Insurance Business America issue 4.09

IBAMAG.COM ISSUE 4.09 | $12.95

TOP WHOLESALE

E&S BROKERS The industry’s 24 go-to firms for hard-to-place risks

IN SICKNESS AND IN HEALTH

What brokers need to know to win clients in the healthcare space

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THE GROWING DIGITAL DIVIDE

Why aren’t independent agents delivering the technology consumers want?

A MAJOR IMAGE PROBLEM

Hard-won insights on reputational risk from the Volkswagen scandal

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ISSUE 4.09

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CONTENTS

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UPFRONT 04 Editorial

It’s time to jump on the tech bandwagon

TOP WHOLESALE

E&S BROKERS

COVER STORY

22

FEATURES

BUILDING YOUR BUSINESS IN CONSTRUCTION

As the construction industry continues its boom, brokers are being asked to do more than ever

FEATURES

Arch Insurance Group’s John Mentz reveals how his company keeps up with the rapid pace of change in the industry

18

48

AGENCY INSIGHT

Holmes Murphy’s Dan Keough explains how going against the grain has propelled his company forward

Assessing the government’s new auto affordability index

09 Opinion

A recent taskforce in the UK provides lessons on how the industry can better combat fraud

10 News analysis

The Volkswagen scandal offers a harsh reminder about the importance of managing reputational risk

14 Workers’ comp update

How this year’s elections could affect the workers’ comp space

16 Technology update

Independent agents want to use the latest technology – so why aren’t they?

PEOPLE 55 Career path

Tim Cunningham’s aversion to large companies eventually led him to start his own firm

56 Other life

King of comedy Frank Vamos

FEATURES

50

THE STATE OF HEALTHCARE

The healthcare sector is undergoing great change – and offering many challenges and rewards to brokers

2

08 Head to head

This month’s big movers, shakers and new products

A complete guide to the wholesale side of the industry, from the current market outlook to details on 24 of the top wholesale E&S brokers

INDUSTRY ICON

The growing risk of wildfire

12 Intelligence

WHOLESALE E&S REPORT

PEOPLE

44

06 Statistics

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Exceptional Partnerships.

Extraordinary Solutions.

Not many companies can boast of a business built on a foundation of partnership. Nor can they build upon the stability that comes with 35 years in the E&S business.

We can.

E&S/Specialty nationwideexcessandsurplus.com A.M. Best rating of A+ (Superior), FSC XV E&S/Specialty nationwideexcessandsurplus.com Fortune 100 company A.M. Best rating of A+ (Superior), FSC XV Fortune 100 company Nationwide and the Nationwide N and Eagle are service marks of Nationwide Mutual Insurance Company. Š2016 Nationwide.

Nationwide and the Nationwide N and Eagle are service marks of Nationwide Mutual Insurance Company. Š2016 Nationwide.

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2/09/2016 5:31:47 AM

UPFRONT

EDITORIAL

Producers, it’s time to plug in

I

t’s no secret to anyone in the industry that technology startups see insurance as a promising new field. This year, InsurTech is poised to break records with 45 deals completed and more than $650 million in funding contributed in the first quarter. Whitney Arthofer, an MBA associate at venture capital firm General Catalyst Partners, pointed out in May that InsurTech startups are overwhelmingly focused on the comparison shopping and purchasing transaction that has traditionally been producer turf.

Each time we report on these claims, we receive a flood of emails telling us why the outsider is wrong. Producers are here to stay, they say, and the truly knowledgeable consumer wants no change from the status quo. So who’s right?

Contrary to what many producers feel, consumers do want change in their relationships with insurance professionals First of all, it’s clear that insurance producers definitely have a role to play in the future of the industry. More than 80% of small business owners expressed satisfaction with their current producer in a recent Deloitte survey. A third also said they value their producer’s knowledge, and 15% credited their producer with cost savings. With that kind of endorsement, it’s hardly surprising that most producers feel secure in the status quo.

But contrary to what many producers feel, consumers do want change in their relationships with insurance professionals. In the same Deloitte survey, about half of small business owners said they would be at least somewhat likely to consider buying insurance policies directly from a carrier. Similarly, more than two-thirds of current policyholders told Accenture they would consider purchasing insurance products from organizations like Amazon or Google.

The good news is that a growing number of producers recognize the need for greater tech adoption. About 70% of agencies surveyed by the Insurance Digital Revolution in August even said they have put strategies in place to implement new technology to improve their businesses.

The trouble is that, so far, it’s just not enough. At IBA, we empathize with and support the independent insurance agent. So when we hear that just 43% of agents operate 24/7 through the use of automation, that less than one-quarter have client portals and just 21% have mobile apps, we get concerned. We know producers are smart, savvy and in touch with their client base – but we also know it’s time to get plugged in and start exploring some of these technologies.

The team at Insurance Business America

www.ibamag.com OCTOBER 2016 EDITORIAL News Editor Caitlin Bronson Journalists Callum Glennen, Penelope Graham, Maryvonne Gray, Paul Lucas, Jordan Lynn News Writers Lyle Adriano, Louie Bacani, Mina Martin, Gabriel Olano Staff Writers Tim Garratt, Libby McDonald, Joe Rosengarten, Heather Turner, Ryan Smith Editorial Researcher Hannah Go Copy Editor Clare Alexander

CONTRIBUTORS David Hertzell

ART & PRODUCTION Design Manager Daniel Williams Designer Joenel Salvador Production Manager Alicia Salvati Traffic Manager Kay Valdez

SALES & MARKETING Vice President Cathy Masek Media Sales Managers Chris Wills, Chris Anderson Mktg & Comms Manager Lisa Narroway

CORPORATE Chief Executive Officer Mike Shipley Chief Operating Officer George Walmsley Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil

Editorial Inquiries caitlin.bronson@keymedia.com Subscription Inquiries subscriptions@keymedia.com Advertising Inquiries cathy.masek@keymedia.com, chris.wills@keymedia.com chris.anderson@keymedia.com

Key Media 78O7 E. Peakview Ave., Suite 115 Centennial, CO 80111, USA tel: +1 720 316 0151 www.keymedia.com Offices in Denver, London, Toronto, Sydney, Auckland, Manila, Singapore

Insurance Business America is part of an international family of B2B publications and websites for the insurance industry Insurance Business Canada john.mackenzie@kmimedia.ca T +1 416 644 874O Insurance Business UK jonathan.connelly@keymedia.com T +44 20 7193 0935 Insurance Business Australia peter.smith@keymedia.com.au T +61 2 8437 47OO Insurance Business NZ peter.smith@keymedia.com.au T +61 2 8437 47OO Insurance Business Asia peter.smith@keymedia.com.au T +61 2 8437 47OO

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Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as the magazine can accept no responsibility for loss.

2/09/2016 5:34:19 AM

Beyond Security®

“Seasoned Professionals”

Michele Tran Production Underwriter Ultra Risk Advisors Seasoned Tourist General Star Broker

“I love to travel the world. In fact, when it comes to touring, I’m a seasoned professional!

“My Med Mal partners at General Star are also seasoned professionals. Needless to say, their A++ rating and Berkshire Hathaway backing are impressive, but it’s their deep knowledge, longevity and specialization in health care risk management that are most important to me.

“Whether I’m navigating Budapest for the first time, or tackling an unusual risk with General Star, I’m confident of a positive outcome.

I rely on seasoned experience, including my team at General Star, to help me solve every challenge.”

To locate the General Star broker nearest you, visit our website at www.generalstar.com.

© 2016 General Star National Insurance Company is licensed in the District of Columbia, Puerto Rico and all states. General Star National Insurance Company has its principal place of business in Stamford, CT and operates under NAIC Number 0031-11967. Insurance is placed with General Star National Insurance Company by licensed producers. General Star Indemnity Company is an eligible surplus lines insurer in all states, the District of Columbia, Puerto Rico, and the Virgin Islands. It has the status as an unlicensed insurer in California and operates under NAIC Number 0031-37362. Insurance is placed with the General Star Indemnity Company by licensed producers and, for risk that qualify, by licensed surplus lines brokers.

Atlanta 404 239 6777

Chicago 312 267 8600

A.M. Best A++ XV

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Los Angeles 213 630 1930

S&P AA+

New York 212 859 3950

Stamford 203 328 5700

A Berkshire Hathaway Company

2/09/2016 5:34:29 AM

UPFRONT

STATISTICS

Spreading like wildfire

Washington

2,013 1,137,664

Oregon

2,588 685,809

Wildfire danger season is getting worse – 2016 has already seen roughly 3.5 million acres go up in flames AS TEMPERATURES rise, wildfire risk grows – that’s the word from environmental scientists at the Harvard School of Engineering and Applied Sciences. According to a study from the school, assembled using decades of historical meteorological data and records of past fire activity as well as internationally recognized climate scenarios, by 2050, wildfire season will be approximately

Alaska

768 5,111,404 California

8,745 893,362

three weeks longer and likely to burn a wider area in the West. The likelihood of large fires is likely to be upped by a factor of at least two.

For now, 900,000 residential properties across 13 states in the West were identified as having a high or very high risk of wildfire damage in a 2105 study by Corelogic, accounting for a combined total value of approximately $237 billion.

Hawaii

17 5,611

MAPPING THE DANGER ZONES

90%

Percentage of wildland fires estimated to be caused by humans

$6 billion

Amount of total insured catastrophe losses due to fire from 1995 to 2014

$3.5 billion The average annual cost of fighting wildfires from 2002 to 2012

Thirty-eight states have wildfire risks, according to The Insurance Institute for Business & Home Safety, although 47 states reported some degree of wildfire last year. The risk is increasing with the trend to build homes in more rustic areas.

100%

The anticipated growth rate of wildfires across the US by 2050

Sources: US Department of the Interior, Property Claims Services unit of ISO, Headwater Economics, Harvard School of Engineering and Applied Sciences

WHO’S AT RISK?

GREATEST EXPOSURE TO DAMAGES

Not surprisingly, arid Western states lead the pack in terms of having the highest percentage of households at risk of wildfire.

According to data from CoreLogic, total potential exposure to wildfire damage in the US is around $861 billion – and that’s only in the Western states most likely to see wildfire activity.

1. IDAHO 24.1%

6. UTAH 12.8%

2. COLORADO 16.9%

7. OREGON 9.5%

3. CALIFORNIA 14.5%

8. WASHINGTON 5.7%

4. NEW MEXICO 9. ARIZONA 13.6% 5.6% 5. TEXAS 13.0%

10. NEVADA 5.1%

Source: Verisk Insurance Solutions – Underwriting and Verisk Climate units of Verisk Analytics

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$ billion

160 140 120 100 90 80 70 60 50 40 30 20 10 0

Arizona California Colorado Idaho Montana Nevada Wildfire risk

low

New Oklahoma Oregon Texas Mexico

medium

high

Utah Washington Wyoming

very high Source: CoreLogic, 2014

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Vermont

102 346

Montana

North Dakota

2,432 351,264

726 32,321

Idaho

1,324 804,094

South Dakota

512 35,652

930 10,203

Arizona

709 22,602

Missouri

3,161 29,893

69 548

Indiana

16 868

Tennessee

611 8,478

1,837 26,630

1,309 100,382

Connecticut

831 4,473

76 159

New Jersey

1,013 2,685

Virginia

Maryland

631 6,574

Kentucky

774 19,207

158 1,078

North Carolina

Arkansas

Oklahoma

696 44,104

1,525 1,763

Ohio

18 806

Colorado

Massachusetts

Pennsylvania

Illinois

533 14,945

51 4,854

New Mexico

1,662 160,152

993 2,970

Iowa

186 3,844

8 219

Wisconsin

Nebraska

Nevada

Utah

1,849 30,563

114 622

New York

West Virginia

526 3,806

1,032 72,985

Wyoming

551 42,479

Michigan

Minnesota

New Hampshire

3,828 15,220

South Carolina Mississippi

Georgia

2,294 34,769

2,331 10,556

976 3,800

Texas

9,272 184,418

Louisiana

1,172 21,036

Number of fires Number of acres burned

Alabama

Florida

3,198 47,380

Rhode Island

86 132

2,422 73,432

Source: National Interagency Fire Center, 2015

INSURED VERSUS UNINSURED LOSSES

THE YEAR IN FIRES

Losses from wildfire are widely variable from one year to the next, but the one constant is that overall losses far exceed those covered by insurance.

Last year set a new record for the number of acres lost to fire in the US – more than 10 million acres burned, outstripping the previous record of 9.9 million acres in 2006.

2015

WILDFIRES

2014

2016 * 34,391

2013

2015 68,151

2012 2011

2014 63,417

2010

0

20,000

40,000

60,000

80,000

9 million

12 million

ACRES LOST

2009 2008

2016 * 3.5 million

2007

2015 10.1 million

2006 $0

$500 million $1 billion $1.5 billion $2 billion $2.5 billion $3 billion $3.5 billion $4 billion insured losses

overall losses

2014 3.6 million 0

3 million

6 million

*as of August 2 Source: Munich Re, Geo Risks Research, NatCatSERVICE

Source: National Interagency Fire Centrev

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2/09/2016 5:35:13 AM

UPFRONT

HEAD TO HEAD

Will the new affordability definition have any effect?

The federal government has unveiled a new auto insurance affordability index, but many in the industry feel it’s misguided

Patricia A. Borowski

Robert Gordon

Robert Hunter

Senior vice president of industry affairs National Association of Professional Insurance Agents

Senior vice president of policy development and research Property Casualty Insurers Association of America

Director of insurance Consumer Federation of America

“The FIO fails to account for critical factors, such as the significant differences that exist among drivers regarding their individual or collective household driving records. Additionally, the FIO’s approach doesn’t give enough weight to numerous variables, including non-insurance-related factors that impact insurance prices and account for regional variations.

