co.

Insurance Co. of North America Pennsylvania General Insurance Co. Milbank Insurance Co. Lightning Rod Mutual Insurance Co. Keystone Insurance Co. Penn National Security Insurance Co. All America Insurance Co. Berkley Regional Insurance Co. Lititz Mutual Insurance Co. Cornhusker Casualty Co. Yosemite Insurance Co. Republic Underwriters Insurance Co. Bituminous Fire & Marine Insurance Co. Bankers Standard Insurance Co. General Fidelity Insurance Co.

Number/States with Greater Than $1 Million DPW 12/31/2008 4 - AZ,CA,IL,NV 3 - ME,NH,VT 8 - AL,AR,ID,LA,MT,OK,TX,UT 30 - AZ,AR,CA,CO,DC,FL,IL,IN,IA,KS,KY,LA,MA,MI,MN,MS,MO, MT,NJ,NM,NY,OH,OK,OR,PA,SC,TX,VA,WA,WI 21 - AZ,CA,CO,FL,GA,IL,IN,MD,MI,MO,NJ,NY,NC,OH,OR,PA, TN,TX,UT,WA,WI 4 - CT,IL,NY,PA 15 - AZ,CA,FL,HI,LA,MS,MO,NE,NV,NY,PA,SC,TX,VA,WA 3 - AR,CA,GA 9 - MA,MI,NH,NJ,NY,OH,PA,RI,VT 4 - NC,SC,TN,VA 4 - AZ,CA,GA,TX 13 - AZ,CA,CO,CT,IL,MA,NJ,NY,OR,PA,RI,TX,WA 30 - AZ,AR,CO,FL,GA,IL,IN,IA,KS,KY,LA,MD,MA,MI,MN,MO,NE, NV,NJ,NM,NC,OH,OK,PA,SC,TN,TX,UT,VA,WA 30 - AL,AZ,AR,CA,CO,CT,FL,GA,HI,IL,LA,MD,MA,MI,MN,MO, NV,NJ,NM,NY,NC,OH,OK,PA,SC,TN,TX,VA,WA,WI 10 - AK,AZ,CA,CO,GA,IL,NV,NM,OH,UT 6 - CA,CO,FL,GA,OK,TX 2 - MT,WY 7 - CT,IL,ME,MA,NH,NY,RI 28 - AL,CA,CO,FL,GA,IL,IN,KS,LA,MD,MA,MI,MN,MS,MO,NE, NJ,NM,NY,NC,OH,OK,PA,SC,TN,TX,VA,WA 9 - CT,DE,MD,MA,NJ,NC,PA,TN,VA 6 - CA,CO,ID,OR,WA,WY 20 - CA,CO,FL,IL,IN,IA,KS,KY,LA,MD,MO,MT,NE,NJ,NY,OH, PA,TX,WA,WI 9 - CO,ID,KS,MO,MT,NE,ND,OK,SD 24 - AZ,CA,CO,CT,DC,FL,GA,HI,IL,IN,IA,MD,MA,MI,MO,NJ,NY, NC,OH,PA,TN,TX,VA,WA 7 - DE,GA,MD,NY,OH,PA,VA 17 - AZ,CA,CO,CT,FL,IL,KY,MD,MA,MI,NV,NJ,NY,NC,OH,PA,VA 7 - AZ,CA,FL,KS,MI,MO,TX 4 - DE,MD,NJ,PA 17 - AL,AZ,CA,FL,GA,IL,IN,KY,LA,MO,NV,NJ,OH,SC,TN,TX,VA 8 - AR,IL,IA,KS,MO,NE,OK,SD 8 - IA,KY,MI,MN,ND,OH,SD,WI 28 - AL,AR,CA,CO,GA,IL,IN,IA,KS,KY,MI,MN,MO,NE,NV,NM,NC, ND,OH,OK,PA,SC,SD,TN,TX,VA,WA,WI 19 - AZ,AR,CA,CO,FL,IN,KY,MD,MA,MI,MS,NV,NJ,OK,OR,PA, TN,VA,WA 5 - IL,IA,NE,SD,WI 25 - AZ,CA,CT,FL,GA,IL,IN,LA,MI,MS,MO,NE,NV,NJ,NY,NC,ND, OH,OK,OR,PA,TN,UT,WA,WI 21 - AZ,CO,CT,FL,GA,IL,MD,MA,MI,MN,NJ,NY,NC,OH,OK,OR, PA,TX,VA,WA,WI 15 - CA,CO,CT,FL,GA,IL,IN,KS,MN,MO,NJ,OH,TN,TX,WI 16 - CA,CT,FL,ME,MI,MN,MO,MT,NV,NJ,NY,OH,PA,VA,WA,WY 19 - AZ,CA,CO,ID,IL,IA,KY,MA,MI,MN,NV,NJ,NY,OH,OR,PA, TX,WA,WI 7 - DE,DC,MD,NC,PA,TN,VA 24 - AL,AR,GA,ID,IL,IN,IA,KS,KY,MN,MS,MO,MT,NE,NC,ND,OH, OK,SD,TN,TX,WA,WI,WY 20 - AZ,CA,CO,GA,IL,IN,KY,MI,MN,MO,MT,NV,ND,OH,OK,OR, PA,SD,WA,WI 5 - CA,FL,MA,NY,WA 8 - CA,CT,MA,NH,NM,NY,RI,TX 6 - AZ,IN,MN,ND,SD,UT 2 - IN,OH 5 - DE,MD,NJ,PA,VA 8 - AL,DE,MD,NC,PA,SC,TN,VA 14 - AZ,CT,GA,IL,IN,MA,NJ,NY,NC,OH,OK,SC,TN,VA 8 - FL,GA,ME,NV,NY,NC,TN,TX 9 - DE,KS,MD,MO,NC,PA,SC,VA,WV 10 - AK,CO,ID,IA,KS,NE,NC,SC,VA,WA 15 - AZ,CA,CO,FL,GA,IL,IN,KY,NC,OH,PA,SC,TN,VA,WI 5 - LA,MS,NM,OK,TX 12 - FL,IL,IA,MI,MO,NE,NC,OK,PA,TX,VA,WI 7 - CT,FL,GA,IL,NJ,NY,PA 11 - AL,FL,GA,IN,LA,MO,NJ,NM,NY,OH,WA

