Geographic expansion plans are giving U.S. specialty insurersand wholesale brokers a broader presence than ever before, with atleast two this month announcing tactics to increase their reachbeyond U.S. borders.

From its headquarter offices in Farmington Hills, Mich., Burns& Wilcox, a national specialty wholesaler and managing generalagent, announced it is forming a new business entity with C.J.Coleman & Company, a London-based wholesaler, in mid-April.

Earlier in the month, Bermuda-based Argo Group InternationalHoldings announced it had made a $272 million cash offer to acquireHeritage Underwriting Agency, Plc, a Lloyd's insurer, creating acombination that Argo said broadens its international presence.

Commenting on Burns & Wilcox's joint venture, Alan Kaufman,chairman, president and chief executive officer of parent companyH.W. Kaufman Financial Group, said, “It has always been my goal tobuild the H.W. Kaufman Financial Group toward a globalorganization.”

The new business entity with C.J. Coleman & Company, whichwill be called Coleman and Kaufman Limited (C&K), expands theexisting business of Burns & Wilcox in the London market.Presently, Burns & Wilcox is among the largest providers ofcontract business to London, and it is now expanding brokerageoperations there, the company said.

C.J. Coleman & Company has been associated with Burns &Wilcox for more than 30 years, the firms said in a statement.

“We are very pleased with the prospect C&K presents tostrengthen our market in the United States, Canada and Europe,”said Christopher Coleman, group chairman of C.J. Coleman Holdingsin London.

Currently, C.J. Coleman & Company Ltd. acts as a wholesalerfor intermediaries in many regions of the world, as well asproviding risk management solutions for its direct commercialclients. The firm has a wide range of clients including globalcorporations. According to the firm's Web site, product offeringsinclude nonmedical and medical professional liability, directorsand officers liability, employment practices, liquidated damagesinsurance (for contractual damages incurred by contractors involvedin construction projects for failing to meet performance guaranteesor completion dates), as well as commercial property coverage inthe United States, Caribbean and other parts of the world.

Burns & Wilcox, currently operating with 36 offices in 24states, provides insurance underwriting and brokerage expertise inspecialty lines, professional and commercial liability, propertyand personal lines. It posts premium volume in excess of $750million, according to the company.

In an interview at the midyear meeting of the Kansas City,Mo.-based National Association of Professional Surplus LinesOffices, held in Scottsdale in February preceding the joint ventureannouncement, Mr. Kaufman discussed his firm's desire to expand itsglobal reach.

After describing his firm's efforts to educate its workforce onmultiple fronts–with an internal learning management system and avariety of recruiting efforts–he commented, “Our goal is to havethe smartest workforce in the industry. We want to be known forbeing smart.”

He continued, “We think we can leverage our expertiseinternationally. For instance, we have a very strong umbrellaprogram.” Mr. Kaufman added that while experienced competentunderwriters are required to write umbrellas, Burns & Wilcoxhad only been writing that business in the United States. However,the same principles apply any place else in the world, he said.

Providing an additional example, he noted that Burns &Wilcox writes a guide-and-outfitters program in Denver, but “toursaren't unique to the United States. There are bicycle and raftingtrips all over the world.”

Likewise, other participants in the U.S. E&S/specialty linesmarket have embraced the idea of global expansion in recent years.During a session at AAMGA University in March, Paul Springman,executive vice president of Richmond, Va.-based Markel Corp.,described his company's expansion activities since its purchase ofLondon-based Terra Nova Group in Spring 2000.

Mr. Springman told members of the American Association ofManaging General Agents that Markel used its acquired Londonoperation as a base for greater geographic expansion–openingoffices in Madrid, Toronto, Stockholm and Singapore over the courseof the last three years.

“As much as we think of the United States as world headquartersof the insurance industry, the reality is only one-third of theworld's property-casualty premiums are written in the UnitedStates,” he said, adding that Markel's portfolio is currentlydistributed in the opposite way–two-thirds U.S. and one-thirdnon-U.S. premiums.

He continued, “We see the opportunities to grow ourinternational portfolio much more attractive in the short run thanwe do in the United States because of competitive pressures andpricing issues.”

He said that “while the pricing environment internationally iscompetitive, for most products it does not seem to have the wildfluctuations and cycles that we endure in the United States.”

Expanding economies also provide opportunities for specialtyinsurers, Mr. Springman suggested.

For instance, five million Chinese people reportedly got theirfirst refrigerator this year, he said. “Think about what that meansin five years, 10 years…for third-party liability and directors andofficers liability exposures,” he told the AAMGA members, notingthat Markel is currently looking at opportunities in China and theemerging economies of Russia and Poland as well.

“It's a huge part of our strategy. And we look at it as a mucheasier way to grow our overall business,” Mr. Springman said.

Paul Goodwin, client executive for the National Clients divisionof Munich Re America in Princeton. N.J., speaking at the samesession, said that a lot of the reinsurer's clients are seeingtheir growth over the next two or three years coming in Europe andthe Far East.

In addition, “the name that has popped up four or five times tome in the last month is Dubai, which is becoming apparently ahotbed for insurance,” he said. “Dubai has replaced Singapore asthe center of interest.”

Continuing an international expansion initiative that began lastyear with a reinsurance venture, Argo Group announced its offer forHeritage in London on April 2.

During a conference call, Argo Chief Executive Officer MarkWatson noted that the “more international approach” of his companygot a jumpstart from Argo's merger with property-catastrophereinsurer PXRE Group last year. The merger established aninternational reinsurance operation, now named Peleus Re, inBermuda.

Commenting on the offer for Heritage, Mr. Watson said theLloyd's operation and Argo are similar in that both targetsmall-account business. He noted, however, that Argo's U.S.specialty insurance operations, Argonaut Specialty and ColonyInsurance, focus on casualty risks, while Heritage has a book thatis predominately property.

In addition to a worldwide property unit focusing on commercialaccounts, he noted that Heritage does write some liability risks,but these are non-U.S. liability risks–making the operationscomplementary to Argo's U.S. operations.

According to Argo, Heritage managed total premium capacity of?315m ($630 million in 2007, and capacity is similar for 2008.

Gross premiums for Argo Group were nearly $1.2 billion in2007.

The deal is subject to the approval of Heritage shareholders aswell as legal and regulatory requirements.

During the AAMGA University session, Mr. Springman alsocommented on regulatory challenges Markel considers as it expandsoperations globally.

Responding to an MGA who wondered whether the high degree ofregulation in the United States would prompt more specialtycarriers to look outside U.S. borders, Mr. Springman said hiscompany's product expertise and regulatory regimes factor intostrategic decisions to expand internationally.

“We tend to lead with professional indemnity products,” he said,noting that they are the most profitable product for Markel.

When the company surveyed the European landscape, it found thatGermany was well served in the professional liability arena andthat five other countries just weren't large enough to accomplishMarkel's goals.

The analysis led Markel to a choice between Spain and France, hesaid, noting that Spain got the nod because of a French regulationrequirement that professional liability coverage be written with a10-year optional extended period. “We just felt that was close tounconscionable and unpriceable, frankly.”

In addition, he said that after a company employs a Frenchnational for two years, some very onerous French labor laws kickin–such as a one-year notice of termination requirement and afive-year severance package if they can't get comparableemployment.

Spain, on the other hand, offered a growing economy with a highnumber of professionals, a good business environment in Madrid,“and they wanted us,” he said, adding that the effort to launch aprofessional liability operation in Madrid is now used as Markel'smodel for expansion to other parts of the world.