While the FIO did make several positive changes in their considerations, PIA remains concerned that defining affordability by a fixed percentage of income using a defined set of factors may not produce meaningful results. Assessing auto insurance affordability is much more complex than determining the affordability of housing.”

“The FIO’s attempt to impose a new arbitrary affordability index on auto insurance lacks important context.

Required auto liability insurance represents less than 5% of the cost of owning a car. The FIO should instead focus on the biggest issue facing motorists and insurers – the looming auto safety challenge.

Auto accident deaths increased 8% in 2015, the largest increase in 50 years. Driving injuries are up 29% since 2009. Despite new safety technology, our roads are getting more dangerous.

Repair costs and medical inflation are skyrocketing. Policymakers should turn to the most urgent issue impacting motorists: safety.”

“The FIO has taken an important step by establishing an auto insurance affordability standard. Consumer, civil rights and community advocates have long highlighted the burden that unaffordable premiums place on working families. This marks the first government effort to grasp the scope of the problem.

We’re hopeful that the result will be a clearer understanding of how difficult it is for low- and moderate-income drivers to comply with mandatory auto insurance laws and target where the problem is most severe. The response to the findings by state regulators and lawmakers will be the true measure of the value of FIO’s research.”

THE MAGIC NUMBER After years of consultation with the industry, consumers and regulatory authorities, the Treasury Department’s Federal Insurance Office [FIO] unveiled its insurance affordability index earlier this summer – but the adoption of a 2% formula for the definition of auto insurance affordability has met with industry disquiet. Announcing the new methodology, Michael McRaith, director of the FIO, said, “Access to affordable auto insurance is crucial for consumers who commute to work, drive kids to school and meet the needs of their families. This new methodology is a meaningful step toward better understanding the affordability of auto insurance for consumers and underserved communities all across the country.”

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2/09/2016 5:35:39 AM

UPFRONT

OPINION

GOT AN OPINION THAT COUNTS? Email iba@keymedia.com

Fraud is corroding our society Insurance expert David Hertzell discusses insights from a recent UK taskforce on fraud and why the American insurance industry should pay attention FRAUD HAS come a long way in the last few years. Most insurance transactions are automated and depersonalized. It is much easier to steal from a computer than from a person. Last year, the Association of British Insurers estimated the total amount of fraud in the UK was £3 billion a year.

That was no more than an educated guess.

But whether the real figure is half of this or twice as much, it’s still a lot of money.

Insurance fraud isn’t a victimless crime.

It is socially corrosive and has been found to fund other criminal activity. Just as importantly, it costs honest policyholders a lot of money. The FBI estimates the total cost of insurance fraud (excluding health insurance) is around $40 billion a year. That translates to between $400 and $700 a year in increased premiums for the average family in the US. In the UK, we established a specialized Insurance Fraud Taskforce. In June, the British Government approved all 26 of our recommendations. I’m confident we are on course to defeat this social evil that has spread across the world.

The fact that fraud accounts for such a large portion of premium increases shows that you’re facing the same drivers of this criminal activity in the US. I can also see similarities in the kinds of fraudsters that are eroding a system that was set up to

protect the injured. Fraudsters are usually organized criminals or opportunists.

We found different deterrents apply to the different types of fraudster, and that fraud can occur either at the application or claims stage. Indeed, there is often a link

insurance fraud in the US want success for all involved, I urge them to start considering some of our recommendations. There must be a dedicated effort toward increasing consumer understanding about insurance, how it works and why fraud is not harmless.

That fraud puts the stress and onus back on the fraudsters’ neighbors, friends, business colleagues and the community as a whole to fund their deception.

One of our most important recommendations involves the use and reliability of data: that there should be an increased take-up and sharing of data to enable all involved to see when fraud is being committed.

I would also stress that regulators need to understand that insurance fraud crosses different sectors, from telecom regulators to professional bodies such as those of lawyers and doctors. In the UK, we needed better coordination among our regulators on fraud and better emphasis on fraud prevention. I can hazard a guess that the same applies in the US. There is one key lesson that I can impart

“Insurance fraud isn’t a victimless crime. It is socially corrosive and has been found to fund other criminal activity. Just as importantly, it costs honest policyholders a lot of money” between the two.

In the current climate that businesses find themselves in, especially banks and insurers, there is a sentiment of disenchantment among consumers. With headlines about price obfuscation, executive excess and tax avoidance, insurers aren’t highly regarded; there is the perception that they will rely on the small print to avoid paying claims.

The problem is not helped by lack of awareness of the value of insurance and what the policy terms are. Indeed, some opportunistic fraudsters believe they are unlikely to be caught, or even see the inside of a courtroom if they are.

If the stakeholders involved in fighting

to those undertaking measures to curb fraud: It can be effectively combated, but only if effort and resources continue to be devoted to detection and prevention over the long-term. There will be many obstacles in your path, but the end result is worth it – the creation of a more just insurance system that exists to protect those who need it the most.

David Hertzell is president of the British Insurance Law Association and chair of the Chartered Insurance Institute Professional Standards Board. He chaired the government taskforce on insurance fraud, whose recommendations have been accepted by the UK government.

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2/09/2016 5:35:53 AM

UPFRONT

NEWS ANALYSIS

Going up in smoke As a popular automaker sinks deeper into a scandal, insurance professionals are considering a common but dangerous coverage gap AUTO MANUFACTURER Volkswagen entered 2015 as one of the most respected names in the car business. It ended the year, however, in a very different place.

In September, the US Environmental Protection Agency issued a violation of the Clean Air Act to the German automaker after it was discovered Volkswagen had intentionally rigged hundreds of thousands of two-liter engine cars in the US with software that allowed them to pollute, undetected, up to 40 times the permitted levels.

By the time Volkswagen admitted to the deceit, it was discovered the programming was put in about 11 million cars worldwide – including 500,000 in the US – between 2009 and 2015. And, according to US Justice Department allegations, the automaker also fitted 85,000 vehicles with three-liter

a $14.7 billion civil settlement with the Environmental Protection Agency and the California Air Resources Board, it still faces lawsuits from individual states, as well as the federal criminal probe.

Volkswagen has issued a statement saying it is “committed to earning back the trust of our customers, dealers, regulators and the American public,” but actually doing so – and doing so with finances intact – presents a tremendous challenge emblematic of a growing and tough-to-insure risk, says Nir Kossovsky, CEO of Pittsburgh-based broker Steel City Re. “Most people have historically viewed reputational risk as negative publicity, but that’s really just the tip of the iceberg,” Kossovsky says. “It’s really the risk that when the expectations of your stakeholders – your

“Most people have historically viewed reputational risk as negative publicity, but that’s really just the tip of the iceberg” Nir Kossovsky, Steel City Re engines with the so-called ‘defeat devices.’

Now, the DOJ says it has found evidence of criminal misconduct by Volkswagen in the handling of the diesel-emissions fiasco – a striking development in an ongoing saga that insurance professionals say should forcibly remind producers of a common but dangerous coverage gap: reputational risk.

Though Volkswagen agreed in June to

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customers, employees or investors – change, they behave in a way that creates financial damage. It’s behavioral economics.”

Steel City Re, which underwrites accounts using a complex index of reputational indicators, divides such risk into six areas: ethics, innovation, safety, security, sustainability and quality. According to Kossovsky, the Volkswagen emissions scandal hits on

several of those areas.

“With something like Volkswagen, you’re looking at a brand consumers choose because they think it’s environmentally friendly, so there’s a sustainability issue right away,” he says. “You’ve also now got an ethical risk, in which the behavior of management hasn’t met the expectations of shareholders, regulators and a number of others.”

Such reputational risk has proven difficult to insure against historically. Loss of reputation or brand value ranked seventh in Allianz’s Top 10 Global Commercial Risks for 2016, and actuarial firm KPMG has said the ways any loss could be tied back to reputational damage are “almost uncountable.”

It’s hardly surprising, then, that an ACE Group survey revealed that just 29% of small companies and 32% of mid-sized companies say they feel ‘very effective’ at quantifying the financial impact of reputational risk. With those metrics, it’s difficult – but not impossible – to develop insurance products for this common corporate anxiety.

“Insurance is not a panacea for the fast-

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2/09/2016 5:36:24 AM

RETICENT ON REPUTATIONAL RISK An ACE survey of businesses across the globe confirms that reputational risk is a major threat for many businesses – and one that’s often inadequately covered.

92%

believe reputational risk is more difficult to manage than any other specific risk category

81%

say reputation is their company’s most significant asset

77%

say they monitor and measure their reputation on an ongoing basis

77%

say they find it difficult to quantify the financial impact of reputational risks on their business evolving world of reputational risk,” says Andrew Kendrick, senior vice president with Chubb Group. “Nevertheless, I believe there is much that insurers and brokers can do collectively to help their clients.”

At a base level, there are many reputational risk insurance products that provide

City Re’s policies have limits, however – up to $100 million on its Reputation Value Insurance product.

The client base for these products is also specific. Products are best suited to large public corporations with boards of directors as well as larger privately held compa-

“Insurance is not a panacea, but I believe there is much that insurers and brokers can do collectively to help their clients” Andrew Kendrick, Chubb Group coverage for crisis management and public relations costs. For true loss of income or net profit stemming from reputational damage, however, a much more limited market exists.

In this highly specialized space, where companies like Steel City Re operate, small deviations in a company’s value result in comparatively small defined payouts. Steel

nies and the captives of bigger companies. Smaller businesses would be better served by a self-insured, captive solution, Kossovsky says.

“The captive instrument can be triggered not on an index, but on a bespoke indicator like lost revenue or other observable measures,” he says. “You can build into the captive a loss absorption capacity and addi-

68%

say information and advice on managing reputational risk is difficult to come by

66%

say they feel inadequately covered for reputational risks from an insurance perspective

56%

say the ultimate responsibility for reputational risk lies with the CEO/managing director

56%

say social media has greatly exacerbated the potential for reputational risks Source: ACE Group, 2013

tional funds for crisis communications.”

Some producers may be able to advise on its creation, but Kossovsky cautions that managing reputational risk is a unique skill set, and professionals “outside the brokerage world” may be best suited to that role.

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2/09/2016 6:57:56 AM

UPFRONT

INTELLIGENCE CORPORATE ACQUIRER

TARGET

PRODUCTS COMMENTS

AmWINS Group

Private Client Insurance Group

Private Client is a wholesale broker that specializes in personal lines insurance for high-net-worth individuals

Arthur J. Gallagher

Victory Insurance Agency

The Texas-based company will operate under the supervision of Gallagher’s South Central retail P&C group

The Hartford

Maxum Specialty Insurance

The $168 million deal expands The Hartford’s presence in Delaware

Holman Insurance Services

Risk Partners

The commercial insurance brokerage and MGU will operate as a subsidiary of Holman

Protective Life Insurance Companies

USWC Holding Company

The stock-based arrangement will see USWC continue to operate in its current location with existing leadership

Quaint Oak Bank

Signature Insurance Services

The acquisition secures the renewal rights of Signature’s book of business

United Insurance Holdings

RDX Holding

RDX is the parent company of American Coastal Insurance Company

AIG launches new primary cyber policy

AIG scores with $3.4 billion sale to Arch Capital

AIG has successfully stalled attacks from activist investors with the $3.4 billion sale of its mortgage guaranty unit to Arch Capital Group in August. AIG will receive $2.2 billion in cash, $250 million in Arch Capital’s perpetual preferred stock and $975 million in non-voting common-equivalent preferred stock from the sale of United Guaranty Corp. The move comes after AIG’s January announcement that it would spin off its mortgage insurance unit, cut jobs and sell its broker-dealer network. The plan was part of a package of concessions to fend off investors unhappy with the insurer’s direction, including board member Carl Icahn.

The sale of United Guaranty is meant to help AIG shed its designation as a systemically important financial institution, a change that would free the insurer from having to comply with stricter capital requirements established by the federal government. AIG says it will “continue to be a participant in the residential real estate market” through direct ownership of mortgage loans, a portfolio of structured securities, the holding of Arch stock and continued ties to United Guaranty.

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In response to the rapid increase cybercrime, insurance juggernaut AIG has a launched a stand-alone cyber insurance policy.

Called CyberEdge Plus, the product covers business interruption, product liability, property damage and bodily injury that results from cyberattacks and offers limits of up to $100 million. In addition to providing organizations with coverage for third-party claims arising from a failure in network security or the failure to protect data, CyberEdge provides protection against business interruption caused by a cybersecurity failure.

Tokio Marine expands US P&C offering

Tokio Marine has announced the expansion of its commercial P&C offerings of large casualty and general/product liability solutions to US customers.

The insurer has offered large commercial property coverage to Japanese businesses in the US for more than a century, but the expansion will make it available to its large national and US-domiciled risk management accounts as well. The products are admitted in all 50 states, and the company has the ability to offer customized coverages and limits through Tokio Marine America Insurance Company.

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2/09/2016 5:36:53 AM

PEOPLE senseFly now offers drone insurance

Drone manufacturer senseFly has partnered with Ascentium Capital and Transport Risk Management to offer drone insurance, along with finance and leasing packages. The options will allow senseFly customers to finance or lease a professional drone with extended limited warranty coverage that will include scheduled maintenance for the full term of the lease or finance agreement.

Transport Risk Management has preunderwritten all senseFly customers, allowing them to have instant comprehensive insurance coverage for the full term of their agreement.