Data Source: The National Association of Insurance Commissioners, Kansas City, Mo., by permission. Information derived from a Highline Data product. The NAIC and Highline Data do not endorse any analysis or conclusion based upon the use of its data. www.insurancejournal.com

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National Coverage News & Markets Risk Managers Report ‘Soft Landing’ for Market Pricing

I

nsurance premiums for businesses continued to slide towards a “soft landing” rather than an abrupt reversal resulting in rate increases, according to risk managers.

While banks and other financial institutions bought directors and officers (D&O) insurance at substantially higher rates, the rest of the commercial insurance market in the first three months of 2009 saw a continuing trend of little or no change in rates, according to RIMS Benchmark Survey, a survey of policy renewal prices as reported by North American corporate risk managers.

General liability premiums fell 3.8 percent for policies renewing during the first quarter of 2009, as compared to a 5.9 percent decline in the fourth quarter of 2008, risk managers reported. The average workers’ compensation premium fell 2.5 percent, which is similar to price decreases in the past several quarters.

The average property renewal was flat for the first quarter as compared to a decline of

3.8 percent in the fourth quarter of 2008, the survey revealed. Also noted was a wide range of changes in recent renewal premiums for individual property risks: Premium changes ranged from a decrease of 11 percent to an increase of 14 percent.

Risk managers said the D&O market continued to be split between financial institution (FI) risks and all other (commercial) risks. Overall, the average D&O premium increased by 3 percent, but the increase was driven entirely by financial companies.

Excluding FI firms, the average renewal was down 3 percent, the survey found.

Higher FI premiums are the outcome of massive losses from the meltdown of the subprime mortgage market and the ensuing credit crisis. By comparison, overall D&O rates fell 1.2 percent in the fourth quarter of 2008 and fell 4.5 percent during that period excluding FI firms.

“Even though the credit crisis and the

N18 | INSURANCE JOURNAL-NATIONAL REGION May 4, 2009

continued on page N20

Bad Economy Not Impacting Essential Insurance Coverages

M

any Americans have taken steps to reduce personal insurance costs in response to the economic downturn, but a new industry study suggests that maintaining essential auto and homeowners coverage remains a priority for the most consumers.

Twenty-eight percent of those with auto insurance coverage surveyed by the Insurance Research Council (IRC) reported shopping for lower rates when they normally would not have done so. Among those with auto or homeowners insurance, 15 percent said they had increased their insurance deductibles or reduced the amount of coverage to reduce premium costs.

Most Americans, however, have maintained essential homeowners and auto insurance coverage despite the challenges posed by the ecocontinued on the bottom of page N20

www.insurancejournal.com

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National Coverage News & Markets Risk Managers, continued from page N18

global recession have had a negative impact on insurers’ top and bottom lines, so far financial institution D&O is the only segment tracked by RIMS Benchmark Survey to respond with higher premiums,” said Dave Bradford, Advisen’s executive vice president and editor-in-chief of RIMS Benchmark Survey. “Insurers struggle against falling rates, increased losses in some lines, and sharply lower investment income due to the credit crisis, but the commercial insurance industry is still overcapitalized.”

RIMS Benchmark Survey is produced by Advisen Ltd., which collects and analyzes the data and provides the technology infrastructure for the survey’s online services. IJ Bad Economy, continued from page N18

nomic downturn, according to the study. Nine percent of those with at least one household vehicle reported canceling or not renewing coverage for a household vehicle in response to the economic downturn. However, almost one-third (31 percent) of those canceling auto insurance coverage also reported selling a vehicle as a way to save money, so many of those vehicles for which insurance coverage was canceled were also likely sold.

Five percent of homeowners and 14 percent of renters reported canceling homeowners or renters insurance coverage.

The study also reported on the frequency with which consumers have taken other steps in response to the downturn. For example, 65 percent reported greatly reducing their expenditures on entertainment. Thirty-seven percent reported postponing the purchase of a major household appliance.

“These findings confirm that most Americans recognize the importance of maintaining essential insurance coverage on their homes and cars,” said Elizabeth A. Sprinkel, senior vice president of the IRC. “But they also show that Americans are willing to shop and reevaluate their insurance needs in order to reduce insurance costs.”

The results of the IRC’s report, “Public Attitude Monitor 2009, Consumer Response to the Economic Downturn,” are based on 1,000 telephone interviews conducted with adults age 18 and older in December 2008 by GfK Custom Research North America.

Copies of the study are available for $65 each in the U.S. at: www.ircweb.org. IJ www.insurancejournal.com

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The Insurance Professional’s Guide to Workers’ Compensation: From History History through through Audit Audit From Author: Christopher J. Boggs, CPCU, ARM, ALCM, LPCS, AAI, APA Price: $55.00 for paperback and $49.95 for a pdf download Available at: http://ijmag.com/wcbook

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Legal and contractual concepts surrounding workers’ compensation presented in simple, non-legal terms.

