By the time you read this, the first quarter of 2008 will bealmost over. Most agents, brokers, and underwriters working oncommercial, surplus line accounts in Florida are at once attemptingto get a grip on what happened in 2007 while contemplating thefuture of the market. There are a number of important trends thatsuggest the market is improving and that rates have moderated orare falling, which is good news for consumers.

To gain some perspective on the state of the market, I'veenlisted the help of four individuals from wholesale brokers whoare successfully writing surplus lines business across the state ofFlorida: Larry Beller, vice president and branch manager of Hull& Company in Tampa Bay; Joe Anderton, executive vice presidentof Bass Underwriters in Plantation; Kathy Colangelo, president ofRoehrig, MacDuff in St. Petersburg; and Dave Rucker, senior vicepresident of All Risks in Ft. Lauderdale. Since property is still amajor concern in Florida, questions concerning this topic dominatethe issues.

Florida Underwriter: How would you characterize the changes thesurplus lines property market in Florida has experienced in thepast six-12 months?

Beller: During most of 2007, rates were dropping gradually, butthe changes that occurred in the last quarter of 2007 weredramatic, and those changes have continued into 2008. Brokerageproperty rates have reduced by 50 percent or so in most areas ofthe state. Without a doubt it's due in large part to the lack ofmajor storms in Florida and the competition to retain business.What we're seeing now is that rates in Florida are consistent withrates for similar risks in other parts of the country.

Colangelo: Rates dropped significantly in the third quarter of2007 and competition is intense. It's a time like no other, andI've heard that from professionals who have been in this business alot longer than I have, some with as much as 40 years ofexperience. There are a number of factors involved, including alack of catastrophic events, new capital and thewillingness/ability of standard markets to write businesspreviously left to the surplus lines market.

Rucker: New capital has made some impact, but not on thebusiness we're seeing. Primarily, it's the same players trying toprotect their hands and, of course, to a great degree that is whatis driving the pricing we're seeing now. I just had a meeting veryrecently with an underwriter to talk about one of our contracts for2008. About 90 days prior to the meeting, we looked at rates topresent to the carrier, and then we adjusted the rates again about10 days before the meeting. When the underwriter asked if theserates will do the job going forward, I had to tell them probablynot. That's just one example of the “speed” at which things havebeen changing.

Anderton: From our experience, just about everything has changedor is changing, not just rates. What's available now compared to ayear ago would include more coverage, lower deductibles (especiallywind), and acceptability or qualification of accounts. New capitalhas been a factor but perhaps more so on the reinsurance side ofthe transaction. I think that many carriers are simply recognizingan opportunity and trying to respond aggressively.

Florida Underwriter: Based on your experience, how are thecarriers reacting to these conditions?

Beller: Competition on middle market accounts is intense and iscoming from standard carriers as much as it is surplus linescompanies. Depending on the account, it may be that the standardcompanies are the competition. Carriers may get a little lessaggressive as we approach hurricane season — that's been the trendin the past few years.

Anderton: Carriers have further segmented the market and havemade a greater distinction based on construction on both coasts.The only area that remains very difficult is the Panhandle due toconstruction codes and other issues unique to that geographic area.Rates have not yet bottomed out and, of course, that should be goodnews for the majority of commercial insurance buyers.

Colangelo: Mitigation is being recognized and considered by manyof our carriers, and it can make a difference if it brings thebuilding up to code and/or if it involves required improvements tothe roof. With proper mitigation more carriers are willing to lookat a risk and at a more competitive price, and it may also bepossible to lower the wind deductibles.

Rucker: Those carriers that intend to keep market share arecompeting any way they can, which certainly includes thepossibility of negotiating coverage and deductibles as well asrates. I still believe for the best accounts it's going to be hardfor a broker or agent to “win” without a very competitive rate.

Florida Underwriter: Besides staying in the game on rate, whatother challenges do you face?

Rucker: Searching the market for the best terms is what we'rehere for, and in this market our customers want/need just aboutevery account shopped. That's understandable given the possibleproblems if they fail to do so. The challenge for us is to deliverthe best possible product but, at the same time, protect ourrelationships with our carrier partners. The more we “shop” themarket the more it could (negatively) impact our hit ratios. We'reconstantly trying to balance those elements.

Colangelo: We're lucky in that our retail agents are prettysavvy and understand what's going on in the marketplace. One of theresults of this market is that our customers have to treat almostevery renewal as “new” business, so aggressively re-marketingrenewal business is now the norm, not the exception. The reality isthat we're all working harder.

Beller: Lack of detailed information. Everyone wants to get asubmission out to their brokers as quickly as possible, and ofcourse getting to the market first is important, but getting therewith good information is just as important. With property businessas an example, we're emphasizing to our customers to provide uswith accurate building construction information and buildingupdates on older properties. The more information and the betterthe format, the more favorably received it will be by thecarrier.

Anderton: Certainly the volume of business is a challenge butone we're capable of meeting. In addition to marketing the accountsproperly and professionally, keeping up with the aggregate propertyexposures is also vital. Many of our carriers require that wemonitor our allotted wind aggregate very closely and we track itconstantly.

All the experts agreed that short of a major storm or othercatastrophic event, this very competitive and “soft” market won'tchange anytime soon. When asked what property business is a stillexclusively surplus lines, they list frame and/or olderconstruction (usually more than 10 years). Some also indicatedproperty within a mile of the water, and property located in thePanhandle.

As for what a retail agent can do with the help of theirwholesale markets, all emphasized that working with wholesalerswhere the retailer has a relationship is important. The better yourrelationship with your wholesaler, the better service and more helpyou will likely receive. (From one who has been there, that's not aknock on new production sources, it's simply a reality in anenvironment that requires more work for potentially less revenue.)Also, if it makes sense for the class of business or size of theaccount, check to see if an online rating tool is available toexpedite the quote process. Make sure you are working withwholesalers that have a diverse group of carriers so they areconstantly acquiring crucial market information, as well as theability to provide you with the most competitive terms.