Missouri gets a new earthquake product

Palomar Specialty Insurance Co. recently launched Flex Choice, a new residential earthquake insurance product available to residents of Missouri.

Flex Choice lets customers customize their earthquake coverage to meet their needs through a variety of coverage choices and deductible options for Missouri residents. Flex Choice is distributed through wholesale brokers and independent agents and can be accessed via the Palomar Automated Submission System, which offers producers a fast quote-to-issue process. The company plans to expand to other states in the New Madrid Seismic Zone in the coming months.

Farmers Insurance expands rideshare coverage

Farmers recently extended its rideshare insurance coverage to Michigan, making it the 26th state where the coverage is available. The offering is designed to give protection to ride-hailing drivers as an extension of their existing Farmers personal auto policies. The coverage begins when a driver turns on the ridesharing application and during the time the driver waits for a match and will extend the driver’s insurance until they accept a ride, at which point their rideshare affiliate’s commercial insurance coverage will apply.

NAME

LEAVING

JOINING

NEW POSITION

Clint W. Anderson

Anderson Land Services

HUB International

President, specialty practices

Jacquelyn Anderson

N/A

Penn National Insurance

Senior VP, CFO and treasurer

Rick Ciullo

Chubb

Hartford Financial Services Group

Chief operating officer, Hartford Bond

Doug Fyfe

CBIZ Insurance Services

Alliant Insurance Services

First VP, Alliant Americas division

Glenn Jackson

Avios Re

RFIB Group

Managing director, RFIB Americas

Lizette Junior

AON Global Risk Client Network

XL Catlin

Underwriting director, multinational casualty programs

John Kirchofer

XL Catlin

Fidelis Group Holdings

VP of marine division, Continental Underwriters

Jeff Lange

Hartford Financial Services Group

QBE North America

Senior VP and regional executive, Midwest region

Cait Levy

Willis North America

Beecher Carlson Insurance Services

Senior vice president

Chris J. Malicki

SMART Safety Group

Cavignac & Associates

Risk control advisor

Edward W. McConnell

Assurance Agency

HUB International

Senior VP and national staffing practice leader

Peter Schmitz

Aon PLC

Lockton Cos.

Senior VP and aviation practice leader

Andrew M. Stephens

Aon Benfield Group

Ironshore

Branch executive of San Francisco, West region

John Tatum

CNA Financial Corp.

Axis Capital Holdings

Executive VP and head of US programs

Rick Ulmer

Marsh USA

Regions Financial

President and CEO

PPIB appoints new underwriting VP

Professional Program Insurance Brokerage [PPIB] has announced the promotion of Susan Etter to VP of underwriting. Etter has been working with PPIB for six years, managing underwriting and sales staff. In her new role, she will continue to oversee PPIB’s various contracts and programs, while working with PPIB president Susan Preston to develop new programs. PPIB has offered unique insurance solutions for specialty and service industries, including medispas, tattoo studios, smoke shops and pyrotechnics, for close to 25 years.

Barclay named chief underwriting officer

Donna Barclay, a P&C expert with more than 30 years of experience, has been named chief underwriting officer of property & casualty at The Guarantee Company of North America. The new role will tap Barclay’s considerable experience in global insurer leadership, tasking her with developing and implementing new underwriting solutions in order to service the ever-evolving P&C market. She will also provide technical underwriting leadership, support and authority to The Guarantee’s P&C underwriting teams, ensuring the successful achievement of key corporate strategies for profitable growth.

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2/09/2016 5:36:59 AM

UPFRONT

WORKERS’ COMP UPDATE NEWS BRIEFS NCCI defends massive workers’ comp rate hike The National Council on Compensation Insurance [NCCI] has moved to block a lawsuit that challenged proposed rate hikes in Florida. The council had proposed a 19.6% increase in premiums following the Florida Supreme Court’s decision to remove the legal limits on temporary total disability benefits and attorney fees. In a legal motion filed in August, the NCCI claimed that delaying the rate increase “could cause severe public harm, as workers’ compensation rates are currently not adequate to meet claims.” The group said insurers could fall more than $1 billion short of what they need to pay claims.

Comcast attempts to cut workers’ comp claims

Comcast, which has 1,300 to 1,600 behavioral health claims a year and pays millions of dollars in benefits, has conducted an investigation into the nature of their claims. The company discovered that 60% of employees being treated for a mental health or behavioral issues were being seen by a general practitioner rather than a licensed behavioral health expert. In response, Comcast has introduced an employee assistance program, which provides a certain number of behavioral health visits at no cost to the worker. The organization hopes the program will have a positive impact on workers’ comp claims.

Injured firefighters denied workers’ comp treatment

The City of San Jose is taking a fresh look at workers’ comp cases after complaints from nearly 70 firefighters, who say that the workers’

14

compensation system has denied them adequate treatment for injuries suffered on the job. The city claims that the private company contracted by the city to handle half of San Jose’s workers’ compensation claims, Athens Administrators, rejected requests for medical treatment. Athens Administrators says it was following the guidelines set out by the state when they determined that the requests for medical service were not necessary.

Berkshire Hathaway under fire for alleged hacking

A suit filed in April accuses Berkshire Hathaway Homestate, Zenith Insurance and Cypress Insurance of hacking into California attorney databases and stealing roughly 33,000 workers’ compensation files containing personal information related to a series of cases.

Insurers filed a motion to dismiss the case in June, saying lead plaintiff Adela Gonzalez cannot identify how she was harmed or aggrieved by the alleged incident. But Gonzalez and others struck back recently, citing the fact that an insurance investigator associated with Berkshire admitted to taking the files, and that the insurer was caught using the information in separate litigation.

Pennsylvania authorities battle misclassification Pennsylvania state and federal labor agencies recently signed a memorandum of understanding to protect employees against misclassification. The Pennsylvania Department of Labor and Industry and the US Department of Labor Wage and Hour Division signed the three-year agreement to curtail the common practice of misclassifying laborers as independent contractors and other nonemployee statuses.

Election casts uncertainty on workers’ comp The five insurance commissioner and 12 gubernatorial positions up for grabs could have major industry impact Every election year has a massive impact on every industry and corporate function across the country, and with this year’s election poised to have an even greater effect than most, uncertainty is a concept that resonates with many Americans at the moment. The economy, foreign policy and the political future of the United States all hang in the balance.

Workers’ compensation isn’t getting spared in the shaky socioeconomic landscape. The vote will have a direct impact on the industry, considering that five insurance commissioner positions and 12 gubernatorial seats are due to be decided, says Mark Walls, vice president of communications and strategic analysis for St. Louis-based Safety National.

“The workers’ compensation industry needs to be paying attention to these elections because the insurance commissioners can have significant influence over procedures, policies and enforcement in their states,” he says.

Walls is paying closest attention to the workers’ comp situations in Florida and Oklahoma, both of which are facing serious challenges to their unique systems.

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“I’m looking at how these states deal with their workers’ comp statutes in light of the fact the courts recently found significant elements of their workers’ comp laws to be unconstitutional,” Walls says. “In both states, there have been important court

in Florida is particularly dysfunctional, he adds.

“The NCCI has recommended rate hikes of [almost] 20% because of the unconstitutional elements,” he says. “The Florida legislature will need to address

“The workers’ compensation industry needs to be paying attention to these elections because insurance commissioners can have significant influence over procedures, policies and enforcement in their states” decisions this year, and there is still another one pending in Oklahoma for which we expect a decision any time soon. These court cases could lead to rate hikes in both states.”

The workers’ compensation situation

this next year.”

Regarding the overall election result, Walls is particularly eager to discover “the direction given to OSHA and the Department of Labor and how those

departments interact with employers. With one candidate, we can probably expect policies similar to the current administration.

It is unclear how the other candidate views such issues.”

.®

www.summitholdings.com

Member of Great American Insurance Group

Policies are underwritten by Bridgefield Casualty Insurance Company and Bridgefield Employers Insurance Company, authorized insurers in AL, AR, FL, GA, IN, KY, LA, MS, NC, SC, TN and TX; BusinessFirst Insurance Company, authorized in FL, GA, KY, NC, SC and TN. RetailFirst Insurance company, authorized in FL; Retailers Casualty Insurance Company, authorized in AR, LA, MS and TX. ©2016 Summit Consulting LLC | 2310 Commerce Point Drive, Lakeland, FL 33801

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2/09/2016 5:38:01 AM

UPFRONT

TECHNOLOGY UPDATE

Insurance agents’ Achilles heel A new survey suggests that agents want to invest more in technology, but they’re not sure where to start

nicate with customers. “This is a relatively inexpensive technology and easy to implement, so the low percentage is surprising,” the report said.

Agencies are also failing to make their websites and services available to consumers in their most preferred formats, says Cal Durland, industry consultant and advocate for the Initiative at Insurance Digital Revolution.

“Your website needs to be more than just a brochure,” Durland says. “It needs to host everything from the ability to quote car insurance or chat with staff, all from their phone.

“There’s a whole slew of functionality that’s just not reading”

Independent insurance agents are more aware than ever of the importance of digital technologies in growing their businesses – yet their actions tell a very different tale. The majority of agents (60%) who responded to the recent Insurance Digital Transformation Survey told researchers their websites are ‘average to poor,’ and only 8% rated their sites as excellent.

The coalition administering the survey, which includes IIABA’s Agents Council for Technology, ACORD User Groups Information Exchange and the PIA, points to a lack of func-

NEWS BRIEFS

tionality as a reason for this low confidence.

“Agents understand the current market and know they need to make changes to compete,” says Ron Berg, executive director of the ACT. “A significant number – 70% – have proactive strategies in place to implement new technology to improve their businesses. But even with that awareness, adoption of new technology has been slow.”

The survey found that fewer than a quarter of agencies host comparative raters, and only 16% use chat or instant messaging to commu-

Wholesaler launches new online platform

SIS Wholesale Insurance Services announced a new online rating and policy management platform in August.

Dubbed SIS Online 2.0, the platform incorporates an advanced comparative rating engine that allows SIS’ appointed brokers access to quote, bind and issue policies in minutes from seven exclusive programs. It also enables brokers to manage all endorsements, in-force business and renewals. SIS’ Matthew Roselle noted that SIS Online 2.0 will handle hundreds of thousands of transactions per year.

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There’s a whole slew of functionality that’s just not reading.”

Consumers are also looking for mobile apps to assist them with their insurance needs, yet just 21% of agencies have developed these capabilities. And not many more (just 23%) have a client portal on their site. Developing these functions should be a top priority for agencies, even if most say their consumers aren’t asking for them directly, says Mike Becker, executive vice president and CEO of PIA. “Agents can’t assume that no news is good news,” he says. “When it comes to customers’ digital requirements, that’s never true. Look at banking – many institutions did not know how popular online and mobile banking would be with their customers until they adopted it. The same is true for insurance.”

Breach underlines importance of tech E&O policies

UK-based human resources software company Sage reported in August that employee data from approximately 280 companies worldwide had been compromised. The attack highlights the need for any technology provider who deals with such sensitive data to have a technology E&O policy. “Brokers need to understand the difference between a technology E&O policy and a cyber liability policy,” said NAS Insurance’s Jeremy Barnett. “There are broader coverages for those companies under the tech E&O.”

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Q&A

Kevin Meagher Senior vice president of business development ROC-CONNECT

Years in the industry 16 Career highlight Winning the Ruban de Honneur as European Entrepreneur of the Year before immigrating to the US

Quantifying the Internet of Things What is most insurers’ current relationship with the Internet of Things like?

There are those who are very alert to what the Internet of Things could do to insurers and how very disruptive it could be, and there are those who are just waking up to it.

The ones who are paying attention are the hungry ones – they’re the ones who want to grow their business, the ones who are always looking for new opportunities. Ironically, while they think the Internet of Things represents a huge opportunity, they’re only just realizing that it also represents a huge threat to their business model, and they need to look at how to defend their position against what might happen.

So is there a positive side for insurance professionals in their relationship to the IoT? Absolutely. The relationship between insurers and their customers could change for the better if they start investing in partnerships with IoT providers.

Insurance companies already buy data from quite a few different companies. If they look to do that from home and business IoT providers, they can add that data into their knowledge base and start to talk to the customer about the overall risk level around their home.

If you know a home has four bathrooms and two water sensors, for example, you can send a message to the policyholder tied into a report from Weather.com to recommend getting two more water sensors so that customers can start proactively managing risk.

More importantly, insurers can start offering services

Quantifying cyber risk prevents effective policies

In 2015, the National Association of Insurance Commissioners [NAIC] implemented guiding principles for insurers underwriting cyber risk, but there is still no standard on which the industry underwrites cyber liability coverage, which could lead insurers to over- or underestimate the value of their clients’ data assets. At present, cyber underwriters use inputs from information security tools such as Security Information and Event Management [SIEM], as well as structured questions, to help them anticipate possible cyberattacks.

to homeowners to allow them to manage their property.

If you note a problem on the site, you can call, talk to the consumer and suggest a plumber or tradesman. It comes back to making money, but also helping customers find these services.

What about consumer privacy concerns?

Privacy is important. You’ve got to give consumers the assurance of knowing exactly what you’re doing with their data. You don’t take it and sell it to someone else, for example. Once you start using data in that way, the relationship and the trust are broken. If I use data to come back and make suggestions to the customer on how they can manage risk and save money, though, I do better. I think of it the same way Google does: If you take a customer’s raw data and throw random marking messages out to consumers, they will be annoyed. By growing increasingly sophisticated in how they target marketing, however, they ensure consumers aren’t offended. The Internet of Things will go the same way.

What role will agents play in facilitating this new relationship between insurers, customers and third-party service providers?