Provides selected statutory information for every state.

Allows the reader to understand the framework on which workers’ compensation coverage is built.

Designed to combine statutes, common law, contracts and the human element of workers’ compensation into one resource.

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Closer Look Agency Technology

Social Networking in an Insurance World Web 2.0 Tools Enhance the Face-to-Face Interactions in the Industry

By Nicole Bissett

I

nsurance firms that have used the tools with their agents and prospective clients. of Web 2.0 appear to be won over for They are experimenting with Twitter to keep good, and have little to say that is negatheir agents up-to-date with what’s happentive. ing in the markets.

Snyder says social McAuley, Woods & Associates, a privately networking tools held boutique wholesale brokerage based in only enhance facePalm Beach, Fla., is one company that has to-face interaction benefitted. McAuley, Woods & Associates, between customers. which uses a select group of retail agents “You can start a conthroughout the United States, began using a versation and relawiki, a internal collection of Web pages that tionship in person allows anyone in the company to contribute and then continue it content,just nine months ago. in the community So far reviews from the McAuley, Woods & getting input from Associates’ employees are positive. everyone,” he said.

Jim Snyder, a property/casualty broker who heads up marketing efforts for McAuley, Community Woods & Associates says, the brokerage is Benefits currently putting all of its corporate knowlMike Wise, the edge into the wiki. “We have our corporate vice president of IdeaStar, also believes agents processes there as well as training videos and will benefit from these tools. marketing information for all of our carriers,” “My opinion is the social web is really putSnyder says. The wiki, Snyder says, can be ting the agents back in the driver’s seat after updated by anyone in the company. Everyone being sort of disenfranchised a little bit over contributes by entering their knowledge in to the past few years because of search engines,” the firm’s wiki.

Wise said. “Everybody’s focused on going and Their main use for it is to market, and to doing a search on a particular insurance share their success stories. They also receive product or need. The big direct consumer updates from underwriters on a daily basis marketers were dominating the search concerning their appetites and where they are results and the agents were open and closed. The brokerkind of left out when it came age also uses the wiki for ‘The social web to all that traffic.” forums and blogs to share IdeaStar, based in information with each other. is really putting Cleveland, Ohio, provides Snyder says it is now faster the agents back Web-based software applicaand easier to access informations to help customers create tion when answering quesin the driver’s online initiatives. Wise says tions over the phone. “We can seat ...’

Web 2.0 tools such as Twitter, look into the wiki and see blogs, podcasting, videocastwhat we’ve done in the past,” ing, YouTube, and others, are excellent from a he said. “It helps us market faster and give prospecting standpoint. them answers quicker.”

These tools are appreciated by other Snyder believes the wiki will be an excelexperts in the field of technology as well. lent teaching tool for new employees. He also Rick Morgan, a board member for the believes the firm’s underwriting guides will Agents Council for Technology (ACT), who become more robust as they build the library has four decades of experience in technology, of risks and how to place them. marketing, and publishing in the independThe firm also uses LinkedIn to keep up N22 | INSURANCE JOURNAL-NATIONAL REGION May 4, 2009

ent insurance agency system, says these tools are easy to use, and very inexpensive. He believes in the concept of social networking, not just because the tools are inexpensive.

“When you engage in the social networking world, you build relationships, and relationships are important,” Morgan said.

“In the agency world of sales, service, and marketing, what they do in small, home-town, Main Street businesses, is they depend a great deal on relationships and on trust. Part of what social networking does is help in that area. It enables, in a digital way, relationship.”

Morgan’s message is that social networking is not a fad; it is a way of tapping in to a core, human desire to belong to a community.

Downsides So with all the benefits of Web 2.0, is there a downside?

As with anything, Snyder believes there are some concerns. Loss of control and mis-information are always possible contingencies.

“For our internal wiki, if you have rogue employees that deliberately want to try and put false information in, they can certainly do it,” he said.

Future revenue possibilities can’t yet be determined from the use of these tools. Even so, Snyder believes they increase the company’s marketing efficiency. “We’re looking for ways to open this up to our retailers and underwriters so we can all communicate as one team in the future,” he said. “This is a bit far off since there are many issues to consider, but it is my vision to help make our business more transparent to our customers.” IJ www.insurancejournal.com

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New Markets The following markets were selected from the MyNewMarkets database of 25,000 coverages and programs. To find additional markets, or to submit markets, go to www.MyNewMarkets.com.

Products Liability for Roller Coasters and Rides Market Detail: MarketScout (www.marketscout.com) offers agents access to products and completed operations coverage for amusement ride manufacturers and importers. In addition to general liability, the insured can purchase protection for discontinued products, excess liability and workers’ compensation. Minimum premiums begin at $20,000 and the insured can apply as high as $10,000 SIR’s.

Available Limits: $1 million to $5 million.

Carriers: Unable to disclose. “A++” rated

by A.M. Best. Non-admitted.

States: All. Contact: John Gaskill at 972-934-4212 or e-mail jgaskill@marketscout.com.

Workers’ Comp Programs Market Detail: Chamber Insurance Agency Services (www.chamberagent.com) makes it easier for agents to find workers’ compensation coverage for hard-to-place risks. This featured program provides access to coverage for accounts with high experience modification factors, multi-state operations and what are usually considered difficult risks.

Available Limits: As needed.

Carriers: Various carriers. Ratings not provided. Admitted.