The agent is always hugely important, and this could make them even more so. If you start to look at the range of services you can develop and market to consumers, you’ll start to consider how you can move beyond just providing insurance to acting as a concierge and providing many services for a home or business.

Online platform provides guide on construction risks

Online insurance placement platform Insurance Noodle has launched a guide that helps independent agents close sales with the construction industry. The guide comes as the construction industry is about to enter its busy season and the housing market is displaying signs of improvement. This is Insurance Noodle’s fifth guide in a series of industry-specific sales guides. The guide is currently free to download as an e-book on the Agent Academy, Insurance Noodle’s educational resource hub for insurance agents.

Tech-based competitor enters drone market

Agents and brokers looking for a share of the profits in the drone insurance market already have a major competitor: a New York-based startup called Verifly. The app-based licensed producer has partnered with Global Aerospace Insurance to offer on-demand, per-flight policies. When a consumer opens the app, Verifly draws a quarter-mile circle around users, analyzes information from the company’s geospatial and weather databases, and calculates risk for an hour-long flight.

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2/09/2016 5:38:35 AM

PEOPLE

INDUSTRY ICON

BUILDING STRENGTH IN INSURANCE John Mentz, president of Arch Insurance Group, talks capital, culture and working to succeed in a challenging market DURING HIS years in insurance, John Mentz has observed some substantial changes. But one change he believes has had a particularly significant impact is the ease with which capital can now move into insurance.

“When I started, it was not easy for new capital to come into the insurance business. There were far too many barriers [to] entry to get that capital into the business and deploy it,” he says. “Today, those barriers have greatly been broken down.

The financial market is just more efficient today than it has been in the past. And with the advent of sidecars, insurancelinked securities, hedge fund reinsurers and other vehicles, this has allowed pension funds, hedge funds, private equity firms and high-net-worth individuals to invest and put capital directly into the insurance market.

“And I think the ease with which the capital is coming into the industry has changed the competitive dynamic greatly in many segments of the business,” he continues.

“What used to be predictable market behavior in response to good or bad industry results is now more uncertain, as new capital can easily come in and be in a new segment much more quickly than it was in the past. I think this is likely to lead to a leveling of some of the market swings that the property & casualty industry has had, which hopefully is a good thing for the industry, in terms of providing a [more stable] environment for its customers.”

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Mentz has worked in insurance since he was a sophomore in college. A math major, he got his first taste of the industry through an actuarial internship with a property & casualty company.

“I thought that was a great introduction to the insurance business,” he says. “It was a good chance to see all the aspects of an insurance company – from product pricing to balance sheet reserving to claim handling

terms of starting up a business, you have to hire a team, convince others to join a startup organization, develop a unique business approach and gain acceptance in the market.

Starting up a business unit from scratch I view as one of the greatest challenges I’ve faced, as well as one of the greatest accomplishments, in terms of building a business unit that has been a good, sustainable business segment for Arch for going on 15 years now.”

“What used to be predictable market behavior in response to good or bad industry results is now more uncertain, as new capital can easily come in and be in a new segment much more quickly than it was in the past” to underwriting, and exposure to virtually all functions of the company.”

Mentz has been part of Arch Insurance Group since it was founded, a tenure he credits with providing him both his best and most difficult times in insurance.

“I was hired to build out a business unit that was specializing in insuring large contractors, and that challenge of starting the business from scratch was much more daunting and intimidating than I thought it would be, but it was also very rewarding,” he explains. “In

The talent pipeline Today, Arch Insurance Group, a division of Arch Capital Group, is a global insurer that provides specialty risk solutions. In Mentz’s view, what separates the company from its competitors is relatively simple.

“I think a great strength of the Arch organization is the responsiveness and flexibility that the organization has to respond to the ever-changing needs of the market,” he says.

“And much of that success and many of our successes have come from individuals and

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2/09/2016 5:39:00 AM

PROFILE Name: John Mentz Company: Arch Insurance Group Title: President Years in the industry: 26 Fast fact: Before joining Arch, Mentz held a number of senior management roles with Zurich and The St. Paul Companies

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PEOPLE

INDUSTRY ICON

teams responding quickly to market opportunities. I think that’s a result of having an innovative and entrepreneurial culture. I certainly view Arch as being a company with big-time financial capabilities, but also a company that is entrepreneurial and innovative in spirit.”

He adds that a further hallmark of Arch is its striving to secure great technical resources for each of its specialties.

“We want to have experts in each of the given business segments that we’re entering, and then give them the environment and

opportunities, as well as career paths.

“There’s obviously more turnover with younger folks that are early in their career,” Mentz says, “but I think the investment in getting them into the company and giving them training and development opportunities, as Arch does, is one that when you get people who stay in the business, you’re more likely to develop some real stars.”

ARCH INSURANCE GROUP BY THE NUMBERS

A digital world

The year Arch Capital Group (the parent company of Arch Insurance) was founded

Mentz also talks about the importance of keeping pace with technological changes.

“We have to be responsive to customers’ risk management needs as their risk practices change. We also have to adapt our business model and utilize technology to most effectively and efficiently serve our customers” support that they need to succeed,” he says.

“And our organization values the expertise that the individuals bring to the table.”

Of course, attracting great people is an issue that continues to plague the global insurance industry. On the subject of recruiting the next generation of insurance professionals, Mentz says he thinks it’s about focusing on attracting young job-seekers.

“The insurance business is a business that’s very hard to get into later in your career,” he says. “It’s just such a specialty and deeply niched functionality type of industry.

So, it’s hard for those later in their career to make the switch to insurance, which means that you just have to be focused on getting young people into the organization.”

And once those young employees are recruited, he adds, it’s essential to then ensure they have training and development

20

“Our customers’ businesses are changing with technology, so we have to be responsive to their risk management needs as their risk practices change,” he says. “We also have to adapt our business model and utilize technology to most effectively and efficiently serve our customers.”

To that end, Mentz mentions the significant investment Arch has made in predictive analytics.

“I think a big piece of technology in the insurance industry is that it aids in operational efficiencies, but I think it also aids in our understanding and pricing of the insurance products,” he says. “A lot of the predictive analytics driven by big data is something that is hugely important to the success of the insurance industry, and I think those who do that better will end up with much better results.”

2001

2014

The year John Mentz was appointed president of Arch Insurance Group

$2.94 billion

Arch Insurance Group’s worldwide GWP for 2015

1,350

The approximate number of Arch Insurance Group employees worldwide.

The organization operates in the US, Canada, Bermuda, Europe, Australia, southern Africa and parts of Asia

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8/26/16 10:48 AM 2/09/2016 5:39:21 AM

FEATURES

COVER STORY: WHOLESALE E&S REPORT

WHOLESALE E&S REPORT IBA takes a look into the current state of the wholesale excess & surplus marketplace SEVERE STORMS, wildfires and data breaches have made 2016 an eventful year so far for the entire insurance industry. Despite hectic occurrences that have rattled parts of the industry, the surplus lines market remains strong and stable heading into the end of the year.

Insuring unique, hard-to-place risks, the surplus lines market meets the needs of clients with non-standard risks and is paving

conducted with all the stamping offices really proves to be right on target of 50% of what the end-of-the-year premiums will eventually be – which will be about $26 billion in premium for the end of 2016,” says Norma Essary, executive director of SLSOT. Although 2016 has only experienced a 0.2% increase in premium volume from last year, Essary says that’s a sign of an established market. “I think that it really shows a

“Despite the rate decline and competitive pressure, there is a lot of optimism in opportunities that exist in the surplus lines market”

Challenges and opportunities

Brady Kelley, NAPSLO the way for new and unconventional products. Although the overall outlook of the market is soft, the wholesale industry has experienced a steady and competitive year thus far. According to the 2016 Mid-Year Surplus Lines Premium report from the Surplus Lines Stamping Office of Texas [SLSOT], US premiums from the 14 state stamping offices collectively increased from $13.075 billion in the first half of 2015 to $13.095 billion for the first half of 2016.

“Historically, benchmarking that is

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1.7% and 0.9%, respectively. Out of the 14 stamping-office states, only Texas, Florida and Arizona saw decreases in premium, and Texas and Florida had decreases of less than 3%, which could be attributed to timing as opposed to a weakness in the market.

From a regional perspective, the South led the nation with 1.1 million filings and had the highest aggregated premium at $5.6 billion. The West region came in second with a total of $4.1 billion in premium for mid-year 2016.

Although these numbers only reflect the first half of 2016, they are consistent with a competitive and stable marketplace, according to the report, and illustrate a secure excess & surplus market.

strong and stable surplus lines market,” she says. “If I look from 2014 to 2015, there was a 9.5% increase, and while from 2015 to 2016, there has just been a very slight increase, it shows me that it’s stable where it’s at, and I can only imagine that it will go up in coming years. It tells me that the marketplace is here to stay.”

The market has been growing for many areas across the US. Two of the top four surplus lines markets, California and New York, both experienced gains this year of

Capital levels in the market are at an all-time high, and there are more forms of it than ever. Coupled with oversaturation in the marketplace, the excess & surplus market has its challenges. “I cannot think of a time in my 20-plus-year career where there have been more people writing insurance,” says Ryan Collier, chief digital officer with Risk Placement Services.

According to Brady Kelley, executive director of NAPSLO, the flattening of insurance rates may be a direct result of the highly competitive market. So why is the

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2016 MID-YEAR WHOLESALE PREMIUMS WASHINGTON

$379 million 53,419 items NEW YORK

OREGON

$163 million 25,934 items

$ 1,869 million 148,058 items

MINNESOTA

IDAHO

$222 million 20,756 items

$47 million 8,447 items

PENNSYLVANIA

$620 million 96,359 items

NEVADA

$133 million 15,679 items

UTAH

ILLINOIS

$104 million 12,052 items

$712 million 67,471 items

CALIFORNIA

$3.05 billion 278,091 items ARIZONA

$208 million 31,460 items

TEXAS

$2.57 billion 473, 258 items

FLORIDA

MISSISSIPPI

$201 million 63,431 items

$2.82 billion 524,672 items

Sources: 2016 Mid-Year Surplus Lines Premium report, Surplus Lines Stamping Office of Texas

surplus lines market growing in spite of these challenges?

“Despite the rate decline and competitive pressure, there is a lot of optimism in opportunities that exist in the surplus lines market,” Kelley says. “Emerging issues and continuing signs of a slow but recovering economy: new construction, new development and a growing number of small businesses that would not be able to operate without a surplus lines policy. When surplus lines carriers are the first to market a newer, innovative product, that creates solutions to new and emerging risks, and I think what we are seeing is top-line growth, and the market is growing as a result of that.”

For Chris Cavallaro, CEO of New Yorkbased ARC Excess & Surplus, the challenge is as simple as staying relevant through the ebbs and flows of the marketplace, a value that rings true across the entire insurance industry.

“If we don’t change our business model and mindset, we are going to see a lot of the E&S business be changed for us if we don’t change it ourselves” Ryan Collier, Risk Placement Services “The challenge we have as [insurance] companies is that we need to remain relevant to every single corporation in the US and the world by delivering products that transfer the risks that those companies have and allow them to operate in an unencumbered way,” he says. “Staying up-to-date with emerging risks and industries such as UAVs, legalized cannabis and autonomous vehicles will ensure that the wholesale industry is focused on the future and areas that major global businesses

are also turning their sights on.”

Another challenge faced by the wholesale excess & surplus market: a stagnant business model. “A lot of folks have a mindset that they are unwilling to change, and I think that is going to ultimately change a lot of our business over the next 11 years,” says RPS' Ryan Collier. “If we don’t change our business model and mindset, we are going to see a lot of the E&S business, or even just the retail insurance business, be changed for us if

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FEATURES

COVER STORY: WHOLESALE E&S REPORT MID-YEAR PREMIUMS YEAR-OVER-YEAR $208 million $238 million

AZ

$3.05 billion $2.99 billion $2.82 billion $2.88 billion

CA FL $47 million $39 million

ID

$712 million $699 million

IL $222 million $250 million $201 million $193 million

MN MS $133 million $129 million

NV

$1.87 billion $1.86 billion

NY $163 million $159 million

OR

$619 million $574 million

PA

$2.57 billion $2.61 billion

TX $103 million $96 million

UT

$379 million $354 million

WA $0

$50 million

$100 million

$150 million

$200 million

$250 million

$300 million

$350 million

$400 million

$450 million

Mid-year premiums 2015

$500 million

$1 billion

$2 billion

$3 billion

$4 billion

Mid-year premiums 2016 Source: 2016 Mid-Year Surplus Lines Premium report, Surplus Lines Stamping Office of Texas

we don’t change it ourselves.”

One solution is to welcome new, young talent into the mix. Faced with the task of attracting and training the next generation of wholesale insurance professionals, companies must overcome the challenge of a widening age gap and look to the next generation for guidance as the use of technology becomes increasingly ubiquitous across the industry.

“A great challenge we have right now is the need to recruit and retain top talent for the insurance industry,” Kelley says. “A lot of the work that we do at NAPSLO is with our Career Development & Next Generation Committee, which leads the charge in reaching out to prospective students across the country at colleges and universities about careers in surplus lines.”

What does the future hold?

Today, the market has yet to be influenced by the recent flooding in Texas and Louisiana,

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that’s not to say that there won’t be repercussions months from now, Collier says. But as he points out, it’s situations like these that the E&S market is designed for.

“Where the E&S market comes into play is exactly for those types of situations,” he says. “If you have a standard market and they get hit hard from a national catastrophe, whether it is a named storm or a flood, you can see sometimes see that standard market pull out and their underwriting appetite change, and that’s when you see E&S come into play to fill in the insurance needs.”