States: All except where not allowed.

Contact: John P. Ferreira at 973-669-2309 or e-mail jpferreira@chamberagent.com.

offered for claims in connection with professional and pollution liability; 4) Coverage for independent contractors; 5) A worldwide coverage territory; 6) “Innocent insured” and mediation credit coverage offered; 7) The availability of an aggregate deductible endorsement; and 8) An available blanket waiver of subrogation.

Minimum premiums begin at $2,500 and deductibles begin at $2,500.

Available Limits: $500,000 to $10 million.

Carriers: Ace, Admiral, AIG, Beazley, CNA, Hiscox, Houston Casualty, Lloyds

rated by A.M. Best. Admitted and nonadmitted.

States: Ala., Ariz., Ark., Calif., Colo., Conn., Del., Fla., Ga., Idaho, Ill., Ind., Iowa, Kan., Ky., La., Mich., Minn., Miss., Mo., Mont., Neb., N.H., N.J., N.M., N.Y., N.C., N.D., Ohio, Okla., Ore., Pa., S.C., S.D., Tenn., Texas, Utah, Vt., Va., Wash., W. Va., Wis. and Wyo. Contact: Josh Hancock at 800-977-9884 or email underwriting@transportationrisk.com.

Bringing Market Seekers and Market Providers Together

Market Detail: Professional Program Insurance Brokerage (www.ppibcorp.com) offers professional liability coverage to interpreters and translators. Coverage is offered on a claims made basis and protects against claims alleging errors, omissions or negligent acts arising out of professional interpreting or translating services.

Coverage can be included for the applicant, applicants owned company, employees and contractors. The option to include general liability protection is also available.

Applications, quotes and purchase requests can all be done online. Minimum premium begins at $275.

Available Limits: $250,000 to $1 million.

Carriers: Lloyds of London. “A” rated by A.M. Best. Non-admitted.

States: All except Alaska and Mississippi.

Contact: Susan Preston at 415-475-4300 or e-mail susan@medispa-ins.com.

• Find markets in our database • Promote your markets on our site • Join our community forums • Membership is free! and Navigators. “A” rated by A.M. Best.

Admitted and non-admitted.

States: All. Contact: Robert J. McIntyre at 610-3373200 or e-mail rmcintyre@apogeeinsgroup.com.

Architects & Engineers Market Detail: Apogee Insurance Group, a Berkshire Hathaway Co. (www.apogeeins group.com) offers a broad architects and engineers program with the following coverage features: 1) Definition of professional service includes engineering, architecture, construction management and environmental consulting; 2) Offerings can include cyber liability, pollution liability and an option for first dollar defense; 3) Bodily injury and property damage coverage

Interpreters and Translators Professional Liability

Household Goods Truck Cargo

Mortgage Broker/Banker Professional Liability

Market Detail: Transportation Risk Underwriters Inc. (www.transportation risk.com) brings agents a cargo market for all household goods movers. Less than two years experience, no problem. Insureds can also get contingent auto liability, contingent cargo, and commercial general liability for brokers. Deductibles begin at $1,000.

Available Limits: $25,000 to $100,000.

Carriers: Multiple carriers. “A-” to “A+”

Market Detail: Gresham & Associates (www.greshaminc.com) has facilities for mortgage broker/banker professional liability which includes sub-prime loans and prior acts coverage. Investor required errors and omissions coverage is also available through a Special Mortgage Bankers Bond naming the investor as the loss payee.

Minimum premiums begin at $2,500.

Available Limits: $1 million to $5 million.

N24 | INSURANCE JOURNAL-NATIONAL REGION May 4, 2009

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Carriers: Unable to disclose. “A” rated by A.M. Best. Non-admitted.

States: All. Contact: Art Hays at 888-473-7444 or email ahays@greshaminc.com.

Fire Protection Contractors Market Detail: McNeil & Co. (www.mcneilandcompany.com) brings agents the FireWatch Program. This is a comprehensive insurance and risk management program offering high quality, specialty insurance products to the complete fire protection market including firms that engage in the sales, service, and installation of fire suppression systems, fire extinguishers, burglar and fire alarm systems, and those involved in selling or distributing fire equipment or emergency apparatus. The program can be tailored to provide an unequaled coverage portfolio.

Available Limits: As needed.

Carriers: Arch Insurance Co. “A” rated by A.M. Best. Admitted.

States: Alaska, Ariz., Ark., Calif., Colo., Conn., Del., Fla., Ga., Idaho, Ill., Ind., Iowa, Kan., Ky., La., Maine, Md., Mich., Minn., Miss., Mo., Mont., Neb., Nev., N.H., N.J., N.M., N.Y., N.C., N.D., Ohio, Okla., Ore., Pa., R.I., S.C., S.D., Tenn., Texas, Utah, Vt., Va., Wash., W. Va. and Wis. Contact: Shawn Yingling at 717-646-8886 or e-mail syingling@mcneilandcompany.com.

Medical Property Protection Market Detail: RPS of New York (www.rpsins.com) offers agents a property protection program designed specifically for the healthcare industry equipment. The medical diagnostic equipment coverage form is crafted to provide protection for: MRI’s, CAT scanners, X-ray equipment and

other portable diagnostic equipment.

Power units and specialized trailers part of mobile units can also be covered. Blanket limits of $250,000 are also available on items such as accounts receivable, EDP (including extra expense), extra expense, food spoilage and contamination, loss data preparation costs, personal property of patients and valuable papers and records.

Minimum premiums and deductibles begin at $5,000.

Available Limits: $1 million to $100 million.

Carriers: Unable to disclose. “A” rated by A.M. Best. Admitted.

States: All. Contact: Robert Hecht at 631-969-1900 or e-mail bob_hecht@rpsins.com. IJ Submit your company’s property/casualty markets to the industry’s leading searchable database at www.mynewmarkets.com.

There’s a better way to find Markets.

Searching for a Particular Market? Find it here.

From Dude Ranches to Pizza Delivery, we have markets covered. Stop Searching and Start Finding. Our database of over 25,000 markets makes it quick and easy to find that obscure market you are searching for. Best of all the service is FREE! So sign up today!

www.insurancejournal.com

May 4, 2009 INSURANCE JOURNAL-NATIONAL REGION | N25

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Special Report AAMGA Issue

‘Red Flags’ to Watch For When Choosing an MGA Partner in a Bad — and Good — Economy or Market

I

n today’s tough economy and proaround for a long time with a few differWhat should agents watch out for longed soft market, some insurance ent markets, then it’s generally one of the when questioning whether an MGA is firms are likely to get into stronger players,” he added. in good financial health or if they are financial trouble. Smaller Donoghue advises agencies to a good firm to partner with? wholesalers and managing always have backups to their priAre there ‘red flags’ to consider? general agencies (MGA) maybe mary markets, Kevin Donoghue: Not havat risk. Their ability to stay especially ing much experience in If they keep afloat with working capital when they are the business is a flag. It’s could be a challenge, says placing surswitching markets, very difficult for an agent Kevin Donoghue, managing plus lines to assess the financial sitit’s an indicator director for Mystic Capital business uation of an MGA or Advisors Group LLC, a New because “anyMGU because financials that they might York-based firm that provides thing can hapare not shared, just as an Kevin Donoghue not be the best financial consulting services to pen.” agency generally doesn’t the retail insurance, wholesale insurance In this interview share their financials. …

MGA to be doing and financial services industries. with Insurance Journal’s Check on references business with.

Andrea Wells, and experience. Checking If an MGA loses a market or loses key Donoghue outlines a with the markets they insurance lines, the fallout could make it few “red flags” agents should be aware of represent is always good due diligence, if difficult for those groups to stay in busiwhen trying to gauge the health of their they (agents) are not familiar with a cerness, Donoghue says. “But if it’s a sizeable MGA partners. Here’s what he had to say: wholesaler or MGA, or one that’s been continued on page N28

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Special Report AAMGA Issue

50 Reasons Why Retail Agents Choose Managing General Agency Partners In an Insurance Journal online survey, 304 independent agents wrote criteria on how they choose their MGA partners. Here’s what some of those agents had to say: 1. As a large broker, this is decided based on relationships, successes, volumes, commissions levels, service. In other words we are dictated by volume.

2. Service, service, service, markets, price, service.

3. Personal relationships.

4.Must know their products and give quick turnaround on quotes.

5. It’s very important to work with someone who will walk me through situations I may be unfamiliar with.

6. Basically we have two MGAs with relationships but will use others for exclusive specialty programs. Sometimes response time can be an issue as to who we write the business with.

7. If they have been in business a long time and have markets that we know are competitive and cutting edge, we give them a chance. If they do their job quickly and accurately, we continue to use them. If their underwriters are fickle and sometimes incoherent, we go elsewhere. We prefer to not swim upstream. Any difficulty in dealing with them is the quickest way for them to lose our interest.

8. What other agents say about the MGA and how they are treated and services offered.

9. Contract with known brokers. Specialty programs influence use. When known agents move, we will follow them to their new MGA.

18. Dedicated underwriters is crucial.

19. The more the MGA can automate their services including upload and download the more we would want to work with them.

20. Ease of submission. Sense that MGA understands nature of risk and will respond accordingly.

21. Financial ratings of companies used, expertise and knowledge of products/markets by brokers/assistants, ease of doing business with my CSRs after I have bound the business as the producer.

22. I like MGAs that are in the Midwest because that’s where my agency is. I feel that puts me in touch with an underwriter who may be feeling the same issues as my customers.

23. I consider those who can provide good service, quick response time and a good selection of companies.

24. Expertise and ease of doing business.

25. The three things all agents want: competitive markets, ease of doing business and the highest rate of commission possible.

40. Service, reputation and recommendation of other agents.

41. I only want to work with a couple. We receive tons of e-mail, mail and advertising, but I tend to stay with MGAs I have used in the past.

43. Met personnel at convention or conference, gained insight to their markets and experience. Tried and liked.

44. Print ads.

26. I choose them based on commitment to service, response time and access to markets.

27 We prefer to limit the number of E&S brokers and MGA/program adminstrators with whom we work; believing that carefully selected relationships will be more rewarding in the long term.

11. Their honesty, expertise, quickness, and quality of the carriers they offer. Their pleasantness in personality is also always preferred.

28. Experience and expertise are very important. They need to have good markets and they need to respond quickly.

12. I work with MGAs who respond quickly to our requests and try to earn our business by strong communication.

29. Most important to me is the ease to work with a particular MGA.

13. Reputation and how quickly they respond to inquiries along with market availability. Customer service has been decreasing over the years.

30. Here’s the priority list: 1) availablity of markets; 2) reliable response; 3) expertise; 4) price; 5) compensation. Everything else is a consideration, but not critical.

14. To place business that can’t be written in the standard market. Most of our MGAs have been around for many years. We only pursue new MGA relationships to gain a market for placement.

31. The relationship with a wholesaler/MGA is dependent on the carriers they represent as well as the responsiveness of their organization.