Notwithstanding recent weather patterns, the 2016 Mid-Year Surplus Lines Premium report shows a bright and stable future for the surplus lines market. If premiums remain on track, the year is set to end at a near $1 billion increase in premium over 2015.

“The premium volume of the surplus lines marketplace continues to grow as a result of private equity, and investment firms continue to pursue opportunities in our industry,” says

Gerald Horton, chairman and CEO of USG Insurance Services. “There is also dramatic growth over the last five years in valuations and EBITA. I see these investments, as well as the admitted markets dipping their toes into having stakes in surplus lines carriers, as positive signs of continued growth.”

The E&S market has seen 500% growth in the last 24 years of operation, and 2016 looks like it will continue that upward trajectory.

Kristen Skender, corporate vice president at USG, says that specialties and programs will continue to be a competitive edge for those who have unique products to offer. Between product enhancements in existing markets, and emerging areas and risks, the E&S market has no intent of slowing down.

“The value that the wholesale market offers to the insurance industry in general is huge,” Kelley says. “Innovation is what this market is all about and our market continues to develop new solutions and opportunities as a result of that.”

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technology platforms*.

To learn more visit: www.westchester.com The Complete Wholesale Solution for Brokerage, Binding, & Programs accounts to small business, and niche Insurance provided by WestcFor hesprograms, ter Flarge, ire Insurancecomplex Company and i t s U. S . based Chubbwe underwhave riting companyyouaffiliatcovered. es. Chubb is the marketing name used to refer to subsidiaries of Chubb at Westchester, coverage, Limited providing insurance andExceptional rtechnology elated services. For a lplatforms*. ist of these subsidiaries, plsuperior ease visit our websunderwriting ite at chubb.com. All product&s award may not be avaiwinning lable in all states and surplus lines products can only be offered through licensed surplus lines producers. This communication contains product summaries only. Coverage is subject to the language of the policies as actually is ued. Š2016 08/2016 To learn more visit: www.westchester.com

*2016 Recipient of the Celent Model Insurer Award.

Insurance provided by Westchester Fire Insurance Company and its U.S. based Chubb underwriting company affiliates. Chubb is the marketing name used to refer to subsidiaries of Chubb Limited providing insurance and related services. For a list of these subsidiaries, please visit our website at chubb.com. All products may not be available in all states and surplus lines products can only be offered through licensed surplus lines producers. This communication contains product summaries only. Coverage is subject to the language of the policies as actually issued. Š2016 08/2016

www.ibamag.com

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*2016 Recipient of the Celent Model Insurer Award.

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FEATURES

COVER STORY: TOP WHOLESALE E&S BROKERS

TOP WHOLESALE

E&S BROKERS Which firms are at the top of the excess & surplus marketplace?

WHETHER THEY’RE national players or regional specialists, these excess & surplus wholesalers have made their names in the marketplace by insuring the risks that would otherwise be declined by standard carriers. Playing a vital role in the insurance market, excess & surplus lines offer

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crucial coverage for hard-to-place, unique or high-capacity risks.

After surveying our readers and working closely with state stamping offices to analyze data from the first half of the year, IBA is proud to unveil, for the first time, 24 of the nation’s top E&S wholesale brokers.

www.ibamag.com

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30342 IBA Hockey ad 1/2 pg. vertical.qxp_layout 1 2/10/16 9:46 AM Page 1

TOP E & S WHOLESALERS

ABRAM INTERSTATE INSURANCE SERVICES INC. ALL RISKS LTD AMWINS GROUP, INC. ARC EXCESS & SURPLUS LLC ARLINGTON / ROE & CO., INC.

PAGE

REGIONS SERVED WEST

SOUTH

MIDWEST

NORTHEAST

30 31 32 29 36

BASS UNDERWRITERS BROWN & RIDING INSURANCE SERVICES, INC. BURNS & WILCOX INSURANCE SERVICES, INC. COCHRANE & COMPANY CRC INSURANCE SERVICES, INC./ SWETT & CRAWFORD

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HARRY W. GORST COMPANY, INC.

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MCCLELLAND AND HINE INC MYRON F. STEVES & COMPANY PARTNERS SPECIALTY GROUP, LLC PEACHTREE SPECIALTY RISK BROKERS, LLC PROGRAM BROKERAGE CORPORATION RISK PLACEMENT SERVICES, INC. RISK THEORY INSURANCE SERVICES RT SPECIALTY, LLC SCOTTISH AMERICAN INSURANCE GENERAL AGENCY, INC. SOCIUS INSURANCE SERVICES, INC. U S RISK INC USG INSURANCE SERVICES, INC. WORLDWIDE FACILITIES, LLC

32 40 32

Some games shouldn’t be played without a safety net.

32 39 43 43

NAPSLO members are specialists who create innovative solutions for nonstandard insurance risk. Count on them to deliver custom, costeffective solutions that are expertly tailored to meet your specific insurance needs.

31 40 35 34 28

NAPSLO members... where complex risk meets innovative solutions.

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National Association of Professional Surplus Lines Offices

.34 36 38 36

Primary region generating majority of premium

www.napslo.org Licensed in at least one state in region

www.ibamag.com

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FEATURES

COVER STORY: TOP WHOLESALE E&S

RT SPECIALTY Headquarters: Chicago, IL Number of offices: 26 Number of employees: 897 Leadership: Timothy W. Turner (pictured), chairman and CEO; Edward F. McCormack, president and general counsel

Possessing industry expertise in virtually all forms of high-risk and hard-to-place insurance needs, Ryan Specialty Group subsidiary RT Specialty is dedicated to providing wholesale brokerage services to its retail clients. RT Specialty defines itself through its “superior execution on behalf of our clients,� and extends its products and services throughout the country, boasting offices in every major US market.

In the past five years, RT Specialty has acquired E&S businesses and merged with two large brokerages. This year, the company has continued to expand its business with acquisitions of wholesale brokerages on both coasts.

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www.ibamag.com

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GORST & COMPASS INSURANCE

ARC EXCESS & SURPLUS

Headquarters: Chatsworth, CA Number of offices: 3 Leadership: Mike Heagerty, chairman and CEO; Bryan Clark, president

Headquarters: Jericho, NY Number of offices: 8 Number of employees: 160 Leadership: Christopher J. Cavallaro, CEO

In 1968, Harry W. Gorst established his eponymous company to underwrite risks for personal article floaters. Half a decade later, Gorst acquired Compass Insurance, which contributed to the firm’s commercial auto line; in 1996, Compass became the wholesale brokerage division, while Harry W. Gorst Company continued to serve as the underwriting authority. The company recently rebranded as Gorst & Compass Insurance, focusing on growing its E&S lines and catering to clients across the West.

Established to meet the growing needs of small to medium-sized businesses, ARC Excess & Surplus derived its moniker from the combined first letters of the three original partners’ names: Albert Salvatico, Richard Fierstein and Christopher Cavallaro. Since its inception in 1986, the company has become one of the nation’s largest wholesale brokers and a top producer for major management and professional liability insurance carriers, offering services to Fortune 500

companies, financial firms and nonprofit institutions.

Looking toward the future, ARC is focused on growing its wholesale business. “We are putting together a new cyber and new construction program, and we want to deliver more proprietary ARC-labeled products,” says CEO Chris Cavallaro. “That is something we strive to do to differentiate ourselves in the market.”

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FEATURES

COVER STORY: TOP WHOLESALE E&S BROKERS ABRAM INTERSTATE INSURANCE SERVICES Headquarters: Rocklin, CA Number of offices: 1 Number of employees: 21 Leadership: Ron Abram, president and CEO; Rhonda Donaldson, vice president

Two decades ago, Abram Interstate Insurance Services started out in the industry by selling equine and mobile home insurance products. From that humble beginning, the company has grown to provide a full range of commercial and agribusiness insurance products. Operating 100% in the Western region of the US, Abram has experienced significant growth since 2015; their

January through June 2016 wholesale premium volume exceeded 2015’s volume by 10%. By following their “simple plan” to provide solutions to their retail agents, Abram is focused on continuing to offer excellent mutual results in the

years to come. “When anyone calls Abram Interstate, they reach an in-house live person, no complicated telephone menus here,” says Abram’s Chris Silva. “We are here for our clients, and we pride ourselves on excellent service and expert knowledge.”

Saving the Chemical Industry Money on their Insurance Premiums Consumer Specialties Insurance, RRG (CSI) is the chemical industry’s leading and most reliable source of liability insurance coverage. CSI also is the exclusive partner of the Consumer Specialty Products Association (CSPA), the premier trade association representing the broad interests of companies engaged in the manufacturing, formulation, and distribution of specialty chemical products.

PRoGRam HIGHlIGHtS Ø Commercial General Liability & Umbrella (including Products Coverage); Ø Limits Available up to 5,000,000; Ø Minimum Premiums Starting at $3,500 (NEW!); Ø Limited Pollution Coverage up to $1,000,000 available;

Ø $250,000 of Product Withdrawal Expense Coverage; Ø Hired and Non-Owned Auto Liability; Ø 10% Premium Credit Upon Completion of “Product Care” Stewardship; Ø 12% Commission to Retail Broker on All New Business.

Our recently expanded BRoaDENING ENDoRSEmENt includes blanket waivers of subrogation, blanket additional insureds, product withdrawal expense, and many other exclusive offerings. *NEW loWER mINImUm PREmIUm oF $3,500 aVaIlaBlE FoR mEmBERS WItH aNNUal REVENUES oF $500,000 oR lESS View our website (www.csiplus.com) for our PRoGRam aPPlICatIoN, FaQ PaGE, PRoGRam BENEFItS aND E-BRoCHURE. CSI is the chemical industry’s leading risk retention group, providing chemical manufacturers and distributors with a financially stable source of liability insurance for over 25 years. We are the exclusive partner of The Consumer Specialty Products Association (CSPA - www.cspa.org), the industry’s leader for education and legislative advocacy. With membership in the CSPA, your clients can participate in CSPA’s Product Care stewardship and best practices program. CSI Policyholders that participate receive additional premium discounts. CSI is endorsed by CSPA and administered by Ames & Gough.

Contact Ames & Gough at 703-827-2277 or email us at csiplus@amesgough.com for more information.

8300 Greensboro Drive l Suite 980 l McLean, VA 22102 l www.amesgough.com

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www.ibamag.com

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PEACHTREE SPECIAL RISK BROKERS Headquarters: Stockbridge, GA Number of offices: 9 Leadership: Elizabeth White, president

Brown & Brown subsidiary Peachtree Special Risk Brokers was established in 2000 to focus on wholesale property insurance and has since expanded to include wholesale casualty, marine and professional lines. The company’s proprietary products and lines of expertise give retail agents a competitive advantage in the market.

Another thing that differentiates Peachtree is “the quality of the relationships we have with carriers and underwriters that allow us to get the job done for our retail agents and retail clientele,” says EVP David O’Keefe.

OVER ARCHING

ALL RISKS Headquarters: Hunt Valley, MD Number of offices: 31 Number of employees: 800 Leadership: Nicholas Cortezi, CEO; Matthew Nichols, president

An E&S facility established in Baltimore in 1964, All Risks touts itself as one of the largest independent P&C wholesale brokers in the country. The company works as a licensed navigator for agents in specialty insurance markets, extending coverages for general and professional liability, property, commercial auto, umbrella and excess, in both admitted and non-admitted markets.

In 2015, the company wrote more than $1.4 billion in premium and has already reached $1.65 billion in premium for 2016.

COVERAGE

®

ACCIDENT & HEALTH ALTERNATIVE MARKETS E&S CASUALTY CONSTRUCTION CONTRACT BINDING OPERATIONS DESIGN & ENVIRONMENTAL EXECUTIVE ASSURANCE EXCESS WORKERS’ COMPENSATION HEALTHCARE LENDER PRODUCTS NATIONAL ACCOUNTS CASUALTY PROFESSIONAL LIABILITY PROGRAMS

PROPERTY SURETY TRAVEL

THE STRENGTH OF ARCH A.M. Best: “A+” Standard & Poor’s: “A+”

®

www.archinsurance.com

Insurance coverage is underwritten by one or more member companies of Arch Insurance Group in North America, which consists of (1) Arch Insurance Company (a Missouri corporation, NAIC # 11150) with admitted assets of $3.56 billion, total liabilities of $2.73 billion and surplus to policyholders of $825.14 million, (2) Arch Specialty Insurance Company (a Nebraska corporation, NAIC #21199) with admitted assets of $497.16 million, total liabilities of $190.04 million and surplus to policyholders of $307.13 million, (3) Arch Excess & Surplus Insurance Company (a Nebraska corporation, NAIC # 10946) with admitted assets of $61.96 million, total liabilities of $279,154 and surplus to policyholders of $61.68 million and (4) Arch Indemnity Insurance Company (a Nebraska corporation, NAIC# 30830) with admitted assets of $53.66 million, total liabilities of $29.27 million and surplus to policyholders of $24.39 million. All figures are as shown in each entity’s respective Quarterly Statement for the quarter ended September 30, 2015. Executive offices are located at One Liberty Plaza, New York, NY 10006. Not all insurance coverages or products are available in all jurisdictions. Coverage is subject to actual policy language. This information is intended for use by licensed insurance producers. © Arch Insurance Group 2016

www.ibamag.com

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FEATURES

COVER STORY: TOP WHOLESALE E&S BROKERS PARTNERS SPECIALTY GROUP

AMWINS GROUP

Headquarters: Horsham, PA Number of offices: 14 Number of employees: 170+ Leadership: Daniel McDonnell, chairman and CEO; Maureen Caviston, president and COO

Headquarters: Charlotte, NC Number of offices: 80 (US) Number of employees: 3,091 (US) Leadership: M. Steven DeCarlo, CEO

A wholesaler focused on becoming “the most effective specialty insurance broker, not the largest” – that was the vision of founder Dan McDonnell when he started Partners Specialty Group [PSG] in 1999. Today, the company has worked with more than 2,500 retail brokerages throughout the country, helping them access the specialty insurance market and providing nearly 17,000 insurance solutions. Its specialties cover a wide range of sectors, from construction and environment to social services and transportation. With surplus lines licenses in most states, PSG focuses its business on placing “the most difficult aspects of the insured’s risk, leaving [retail brokers] to place the balance of the account with standard insurers.”