15. Continuing to place additional business with an MGA does depend on the relationships and service that are given.

32. We go to an MGA because we have a client with a need that our markets cannot handle.

16. Length of time in market. Reputation. Good reports from other agents that use them. Good working relationship with the underwriter staff.

33. Consistent quality level of service is most important.

www.insurancejournal.com

38. Three reasons: expertise, product or price.

39. I choose them via peer referrals. I stay with them according to the response time.

42. We select our wholesalers based upon their expertise, references and our employees’ past working experiences with a wholesaler or MGA.

10. Early response to my needs extremely important. In the future being able to quote online with MGAs will become more and more important.

17. Most important factors are the ability to have the most attractive markets for our clients, in conjunction with providing top level service and to believe that the number one priority is taking care of the client.

37. Recommendation of peers is very important and the input of company reps who pass along comments and/info from multiple sources.

34. Service, response time and and a competitive premium are a must.

35. Ease of doing business, service, and financing.

36. We discuss with similar agencies outside our marketing territory and also evaluate their market representation.

45. I work primarily with construction related accounts so even in the soft market it is important to work with brokers and MGAs who know the markets, have good relationships with the companies and understand the need for a timely response to all requests. Those that can do this will keep our business even when their price is slightly higher.

46. In my experience, over many years, wholesalers make a lot of promises in their ads that they will respond quickly to quote requests but for the most part they do not. Their underwriters are overwhelmed and do not respond to newly appointed producers. This is counterproductive and I don’t have time to deal with them. My quote requests die on their desks.

47. We work with the brokers who have expertise in a niche and expect quick response and results.

48. I look for a firm who has good relationships with their carriers and can provide expertise when it comes to questions regarding the quotes. I also look for a good response time for new business, renewals and for everyday service problems.

49. I appreciate brokers that take the time to help me understand the some of the peculiarities of a particular coverage form or company’s way of doing business.

50. Choice. Variety. Access. Today, the little guy can’t obtain many appointments by himself/herself. Agents must band together to meet quotas via MGAs. IJ

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Special Report AAMGA Issue Red Flags, continued from page N26

When a wholesaler or MGA is having tain MGA and they want to write with financial difficulties, what happens? Is them. … the department of insurance involved?

Ask for a company referral. Say XYZ Donoghue: A lot of times when they get in managing general agency underwrites on trouble they sell themselves. They try to get behalf of the Lexington. Don’t be hesitant out of trouble via sale. If there’s been a misto ask for a reference from Lexington.

If an agent is talking to an MGA and that appropriation of funds, then the insurance department would definitely be alerted to MGA tells them that they represent XYZ (carrier), a follow up question is, “How long it.

And then there’s just that gray area where have you represented them?” And if the they are not able to sell answer is a year or two, or they haven’t found the the agent should find out sale so they are kind of who they represented With the times, using fiduciary funds to before that and how long and the soft maroperate their business, they represented them.

And here’s the point, if ket, if you get into having yet been caught to playing the float. they represent a company financial hardships due So sometimes it’s difficult that they have only represented for a few years, there’s more pres- to know who’s in solid financial shape and who’s and did the same previsure to do somenot. ous to that, it’s a bad business practice because thing that is probaGiven the current they are probably burnbly inappropriate. financial crisis and ing markets. That’s a soft market, and huge red flag. heightened pressure to increase revWe look at that when we look at the enues, is it more likely for someone to value of an MGA. If they keep switching be dishonest now than in the past? markets, it’s an indicator that they might Donoghue: I don’t know that it’s more likely not be the best MGA to be doing business for someone to be dishonest if they weren’t with. It certainly begs the question, “Why dishonest to begin with. It’s almost like are you changing markets?” “what cloth are you cut out of?” With the times, and the soft market, if you get into Any examples of failed companies you financial hardships there’s more pressure to can share? do something that is probably inappropriate.

Donoghue: None that have been made public But for the most part, in insurance, you are but we work with some that have been in still dealing with the 90 percent plus that trouble and they needed to secure financare honest folks but there’s 10 percent out ing, working capital to stay afloat. None there that give the rest a bad name. that have gone out of business, but in the past we have seen situations where you If an MGA or even a retail agency is have unscrupulous individuals that misaphaving financial difficulty, what propriate funds, on both the retail side and chance do the owners have of securing the MGA side. capital to help given today’s credit It’s always important to do your due dilimarkets? gence on a group before starting to write Donoghue: Well there are good operations out with them. It’s always good to know that there that lend. So to the extent that they your client, your insured, is actually in are in trust and they have solid business place with the insurance company. The practices and they just need working capiMGA may have been paid but you always tal, there’s potential that they can get there. want to make sure that that payment was If they need money tomorrow, they are remitted on to the company and your poligoing to have a difficult time finding it. cy is in force.

But if they are looking ahead and saying “I N28 | INSURANCE JOURNAL-NATIONAL REGION May 4, 2009

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might need a working capital loan in 90 days” and plan ahead, I think some of the banks out there, InsurBanc being one of them, could try to see if they could bridge the gap.

On the retail side, another bank out there, Westfield Bank in Ohio, lends to agencies. There are groups out there that will lend to an agency that will make it a little easier than going through a traditional banking facility.

But for the most part, as long as the agent verifies that the underlying insurance is in place and it’s with a credible company, the agent should be in good shape. They have done their job. They have maintained the confidence of their client to the extent that there is an intermediary that went

under during the course of business.

To the extent that agents don’t do due diligence, and they haphazardly place risk with groups that they are unfamiliar with, then they would have exposure. … It’s always important to do some background on the owners and their experience. IJ

Are you seeing an uptick of firms looking for capital these days?

Donoghue: Yes, in the last couple of years I think there’s been somewhat of an uptick just because revenues are soft and people haven’t maybe downsized their staff appropriately. But lately there seems to be less softening going on. If anything it seems to be bottoming out so that could be helpful.

So to the extent that they have right-sized themselves right now they might benefit from an uptick in pricing.

If an MGA did go under, closed its doors, or was selling, how should the clients be handled? Would the MGA look for another firm to buy the book?

Donoghue: Ideally they would. So to the extent that they have the ability to sell, they are not financially impaired to where a sale price would be less than the debt they are in, they can generally find an avenue to sell and maybe make some money on it.

If an MGA goes under, it’s not necessarily the end of the world as long as that underlying insurance has been placed with a company. You know, it’s when they went under and didn’t place the coverage (that’s a problem). For the most part, the underlying insured shouldn’t be at risk if the policy was placed and underwritten properly.

If the MGA fails the policy is still in force.

If an MGA were to fail, how might the end customer view the retail agent who placed the account?

Donoghue: I think anytime you have a change in a market, the underlying insured is going to wonder why, so it could look bad on the agent. www.insurancejournal.com

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W

elcome to Insurance Journal’s 2009 Premium Finance Directory, a comprehensive listing of premium finance companies able to assist agents and brokers with their clients’ financing needs.

All company information listed in this directory was directly submitted to Insurance Journal. To be listed in future editions of Insurance Journal’s Premium Finance Directory, or any other directory, contact Kristine Honey at: khoney@insurancejournal.com.

We hope you find this directory to be a valuable resource when searching for financing options for your clients. Feel free to send us comments and suggestions on how we might improve this directory, or for additional help, e-mail: editorial@insurancejournal.com.

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7050 Woodbine Ave., Ste. 401, Markham ON L3R 4G8 Canada Phone: (905) 886-1674, Fax: (905) 886-7855 Email: service@acuretfinance.com www.acuretfinance.com

750 N St. Paul, Ste. 1500, Dallas, TX 75201 Phone: (800) 299-5626, Fax: (214) 954-0537 Email: service@afsibex.com www.afsibex.com

534 Broad Hollow Rd., Melville, NY 11747 Phone: (631) 777-1377, Fax: (631) 777-1388 Email: info@allislandcredit.com www.allislandcredit.com

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Aviation Premium Finance, LLC P.O. Box 18067, Kansas City, MO 64133 Phone: (877) 353-1047, Fax: (816) 353-1048 Email: kw@aviationpremiumfinance.com www.aviationpremiumfinance.com · APF provides aviation insurance buyers with payment options for their annual insurance premiums. · Customers traditionally put 20% down and then make 9 monthly payments. · Our goal is to make aviation affordable for everyone!

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Premium Finance Directory Birch Financial, Inc.

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20946 Devonshire St., Ste. 200 Chatsworth, CA 91311 Phone: (818) 772-4244, Fax: (818) 772-2221 Email: info@birchfinancial.net www.birchfinancial.net

784 Wall St., Ste. 110, O’Fallon, IL 62269 Phone: (800) 844-2678, Fax: (618) 206-3223 Email: daveg@costfinancial.com www.costfinancial.com

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Premium Finance Directory IUI Premium Financing, Inc.

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Premium Finance Directory

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Specialty Risk Premium Finance

Pro Premium Finance Co., Inc.

427 W 12th St., Ste. 100, Kansas City, MO 64105 Phone: (800) 838-2350, Fax: (816) 627-0502 Email: jen.newhouse@premiumfinance.com www.premiumfinance.com

South Bay Acceptance Corp.

· Achieving excellence in the premium finance industry · Interactive web application providing turnkey agency management system · Competitive agent marketing incentives with flexible rate structures

Royal Premium Budget, Inc. 30833 Northwestern Hwy, Ste. 220 Farmington Hills, MI 48334 Phone: (800) 477-7889, Fax: (248) 932-9043 Email: financing@royalpremium.com www.royalpremium.com · Online Payments & Account Status – make payments or review insureds' accounts, including payment history, 24/7. · Same-day turnaround on finance quote requests and quote revisions. · Online Quotes system gives agents the option of producing finance quotes and finance contracts anytime.

7600 Fern Ave., Bldg. 600 Shreveport, LA 71105 Phone: (318) 683-6206, Fax: (318) 683-3846 Email: frances.lee@specialty-risk.com www.specialty-risk.com · 1st Class Service with in house finance through Specialty Risk Associates! · In house finance allows for immediate credit to your broker statement · 24 hour “real time” account access for you and your clients

Standard Funding Corp 335 Crossways Park Dr. Woodbury, NY 11797 Phone: (800) 526-2470, Fax: (800) 203-2547 Email: info@standardfunding.com www.standardfunding.com · Fully automated web-based online services · Personalized customer service & experienced field representatives nationwide · Competitive rates & loan structures

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Premium Finance Directory Tepco Premium Finance 1333 S Rustle Rd., Spokane, WA 99224 Phone: (800) 571-0843, Fax: (509) 622-4702 Email: info@tepcofinance.com www.tepcofinance.com · Easy to use online system for quoting & account management · Free online payments · Licensed in 9 western states

TWG Capital 6666 E 75th St., Ste. 500, Indianapolis, IN 46250 Phone: (877) TWG-CPTL (894-2785), Fax: (317) 813-1701 Email: sales@twgcapital.com www.TWGcapital.com · Trusted by agents as leading financial solutions provider for 10 years · Providing capital to P&C Agents · Free valuations & customized business solutions

US Premium Finance 1255 Lakes Pkwy, Bldg 200, Ste. 201 Lawrenceville, GA 30043 Phone: 1 (866) 246-9691, Fax: 1 (866) 246-9692 Email: customerservice@uspremiumfinance.com www.USPremiumFinance.com · SERVICE: Creatively Structured Premium Finance Loans. · TECHNOLOGY: User-friendly software, easy access to your customer database any where in the world 24/7. · PRICING / RATES: Flexible, Fair Market Pricing.