Since the company’s inception in 1998, AmWINS Group has expanded its specialty insurance products and services worldwide, with more than 100 global offices, 80 of which are located across the US. Offering a diverse mix of commercial P&C and niche program products, AmWINS is an amalgamation of more than 35 wholesale brokerage, underwriting and group benefit operations. Annually, AmWINS receives more than 675,000 submissions from retail insurance agents across the US, and the company places more than $11.1 billion in premium every year.

BROWN & RIDING INSURANCE SERVICES Headquarters: Los Angeles, CA Number of offices: 14 Number of employees: 200+ Leadership: Chris Brown (pictured), chairman; Jeff Rodriguez, president and CEO

Employee-owned and -managed since the company’s inception in 1980, Brown & Riding takes pride in offering “total transparency while keeping all sensitive data confidential.” As one of the nation’s top wholesalers with offerings for amusement parks, construction, cyber, energy, transportation and more, Brown & Riding was built on the core values of teamwork, quality and professionalism. Boasting 14 offices nationwide, Brown & Riding performs business in all 50 states, as well as Canada.

MCCLELLAND AND HINE Headquarters: San Antonio, TX Number of offices: 4 Leadership: Gil Hine, CEO

Since McClelland and Hine [MHI] began writing business in 1982 in San Antonio, the company has grown its business to include three additional branches and product offerings that spread nationally.

With its products and services for specialty and surplus lines, MHI writes approximately $55 million in annual premium volume.

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www.ibamag.com

A NAME THAT SHARES KNOWLEDGE At Risk Placement Services (RPS), we recognize that knowledge means empowerment. And we are committed to sharing our knowledge with our retail partners so that they can be empowered to offer solutions to meet their customers’ needs and access to the finest markets and top producers in the industry. Now that’s information we can advocate.

For additional knowledge on RPS, contact an RPS representative at 866.595.8413 or email us at Contact_Us@RPSins.com. www.RPSins.com

www.ibamag.com

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FEATURES

COVER STORY: TOP WHOLESALE E&S BROKERS RISK THEORY INSURANCE SERVICES Headquarters: Dallas, TX Number of employees: 55 Leadership: Bryan Wilburn, CEO

As the wholly owned subsidiary of Risk Theory, a privately held specialty lines insurance manager with a dedicated focus on delivering property & casualty products to underserved markets, Risk Theory Insurance Services offers specialty E&S products to auto dealers, contractors, manufacturers and more.

Risk Theory is also committed to affecting change in the marketplace and the world through its support of various organizations. Advocating volunteerism throughout the entire organization, as well as workplace giving and corporate sponsorship of local charities and national nonprofits, CEO Bryan Wilburn and the rest of the leadership team have made social responsibility an initiative, offering limitless opportunities for employees and their families to give back.

SOCIUS INSURANCE SERVICES Headquarters: San Francisco, CA Number of offices: 7 Number of employees: 67 Leadership: Patrick Hanley, president

Personal Lines l Commercial Lines l Agri-business

Main Street Homes

Possible in “High Hazard” areas

Primary Homes

High Value Dwellings

Vacation Rentals

Flexible Underwriting

Secure Homeowners or Dwelling Fire Insurance today.

We help you help your customer.

ABRAM INTERSTATE INSURANCE SERVICES, INC. CMGA

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“Your success is our success” is the motto of Socius Insurance Services, a full-service brokerage founded in 1997 that takes its name from the Latin word for partnership. Specializing in areas such as casualty, property, D&O, employment practices liability, professional liability and cyber, Socius works closely with admitted and specialty markets to find the right solution for a client's every need. The Socius team is also dedicated to giving back to the communities in which they live and work by aiming to improve the standard of living in those areas. In 2014, the company formed the Socius Foundation, a philanthropic organization that aids local communities through volunteerism and donations.

SCOTTISH AMERICAN INSURANCE GENERAL AGENCY Number of offices: 16 Number of employees: 100+ Leadership: Paul Thomson, founder

Established in 2009 by Scotsman Paul Thomson, Scottish American grew out of an investment fund focused on acquiring and managing insurance distribution businesses. The company takes pride in its unconventional, producer-led culture, where teamwork is exemplified by lack of official titles and hierarchical organizational structure. Scottish American works with a long list of carriers in both admitted and non-admitted markets on the East and West Coasts, as well as in Texas.

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RISK PLACEMENT SERVICES Headquarters: Itasca, IL Number of offices: 70+ Number of employees: 1,300+ Leadership: Joel Cavaness, president

Risk Placement Services [RPS] opened for business in May 1997 with four employees based in Chicago and Atlanta. Since then, it has completed dozens of acquisitions across the US, acquiring top talent in all aspects of insurance. Thanks to the company’s robust yearly internship program, which hires approximately 300 interns each summer, RPS is continuously channeling some of the industry’s best talent into the company. “We spend a lot of time recruiting young talent, but we also spend time training them over the first three years because our home-grown [employees] are the ones who really lead our company,” says Ryan Collier, RPS’ chief digital officer.

Placing more than $3.2 billion in annual premium, RPS focuses on smart and strategic growth by focusing on the needs of their retail partners. “We are always looking at new programs to stay creative and solve our clients’ problems,” Collier says. “That is how we are differentiating ourselves – by not doing just typical standard lines, but really finding expertise in a niche and diving into that.”

This strategy has made RPS one of the largest wholesale brokers in the country – and it’s clear that the company is here to stay.

“We have a ton of great products and expertise in the E&S marketplace,” Collier says. “As long as there is going to be a changing, dynamic need for products, you will see RPS and the E&S marketplace exist.”

www.ibamag.com

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FEATURES

COVER STORY: TOP WHOLESALE E&S BROKERS

ARLINGTON/ROE & CO. Headquarters: Indianapolis, IN Number of offices: 7 Number of employees: 180 Leadership: Jim Roe, president

Rated as one of IBA’s Five-Star MGAs earlier this year, Arlington/Roe has made the cut again as a top-performing wholesale E&S broker, which confirms that they are, as their company motto attests, “doing the right thing since 1964.” A familyowned and -operated wholesale brokerage since its formation, Arlington/Roe has several key specialty areas, including aviation, bonds, commercial brokerage

US RISK INSURANCE GROUP Headquarters: Dallas, TX Number of offices: 16 Number of employees: 387 Leadership: Randall Goss, chairman and CEO

For three decades, US Risk has offered a broad spectrum of specialty insurance products and services through its various subsidiaries and affiliated companies.

Operating internationally in North America, London, Zurich, Dubai and Liechtenstein, US Risk’s wholesale excess & surplus lines firm, US Risk Brokers, has access to more than 300 carriers nationally. Offering a diverse set of products, US Risk’s key specialty niche areas include energy, entertainment, professional liability, healthcare, property and more.

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and binding, farm, medical professionals, professional liability, transportation, and workers’ compensation, catering to states in the Midwest with seven offices and 180 associates working across 200 markets.

The company celebrated its 50th anniversary in 2014; president and owner Jim Roe recalls how his father “started out selling mobile home insurance to independent insurance agents who couldn’t get a contract directly with a company.” In 1972, Arlington/Roe launched its commercial operations in surplus lines, and the business has grown since – its wholesale business this year has already surpassed last year’s mid-year volume.

WORLDWIDE FACILITIES Headquarters: Los Angeles, CA Number of offices: 16 Number of employees: 252 Leadership: Davis Moore (pictured), CEO; Ron Austin, president and COO

In the last six years, Worldwide Facilities has attained a growth rate of approximately 130% as the company continues to add product-specialty experts and markets to its portfolio. Established in 1970, Worldwide Facilities wrote more than $530 million in premiums in 2015, about 50% of which was for its wholesale business during the first half of the year. The company also received the Employer of the Year Award from the LA Chapter of the CPCU and was recognized this year as a top MGA by both the AAMGA and IBA. Looking toward the future, Worldwide Facilities continues to hire key executives and diversify its product lines and geographical presence.

S 4

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COLLECT DATA. MAKE CONNECTIONS. GO SKIING!

MarshBerry’s Peak Performance event is the preeminent event for specialty distributors in the insurance space. Peak Performance creates an intimate networking opportunity for executives to learn and help improve their business - while enjoying the slopes of Park City, Utah.

AGENDA HIGHLIGHTS: • State of the Industry for Specialty Distribution • Keynote Address by Paul DePodesta, focus of Moneyball: The Art of Winning an Unfair Game • Perpetuation and How Carriers Can Help

THE MARSHBERRY PEAK PERFORMANCE SEMINAR IS DESIGNED FOR EXECUTIVES WITH: • Wholesale Brokers, Managing General Agents (MGAs) and Program Administrators • Specialty Carriers • Reinsurers with Specialty Books of Business

• Industry Panel Discussion

• Specialty Retailers

• Current Perspectives on Specialty Distributors DATES: Sunday, January 29 - Tuesday, January 31, 2017

REGISTER NOW: PLATINUM SPONSOR

GOLD SPONSOR

LOCATION: Hyatt Centric Park City 3551 North Escala Court Park City, Utah 84098

WWW.MARSHBERRY.COM/PEAK OR 800.426.2774 Space is limited. Reserve your spot by October 31, 2016 to secure Early Bird Pricing of $1,350. Separate vendor pricing available.

SILVER SPONSOR

MARSHBERRY learn. improve. realize.

Securities offered through MarshBerry Capital, Inc., Member FINRA and SIPC, and an affiliate of Marsh, Berry & Company, Inc. 28601 Chagrin Blvd., Suite 400, Woodmere, Ohio www.ibamag.com 37 44122 (440.354.3230). Marsh, Berry & Co., Inc. and its affiliates are non-affiliated entities with Oak Street Funding, RSG Underwriting Managers and StateNational.

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FEATURES

COVER STORY: TOP WHOLESALE E&S BROKERS USG INSURANCE SERVICES Headquarters: Tampa, FL; flagship office in Canonsburg, PA Number of offices: 19 Number of employees: 155 Head leadership: Gerald Horton, chairman and CEO; Timothy Horton, president; Kristen Skender, corporate VP

National wholesaler and MGA USG Insurance Services recently celebrated 15 years in the industry with a $160 million-plus book of business in specialty areas such as contractors, habitational, garage, manufacturers, hospitality and medical insurance. USG targets a minimum of double-digit annual growth, a goal it has achieved or exceeded every year.

“We are working with the small to mid-size retailers and providing access to specialty products and solutions that they are maybe not as familiar with, which gives that agent a competitive edge in the marketplace that they would not be able to obtain otherwise,” says Kristen Skender, USG’s corporate VP. USG is focused on developing proprietary technology to propel the company to a unique position in the marketplace. “We

- Submissions - Underwriting - Rating

believe that speed to market and the ability to provide multiple options for particular risks within a quick time period is critical to our success,” Skender says. “We believe the wholesale broker that offers a competitive edge – whether it is an MGA account and providing multiple quotes, or a brokerage account and proving that transparency and instant access to information – we believe that the leader in technology will also likely lead in the industry vertical.”

- Quoting - Policy Issuance - Reporting

All together in an accessible anywhere, easy to use platform.

Introducing the all new...

NetRate Portal Your insurance processing solution in the cloud.

For More Information, Contact NetRate Systems at 517.742.3123

www.NetRate.com 38

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BURNS & WILCOX Headquarters: Farmington Hills, MI Number of offices: 40 (US) Number of employees: 1,298 (US) Leadership: Alan Jay Kaufman, chairman, president and CEO

An expert in the excess & surplus market, Burns & Wilcox was formed as an insurance wholesaler nearly half a century ago by Herbert W. Kaufman. Today, his son, Alan Jay Kaufman, carries on the company's legacy as Burns & Wilcox's chairman, president and CEO. With offices spanning across North America, Burns & Wilcox writes more than $1 billion in annual premium through its various offerings for sophisticated and complex risks, including property, casualty, professional, transportation, environmental, marine and cyber.

At the forefront of the industry in terms of investments in recruiting, training and retaining young talent, Burns & Wilcox offers three development-focused programs: the Kaufman Emerging Leaders Program [KELP], the Kaufman Advanced Management Program [KAMP] and the Kaufman Institute, all of which allow the company to remain active in encouraging and training the next generation of insurance leaders.

www.ibamag.com

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FEATURES

COVER STORY: TOP WHOLESALE E&S BROKERS MYRON F. STEVES & CO.

PROGRAM BROKERAGE CORPORATION

Headquarters: Houston, TX Number of offices: 3 Number of employees: 200+ Leadership: Fred Steves, chairman

Founded by Myron F. Steves, one of the oldest CPCUs and a founding member of the CPCU Houston chapter, Myron F. Steves & Co. started out in 1955 with one employee and $10 in the bank.

Today, it has grown to a multimillion-dollar operation with more than 200 employees and numerous subsidiaries. As a wholesaler and independent MGA, Myron F. Steves & Co. found its niche in surplus lines in 1961 and remains in that market today. Areas of expertise include commercial transportation, commercial property, healthcare and professional liability. The company’s brokerage division operates in more than 70 markets and offers products such as aviation, environmental, E&O, excess casualty, inland marine, oil & gas and specialty property.

Headquarters: New York, NY Number of offices: 5 Number of employees: 103 Leadership: Marc Cohen (pictured), president & CEO; Cynthia O’Brien, president, wholesale division

As the wholesale subsidiary of HUB International Group Northeast, Program Brokerage Corporation [PBC] pioneered an innovative approach to purchasing group insurance-buying that has gained popularity in the market. Leveraging its 50-plus years of experience, PBC offers exclusive programs for landscapers, metro builders, elevators, fine arts, limos and senior living facilities. Through its Weisburger division, PBC is also the largest provider of insurance products and services to the pest control industry nationwide.

SENDING BUSINESS TO A WHOLESALER SHOULDN’T BE A BLACK HOLE There is another way. A national wholesaler that values our employees, agents, and carriers.

800.886.3897 www.jointeamusg.com 40

Voted a 5 Star MGA by IBA Readership

R R L

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S:7.5"

THANK YOU. IT TAKES EXTRAORDINARY PARTNERS TO ACHIEVE EXTRAORDINARY GROW TH.

S:10.125"

It’s because of your incredible support and discerning confidence in us that we are where we are today.

We want to express our deepest appreciation to all our partners for helping us become a national leader since our founding in 2010. We sincerely thank you, and we look forward to many more successful years together.

Learn more about RT Specialty at www.RTspecialty.com.

RTspecialty.com R-T Specialty, LLC (RT), a subsidiary of Ryan Specialty Group, LLC, provides wholesale brokerage and other services to agents and brokers. RT is a Delaware limited liability company based in Illinois. As a wholesale broker, RT does not solicit insurance from the public. Some products may only be available in certain states, and some products may only be available from surplus lines insurers. In California: R-T Specialty Insurance Services, LLC License #0G97516. Š 2016 Ryan Specialty Group, LLC www.ibamag.com 41

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FEATURES

COVER STORY: TOP WHOLESALE E&S BROKERS

BASS UNDERWRITERS Headquarters: Plantation, FL Number of offices: 14 Number of employees: 280 Leadership: Ed Jackson, president

South Florida-based Bass Underwriters

has been “driven by relationships, not statistics” since forming in the mid-1990s.

Though 60% of the company’s business is in the South, Bass is licensed in 31 states across the country. As an MGA with 95% non-admitted wholesale business, Bass

offers a wide range of specialty lines, including professional liability, garage, transportation, marine and more. Driven by a customer-service-focused attitude, Bass has already experienced an 11% increase in business in the first half of 2016.

SPECIALIZED PROTECTION. YOUR WOOD ACCOUNTS ARE NOT LIKE OTHERS. THEY HAVE SPECIFIC NEEDS AND RISKS THAT THEY WORRY ABOUT… THINGS LIKE DUST COLLECTION, AUTO FLEET SAFETY AND FIRE PROTECTION. YOU NEED AN INSURANCE COMPANY TO PARTNER WITH THAT UNDERSTANDS THESE UNIQUE NEEDS AND ISSUES.

MEET MICHAEL. Michael Culbreth has been a Loss Control Services Consultant with PLM/ILM for over 13 years. Over these years he has visited thousands of lumberyards, sawmills and wood products manufacturing operations. He lives and breathes the lumber and building material industries. Michael’s specific knowledge allows him to provide your clients with relevant and practical recommendations to protect their businesses. He aims to prevent risks that are avoidable and makes sure your clients are adequately prepared for what may come.

Your clients deserve the best. Partner with an expert in the wood industry. Keep them safe with Michael and PLM/ILM. PENNSYLVANIA LUMBERMENS MUTUAL INSURANCE COMPANY INDIANA LUMBERMENS MUTUAL INSURANCE COMPANY MAIN 800.752.1895

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COCHRANE & COMPANY Headquarters: Spokane, WA Number of offices: 3 Number of employees: 81 Leadership: Tom Cochrane, president

Founded in 1960 in Spokane, Washington,

Cochrane & Company provides brokerage services for E&S lines, specializing in commercial general liability, environmental, excess and umbrella liabilities for the construction, product-driven, manufacturing, bar and nightclub, and environmental industries.

Recently recognized as an IBA Five-Star

MGA, Cochrane & Company caters to 14 states in the West and considers itself one of the leaders in technology use for insurance, as well as a strong supporter of the education and development of professionals in the industry, participating in events organized by initiatives such as the E&S Joint Working Group.

CRC INSURANCE SERVICES / SWETT & CRAWFORD Headquarters: Birmingham, AL Number of offices: 81 Number of employees: 2,400 Leadership: Dave Obenauer, CEO

Two forces in the E&S market became one this year when CRC Insurance Services and Swett & Crawford merged in May to become CRC Swett.

Capitalizing on 130-plus years of combined insurance experience, the new company now encompasses 2,400 employees and more than 600 producers in 81 offices nationwide. The impetus of the merger was to be able to offer retail customers a wider selection of property, casualty and professional lines through open-market placements, MGA facilities and exclusive programs. Last year, the two companies wrote nearly $13.7 billion in combined premium.

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2/09/2016 6:08:09 AM

FEATURES

CONSTRUCTION

Building your business in the construction space IBA examines the current state of the construction industry and what it means for insurance professionals THE US construction industry is currently experiencing strong growth. Projects are being funded, jobs are being created, and the sector as a whole feels like a good place to be.

Agents who work in the construction space have a great opportunity to grow their book of business and boost their bottom line. But

in an industry that’s subject to constant rule and regulation changes, agents have to be proactive and stay on top of the latest trends.

“While there is ample insurance capacity in the market, when placing coverage on an individual risk basis, there are a lot of bids and costs associated with securing coverage

GROWING AND GROWING Despite a brief slump in early 2016, construction employment has grown 4.7% year-over-year.

Construction employment

General employment

145 million

8 million 7 million

Construction

140 million

6 million 5 million

135,000

4 million 130,000

3 million 2 million

125,000

1 million 0

2010

2011

2012

2013

2014

2015

2016

120,000

Source: JLL Research, Bureau of Labor Statistics

44

options on each project,” explains Ben Beauvais, Ironshore’s global construction practice leader. “For relatively similar exposures, we see successful brokers using vehicles like Master Builders Risk Programs.

Brokers use rolling wrap-up solutions and supplement their owner clients with standalone coverage to supplement contractor coverage to fill any gaps.”

These types of products provide a level of predetermined pricing that allows clients, both owners and contractors, to bid projects with cost certainties. This provides efficiencies for all sides of the transaction.

Although building successful partnerships is a possibility for conscientious brokers, construction is an industry that has many unique coverage challenges.

“Contractors and owners both need to ensure their liability and professional interest are protected in a construction project, and each has unique coverage, depending on the program and project delivery vehicles,” Beauvais says. “Designbid-build projects require different professional coverage from design-build or integrated project delivery. Also, wind- or catastrophe-exposed projects require

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specialized builder’s risk coverage to satisfy a lender’s requirements.”

The end use of the project is also important. Will a building be converted into condos within the statute period, and where is the project is located? Does the owner know this at the project outset? What if they receive a premium offer from an outside person to purchase the project while it’s under construction?

These are all serious questions that every project leader needs to consider – each answer will impact their risk exposure. Inadequate solutions could leave clients unprotected.

Compliance and labor challenges Changing regulations, rules and business risks are inherent in all sectors of the economy, but construction is under particular scrutiny. Beauvais believes construction firms must assume some of the risk outside of traditional insurance solutions.

“To mitigate unexpected loss and expenses, many firms employ in-house or third-party firms to avoid compliance issues,” Beauvais says. “Often regulatory risk is best mitigated by proactive clients and documentation designed to minimize unexpected delays.”

Beauvais has noticed the need for brokers to adopt more of an enterprise risk approach to construction projects. “Brokers need to be able to understand their client’s view of a project through their experience of prior claims and industry trends,” he says. “Brokers should make sure the client is aware of document retention services and third-party project management firms that can streamline their process. Brokers have the opportunity to become more of a project consultant and less of a transactional insurance agent.”

Thomas Blanquez, business development director at Quirk & Company, has noticed a sharp increase in admitted carriers entering the space and “gobbling up anything they can get their hands on, especially business that had traditionally been surplus lines.

“Agents who work with construction divisions of insurance carriers are writing a lot of premiums right now,” Blanquez says. “The rates are very low for the exposures that are out there, so it’s a good time for insurers to buy insurance for very competitive prices. It’s a buyer’s market; there is fierce competition, and rates are very low. Admitted players are coming into the space very aggressively.”

There’s currently a shortage of skilled labor in the construction industry, and this is something that Luis A. Vázquez, president of Quirk & Company, believes could lead to more accidents and ultimately an increase in workers’ comp claims and rates, so it’s an issue that brokers and agents should be looking at closely.

“The increased use of subcontractors is another thing that agents need to start thinking about,” Vázquez says. “You have to understand all of the coverage forms and how each carrier handles certain scenarios.

The price may be low, but that doesn’t mean you’re getting all of the coverage you need to have a solid insurance program.”

In order to differentiate themselves from the crowd and grow their business, Vázquez believes that agents need to shift their focus

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2/09/2016 6:14:29 AM

FEATURES

CONSTRUCTION

COSTS ON THE RISE Between 2014 and 2015, building costs grew 3.5%, a trend that shows no signs of slowing. In fact, overall costs are projected to grow at an average of 1.5% each year through 2020.

Building cost index 2020 2019

away from price. “We’ve conditioned our client base to think of price as a top priority, so our agents are driven by price,” he says.

“For brokers, the priorities should be knowing their coverage and forms and understanding the contract in order to satisfy all of the requirements. Brokers should engage their clients – ask for as much information as possible, get access to contracts, and talk to safety officers. Understand your client’s business to be able to successfully create situations that are beneficial to everybody.”

Expert advice In the last few years, as the economy has recovered from the housing bust, the US has experienced a significant increase in residen-

2018 2017

these days,” Clinton says. “Making sure you really understand the contract and paying attention to the key areas of the contract is a necessity. Is your form a true occurrence form, or is it a modified contract? Agents need to get familiar with the new, complicated language.”

Clinton believes that to achieve true success in the construction space, agents should invest time in getting to know their clients. “Visit the job site to see how well it’s run,” he says. “Investigate the work the client has done in the past, and find out what work they want to do in the future. They may plan to get into something that the underwriter didn’t account for when creating the policy.

Really understand the present and future

“You have to understand all of the coverage forms and how each carrier handles certain scenarios. The price may be low, but that doesn’t mean you’re getting all of the coverage you need to have a solid insurance program”

2016 2015 2014 2013

Luis A. Vázquez, Quirk & Company 2012 2011 2010 0

1,000 2,000 3,000 4,000 5,000 6,000 7,000 Building costs, 20-city average Source:: JLL Research, ENR Building Cost Index

46

tial construction – growth rates have been in the low double digits. As a result, a lot more contractors are coming back into the market.

“That represents a challenge for agents, because carriers want to see continuity in insurance coverage,” explains Christopher P. Clinton, chief marketing officer at NormanSpencer Agency. “So, to find coverage for those contractors who took their business down, agents need to find an understanding carrier who will make an exception to this requirement.”

The commercial construction space is also experiencing strong growth; however, agents in this sector are having to get used to a different type of language: contract language.

“The language is much more complicated

of the company. Where do they get their employees, what are their screening requirements, who is going be driving the business?

Knowing how the business operates is key for agents.”

Clinton also strongly recommends that agents investigate the online presence of any potential client. Go to their website, check their social media and dig a little deeper on popular search engines.

“Social media isn’t just for regular people – underwriters use social media to evaluate risk,” Clinton says. “You want to make sure there are no discrepancies online. If you find anything that concerns you, talk to the client and fix the problem before you approach a carrier and submit an application.”

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2/09/2016 5:46:42 AM

FEATURES

AGENCY INSIGHT

Holmes Murphy For more than eight decades, Holmes Murphy has thrived by setting itself apart from the rest. IBA spoke with chairman and CEO Dan Keough to find out how being different has led to years of success for this Iowa firm

IBA: How did Holmes Murphy get its start?

Dan Keough: Our firm started when two entrepreneurs, Max Holmes and Ray Murphy, came together to serve the community and customers in the Des Moines area.

When they formed Holmes Murphy, they made an agreement to not bring family into the business, which is unusual in this industry. That legacy has provided opportunities to the four generations of leaders and shareholders that have transitioned the ownership of the firm since 1932.

We currently have 100 shareholders, of which 26 are voting shareholders who are not allowed to have family in the business.

Our goal has always been to attract the best and brightest the insurance industry has to offer and give them the opportunity to become an owner of the company.

IBA: What is Holmes Murphy doing to attract and develop new talent?

DK: Holmes Murphy has a long history of supporting and employing college interns as they learn the ins and outs of the industry.

If you look back, a few of our former senior leaders, including one CEO, were interns who worked their way up to leadership positions. This summer alone, we had 33 interns across nine of our offices.

On top of that, we know that insurance has the reputation of being an old, tired and boring industry, which makes it challenging

48

to attract new talent. Last year, we started an initiative to change this perception by creating the industry’s best training and development program for college graduates, called The Brainery. This year, we hired 34 college graduates for the program. Through The Brainery, we educate these selected graduates on corporate health, benefits and risk management, as well as general business topics that form a strong foundation as they begin their insurance careers.

IBA: How did Holmes Murphy build its culture?