UPAC Premium Finance 8245 Nieman Rd., Ste. 100, Lenexa, KS 66214 Phone: (800) 877-7848, Fax: (913) 984-4988 Email: marketing@upac.com www.upac.com · Financing insurance premiums since 1954 nationwide. · Industry-leading web site offering unlimited flexibility and options that will save you time AND money. · Paperless e-commerce, reduced cancels, flexible payment options, endorsements in a just matter of seconds and total account management are just some of the benefits you will enjoy. · Agency management system integration for seamless financing. · 10 - Ways for your insureds to pay. · Old-Fashioned Service with Leading-Edge Technology provides you with the one-stop, effortless financing you can count on.

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Insurance Journal webcasts allow you to interact with the experts in real time.

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Check out the next webcast TransUnion presents: Protecting Your Portfolio Against Foreclosure and Vacancy-Related Claims Date: May 5, 2009 Time: 10:00AM PT / 1:00PM ET Register at: www.insurancejournal.com/webcasts Are you interested in having your own webcast or custom video? Give us a call: 800-897-9965 ext. 148

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Idea Exchange Closing Quote

Being Prepared Don’t Lose Sight of the Greater Risks We Face

By Richard Ward

N

o one could fail to have noticed that we are in the grip of a recession. With unemployment affecting 2 million in the United Kingdom, interest rates almost at zero and a deflationary environment, there is a lot for businesses to deal with.

While the financial crisis has certainly been front-of-mind for many around the world, it would be disastrous for us to lose sight of the greater risks that we face, particularly as insurers.

This has been recognized at the highest level during the recent G20 meeting in London when the communiqué agreed by all of the world leaders reaffirmed their commitment to address the threat of climate change.

As our understanding of climate change and its impact develops, it is clear that it will have major implications, not only on our environment but also on how our societies and economies operate in the future.

Indeed, it is likely climate change will pose a threat to the future security of the world.

For example, we could see a time when because of changes in our climate, nations cease fighting over ideology and instead compete for control of natural resources. As a result, the world map could be significantly redrawn as borders are decided on the availability of food, water and oil. Whereas prospectors left their homes centuries ago to search for gold and land, water shortages could force mass migration on a previously unseen scale. Nations could be held to ransom as energy pipelines become crucial bargaining tools in world politics and finally the exotic foods that we have all come to know and love could become a thing of the past.

Climate Change and Security Our new report on Climate Change and Security, produced in conjunction with the International Institute for Strategic Studies, examines how climate change will affect global security by exploring four key interrelated issues —

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Ward

water scarcity, food supply, energy security and demographic pressures. To read more, visit our Web site at www.lloyds.com/360.

We are also investing in research to better understand the current threat of political risk. The recession is likely to lead to greater instability across the world — the increased incidences of piracy are just one recent manifestation of this.

Incidences of piracy in the Gulf of Aden and off the coast of Africa have been increasing since 2005, but the number and scale of recent attacks is a real cause for concern. To set things in context, since June 2007 there have been more than 200 reported acts of marine piracy there and 30 percent of Europe’s oil goes through this route.

We are also likely to see a rise in businesses and their executive being targets from threat groups, terrorists and disgruntled populations following the financial and economic turmoil we are witnessing — which could long outlast the recession. We will be exploring this in more detail in a report in June.

Blame Culture It’s not just changing weather and violent actions that the world seems to be facing more of, but a blame culture that, in this current financial environment, may spiral out of control. Boards now spend 13 percent of their time discussing litigation, and most companies believe that stakeholders outside the United States are now more willing to litigate generally.

Globally, actions brought by employees and customers are the most frequent, but actions from shareholders, regulatory authorities and special interest groups will grow as people take stock of the subprime and credit crunch crises.

Added to this, there is a perception that U.S. courts are becoming more willing to rule on cases that might have once been considered extraterritorial. Concerns about liability risk — whether real or perceived — are constraining entrepreneurship in business at a time when we need the best and brightest to stand up.

But it’s not all doom and gloom. Risk is not a dirty word.

The insurance industry deals within it every single day and we have made it our business. We manage many risks — big and small; immediate and long term; simple and complex — but the most important thing is, when managing these, we don’t forget the others. IJ Ward joined Lloyd’s as CEO in April 2006. www.insurancejournal.com

Joe Santini, Master Mechanic.

Keeps classic cars running smoothly.

Relies on Applied Underwriters to help run his business the same way. ®

Business owners shouldn’t have to be experts in everything. Applied Underwriters gives them tools to focus on what they know best: their business. With products like SolutionOne® that integrate casualty coverages with payroll processing and risk reduction services. Our superior customer service and Best’s Rating of A (Excellent) have earned us a client retention rate of over 90%. For more information call (877) 234-4450 or visit www.applieduw.com.

©2007 Applied Underwriters, Inc. A Berkshire Hathaway Company.