DK: It has been an evolution. Holmes Murphy has a very entrepreneurial, innovative ownership where we are always looking for what’s next in the industry. We believe the role of our brokers is not just to sell insurance. In fact, that is probably the lowest level of value we could bring to a customer.

The true relationship is built from trust and

integrity by doing what you say you will do.

Also, it is great having entrepreneurs on our team and giving them the freedom and flexibility to serve our clients by understanding their problems at the root cause.

To find solutions for our clients, we must start by listening to them and keeping their best interests in mind. We work to find out what they need and then work backwards to determine the solution.

IBA: What is one of Holmes Murphy’s more unique offerings?

DK: I think our Innovative Captive Strategies subsidiary has changed the way member-owned group captives are structured in the industry. It has created greater alignment and lower costs for our customers. We turned the captive into a partnership where agents and brokers can partner with their customers and not just be viewed as someone who is selling insurance.

COMMITMENT TO COMMUNITY Community service is one of the driving forces behind Holmes Murphy’s company culture. The company’s employees are dedicated to donating time, energy and resources to the communities in which they live and work. Recently, Holmes Murphy sponsored a special needs bicycle for a child living in the community, in addition to supporting the United Way and many other great causes.

“We recently began offering voluntary time off for our employees,” says Dan Keough. “Responsibility is our company’s key strength, and that includes responsibility not only to our clients, but to the communities we serve. Community and charitable involvement are priorities we’ve always encouraged, and employees can dedicate even more time to giving back in meaningful ways.”

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HOLMES MURPHY FAST FACTS

Top areas of specialization Agriculture Architects and engineers C-store and petroleum Construction Fraternal Surety bonds Captive clinical wellness

“We believe the role of our brokers is not just to sell insurance. The true relationship is built from trust and integrity by doing what you say you will do” We take on the risk with our customers, help them improve, and are not just trying to put them in a risk trap.

The other thing we have done that I think is revolutionary is starting a clinical and wellness firm, ACAP Health, which measures the production of disease in a population.

These insights allow us to help our clients look at their employee population and help them identify at-risk employees who will drive costs in their healthcare programs.

From there, we deliver a program that guarantees the reversal of their situation and ultimately lowers their costs. We have three

doctors on our staff who help us solve these problems for our clients.

IBA: What are Holmes Murphy’s future plans and goals?

DK: We just ended 2015 as a $135 million company, and we want to grow tremendously over the next five years. We see there is significant opportunity for an employee-owned and -controlled firm, where we report to our customers and not a third-party shareholder who demands a return monthly. We think our industry is better served when we can look at the best interests of our clients over

Year founded: 1932 Number of employees: 746 Headquarters: Des Moines, IA Offices: Twelve offices servicing all 50 states and the District of Columbia Corporate leadership: Dan Keough, chairman and CEO; Den Bishop, president; Chris Boyd, senior vice president; Craig Hansen, senior vice president, bonds; John Hurley II, senior vice president the long term. Holmes Murphy is committed to being privately held, and we continue to invest in next-generation talent with training and development programs. We are truly excited about what the future of the industry holds and the new opportunities to service our clients.

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2/09/2016 5:47:23 AM

FEATURES

HEALTHCARE

The state of healthcare

The US healthcare industry is undergoing a number of fundamental changes, all of which are impacting organizations’ risk exposures. IBA spoke to Marie Gaudette, programs manager for healthcare at Willis Towers Watson, to find out what’s happening and how it’s affecting insurance professionals

THE SHAPE of the healthcare industry – and specifically, the way health services are delivered – is being transformed.

Consolidation is rife, and services that would have been provided by a physician 20 years ago are now the responsibility of mid-level providers such as a physician’s assistant or a registered nurse. More and more people are receiving care from lower-skilled providers

impacting insurance,” says Marie Gaudette, programs manager for healthcare at Willis Towers Watson. “We’re seeing more claims as a result of falls, burns and medication errors – things that are preventable causes of loss.

This increase in claims is being caused by a mix of things, including fewer graduates becoming doctors and the aging population.”

The introduction of Obamacare and

“Over the next 10 years, we’ll see more claims that are completely preventable. That is going to eventually impact the cost of professional liability or medical malpractice insurance in a negative way” within their homes or at small medical facilities rather than hospitals. Throw into the mix the fact that fewer people are becoming physicians and more people need medical attention, and it becomes clear that this is a crunch time in the history of US healthcare.

“We have a lot more types of providers delivering health services, and that’s

50

recent Medicare reforms are both directly linked to increasing consolidation in the healthcare industry. More and more physicians’ groups are now owned by hospitals, and some hospitals are even combining practices.

“There is so much consolidation going on in this space as the government attempts

to reduce hospitalizations and unnecessary expenses, but it’s going to lead to an increase in claims,” Gaudette says. “Over the next 10 years, we’ll see more claims that are completely preventable. That is going to eventually impact the cost of professional liability or medical malpractice insurance in a negative way.”

Medicare reforms are also asking physicians to care for a larger number of people, but for less money. The reforms aim to cut costs by diverting patients away from costly hospital and ER facilities and overnight stays. But inevitably, when the level of care is reduced, the level of risk increases.

There is a lot of capacity in the market to write limits, but a lot of competition, which is driving prices down. The consolidation also means that the agents in the space have a shrinking client base, as all agents are competing for a smaller number of clients.

“Although a lot is changing in the space, and we’re probably going to see an increase in professional and general liability claims, property claims aren’t really going to change,” Gaudette says. “Those are based on the age of the buildings and the value of the buildings and their locations. The property

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still needs to be written, and the risk isn’t changing as much as the liability risk.”

Challenges and opportunities In order to remain competitive in this rapidly consolidating market, it’s essential that brokers become experts. Brokers in the space now need to be able to understand all aspects of a massive, consolidated healthcare organization.

Being familiar with a particular account is no longer enough; brokers also need to understand the workings of the account’s related entities. Previously, an agent may have just been responsible for providing coverage for a hospital. Now that same agent must be able to write the hospital, its associated physicians and all of the ancillary providers who are now combining onto that program: the ambulatory surgery centers, the diagnostic labs, the home healthcare provider, the staffing divi-

QUESTIONS A BROKER IN THE HEALTHCARE SPACE SHOULD ASK Do I have the access to the products my client will need?

Do I have the ability to explain to healthcare organizations why they’re going to need every product I recommend?

Do I know the carriers and the markets that have the best products and services for each specific client?

Do I have the market for professional liability for each type of service my client provides? sion and the assisted living arm.

To succeed in this space, brokers need to have the ability to look at the entire risk and then give advice on where it would be best placed – which means the broker needs to have access to all of the potential markets

that can insure that risk.

“You also need to have relationships in place within the community – you need to gain a respect for your knowledge and your ability to provide service to accounts,” Gaudette says. “You have some big brokers

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2/09/2016 5:47:57 AM

IBA SEPT

FEATURES

HEALTHCARE

CONSOLIDATION IN HEALTHCARE After consolidation in the next decade, Deloitte estimates that only 50% of current health systems will remain. Here are some of the major acquisitions that have shaped the industry over the past few years.

Acquirer: Community Health Systems Target: Health Management Associates [HMA] Dollar value of deal: $7.6 billion

Acquirer: Tenet Healthcare Corporation Target: Vanguard Health Systems Dollar value of deal: $4.3 billion

Acquirer: Catholic Health Initiatives Target: St. Luke’s Episcopal Health System Dollar value of deal: $1 billion Source: “The great consolidation: The potential for rapid consolidation of health systems,” Deloitte

52

competing for these large accounts, and there are a lot fewer of the small and mid-size accounts. There is a lot of capacity, but the number of risks is going down, which means you must have the talent in your organization that can handle all aspects of that risk.”

It’s a confusing market that’s ever changing, as healthcare always will be. The evolving nature of the industry means that brokers need to stay up-to-date with legislation and the laws surrounding healthcare and Medicare reform so that they can have a firm grasp on what their insured needs to comply with.

“Brokers are also going to have to learn

help them with those services in a way that is going to make them a more profitable, better run company?”

Big risks, big rewards Although it has its complexities, Gaudette still believes the healthcare sector is a worthwhile space for brokers to pursue. It’s an industry that is always growing, and the consistent introduction of new technologies means well informed brokers who can provide insurance solutions will always be in demand.

“There’s a lot of security in the space – people are always going to need healthcare, and there will always be advances that need

“There is a lot of capacity, but the number of risks is going down, which means you must have the talent in your organization that can handle all aspects of that risk” more about the captive area than in the past,” Gaudette says. “They need to have the ability to help clients do feasibility studies and place certain lines or selfinsured retentions in a captive-like program to address these accounts’ risks as they grow. Brokers need to understand medical malpractice, cyber liability, property coverage and workers’ comp.”

Brokers should also aim to assist their healthcare clients with loss control, helping them monitor their performance and enhance their risk management programs.

“Clients are being asked to do a lot more with a lot less remuneration – they are getting compensated less by Medicare and private pay insurance carriers, but they are having to do more than they’ve ever done before,” Gaudette says. “Which means they have less money to spend on insurance and risk management and training. Can a broker

to be addressed,” Gaudette says. “Twenty-five years ago, people weren’t thinking about cyber liability, but today, for a large healthcare organization, that is extremely important.”

Gaudette advises any ambitious broker to move into the healthcare space – but, she says, you need to be willing to evolve with technology, services and products.

“You need to be hard-working, willing to work more than a 40-hour week and be service-oriented,” she says. “Healthcare providers deliver care 24/7, and they need people who can provide solutions on the same basis. If you don’t want to work that kind of schedule or you don’t want to put in the hours, maybe it’s not the space for you.

“But there are rewards,” she adds.

“Brokers with excellent reputations who are known as experts make a very good living in this space. It’s growing area, and it’s never going to go away.”

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PEOPLE

CAREER PATH

EVER UPWARDS

Tim Cunningham’s career has been all about striving to reach new heights, culminating in co-founding his own firm Cunningham’s desire to pursue a career in accounting and finance was scuttled by one summer job in a bank and another in the accounting department of a large insurance company “That convinced me I didn’t want to be with a big company. At the end of the day, God forbid if you were walking down the hall the wrong way at 4:31 p.m.; you ran the risk of being run over. It was too narrow, too rigid”

1969

SUMMER JOBS SET THE SCENE

1974

GETS MARRIED Cunningham married wife Raima in 1974; the couple celebrated their 40th wedding anniversary two years ago. Daughter Alana followed in 1993; she eventually left Chicago behind for Montana, where she works as a social media manager for the local affiliate of a network TV station

1997 BECOMES PRINCIPAL OF IMCG After 10 years, Cunningham left Hales for IMCG, a Kansas City-based business management consultancy specializing in startups and mergers. As a principal, he worked exclusively with insurance clients “The natural progression from when I left Hales was to create a firm and identity to trade under. For a short while before IMCG, I operated solo out of an office in my house – solo is lonely, and camaraderie is good”

2011 IS RANKED AMONG TOP ADVISORS For five years in a row, OPTIS has been ranked as one of the top deal advisors by SNL Financial news service

“It dawned on me recently – we’ve got a pretty prominent reputation and place in the industry. What I’ve really enjoyed about what we do is the great client relationships that turn into friendships. It’s a great industry with great people”

1971

Tim Cunningham

BEGINS INSURANCE CAREER Cunningham got his first taste of the insurance world at Cunningham Insurance Group, a suburban Chicago brokerage specializing in professional liability and middle-market commercial accounts. First as senior vice president and then COO, Cunningham also worked as a producer, selling his interest in the late 1980s “I admit I was probably just an OK producer. What makes me good as a consultant and advisor is a different skill set. I was a better manager than I was producer”

1987 MOVES TO HALES & ASSOCIATES Cunningham accepted a position with Hales & Associates, a Chicago-based insurance, financial consulting and investment banking firm, which specialized in agent-broker mergers & acquisitions and valuations. He also edited the Hales Report, a monthly newsletter covering the insurance industry with a focus on the distribution sector “I joined Hales thinking it would be a good transitional place to find a firm to buy into; I found I enjoyed the consulting and M&A advisory business”

2002

FORMS OPTIS PARTNERS Wanting to extend the depth and breadth of his consulting practice, Cunningham partnered with Steve Germundson to form the Chicagobased specialty investment banking consulting firm OPTIS Partners in 2002; the company focuses on the insurance distribution sector “Originally we had four of us [forming OPTIS]. One was my junior at Hales, one was a former CFO of a client, and one was doing solo consulting – we all revolved around and were passionate about the agent/broker side of the business”

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2/09/2016 5:49:16 AM

PEOPLE

OTHER LIFE

TELL US ABOUT YOUR OTHER LIFE E-mail iba@keymedia.com

IT’S A LAUGH A passion for comedy led Frank Vamos to an afterhours life onstage IT WAS the first laugh from a crowd almost six years ago that really hooked Frank Vamos on stand-up comedy, and “ever since then, it has been an obsession,” he says.

The underwriter’s introduction to comedy came as a direct result of his reputation among his friends for his acerbic wit – a group of buddies showed up at the bar he was managing one night with a notebook at the ready to collect his bon mots to use at an open mic comedy night.

Vamos tagged along to that open mic night. “I thought, ‘I could do this – I’m funnier than these guys!’” he recalls.

Hundreds of shows followed – both paid gigs and open mic nights, which he uses to refine his material. Vamos now gigs regularly all over New York and his native New Jersey.

“It’s exhilarating,” he says. “You’re up there alone – it’s sink or swim.”

$20

The amount Vamos earned for his first paid gig

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750

The number of shows he has performed, both paid and open mic

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24

Minutes in the longest set Vamos has ever performed

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