Zurich Financial alumnus Mario Vitale took a spot on Aspen U.S. Insurance’s leaderboardas president last week, bearing battle scars of past cycles thatgive Aspen an edge as it positions for a turn, the group’s chiefexecutive said.

John Cavoores, co-CEO of the insurance division of Bermuda-basedAspen Insurance Holdings Limited known as Aspen U.S. Insurance,said Mr. Vitale has “been through a number of market cycles” in 34years in the business. “He has made profits through those cycles,and that’s exactly the kind of guidance we need to give our team inthe United States as they develop their plans going forward,” Mr.Cavoores said.

Mr. Cavoores, who like Mr. Vitale has more than 30 years underhis belt with prior stints at OneBeacon, American InternationalGroup and Chubb, spoke to NU’s Specialty Markets Insightsa day after Aspen announced Mr. Vitale’s hiring and a day before anew team of surety experts came on board—describing the historicalchanges in the E&S/specialty business written at Aspen U.S. andthe vision for the future.

Mr. Vitale joins Aspen from Zurich Financial Services where hewas CEO, Global Corporate. Prior to joining Zurich in 2006, heserved with the global broker Willis Group Holdings for six yearsand as CEO of Willis North America for four, after many years withReliance National.

“He brings patience. He brings experience. He brings prudence.He brings a great deal of technical strength and a tremendousaccess to the distribution system,” Mr. Cavoores said, referring toMr. Vitale’s role as head of Willis’ North American retailoperation.

“The timing couldn’t be better to have someone with [his]experience directing our U.S. strategies,” he said, referring tothe fact that Aspen plans to become active in the admittedspecialty market accessing large retailers and regional producersover the next two years.

Hinting at the surety announcement to come a day later, Mr.Cavoores referred to it as an example of a team-building effort inthe U.S. specialty-insurance market that started to take shape inlate 2009. Rattling off names of the professionals like BruceEisler, who previously ran the professional-liability operation forLiberty Mutual, and Adam Schnell, who had run the New York casualtyoperation for ACE Westchester, Mr. Cavoores listed these men andthe teams they brought with them among six that came to Aspen injust over a year. (See accompanying textbox, “AtA Glance,” for the full roster of key hires.)

Michael Toppi, who hails from Travelers Bond and HartfordInsurance Group, is slated to head up the new commercial-suretyteam, which will narrowly focus on the niche of public and privatecommercial and non-construction surety bonds.

“It gives us some diversification” into businesses thathistorically produce the best underwriting returns for insurers,Mr. Cavoores said, not just referring to the addition of the suretygroup but also to the staffing of professional-liability,excess-liability, management-liability and marine businesses overthe last two years.

“We want to have a very specialized grouping ofbusinesses—businesses that run countercyclical, but also thosewhere you have to be flexible enough to move when the market ischanging,” he said.

Mr. Cavoores said Aspen has been writing primary insurancealmost since its start in 2002. While the overall size of Aspen’sinsurance business was just shy of $1 billion in premium in 2010,the U.S. component remains small—at just about 15 percent of thetotal, with the rest coming from a London-based specialtyoperation.

(Aspen also wrote about $1 billion of reinsurance premium in2010.)

Heading the insurance operation in London isCo-CEO Rupert Villers, a veteran who co-founded Novae Holdingsoperating at Lloyd’s, who joined Aspen in April 2009.

“The emphasis from the beginning has really been to writeE&S, mostly property and general liability,” Mr. Cavoores said,noting that in late 2009, the management team decided “it was theright time to rebrand what we wanted the company to be in theUnited States.” That would mean building on the success Aspen hadachieved on the E&S property side, revamping specialty casualtyand adding professional-liability expertise.

GOING AGAINST THE FLOW

Asked why Aspen is ramping up in the U.S. insurance segment ascompetitors like RenaissanceRe pull back, he said Aspen’sactivities don’t represent “a traditional insurance ramp-up.”

“It’s quite the opposite. It’s just investing capital, investingin people—entering with a toe in the water rather than both feetand positioning the company to do well,” he said.

“We’re actually being very prudent in our growth strategy,” hecontinued, explaining, for example, that in lines such as directorsand officers liability, Aspen currently writes excess layers but ispoised to move aggressively down to primary layers when pricingmakes sense.

Mr. Cavoores said Aspen does not have a specific target for itsmix of U.S. specialty business among professional-liability,property and casualty segments. “We don’t think of the businessthat way,” he said. “We tend to think of the business in a moreopportunistic way.”

“We try not to say here is point A, here’s what we want point Bto be and we’re going to get there no matter what,” he said. “Ithink that’s what differentiates us from our competitors. The threepeople who are running this insurance business have enough scars onour backs to know when it’s time to pull back and when it’s time tobe a bit more aggressive,” he added, referring to nearly a centuryof market-cycle experience that Mr. Cavoores, Mr. Vitale and Mr.Villers have between them.

Although Mr. Cavoores spoke about a high-excess-layer strategyfor the current market, he said that didn’t mean the sole focus ofthe U.S. insurance segment is large-account business.

“We’re not going to be a market for the really small risk;however, we do write property program business,” as well as somesmaller casualty programs, he said.

He also explained that Aspen is not investing in the kind ofinfrastructure an insurer needs to support really small business.“So it’s probably safe to say we’re in the middle market and someof the larger risk tiers going forward.”

REMEDIAL ACTION REQUIRED

Although Aspen ranked as the 34^th largest U.S. E&S insurer on an NUranking based on premiums written for the first nine months of2010, getting to $127.8 million of U.S. E&S premiums has been abumpy road.

Back in 2005, Chris O’Kane, CEO of the holding company, told NU about the group’s earliest forays into the U.S.E&S market—writing small nonadmitted property risksincluding vacant properties (with a typical limit of $5 million)and what he termed “the lighter end of casualty.”

In 2008, Nathan Warde, then president of Aspen Specialty (whohas since moved on to a position with Markel Corp.), was talking about rebuilding efforts and a changed riskappetite that would de-emphasize a dominant book of unprofitableprimary habitational business (including garden-style apartmentsand condominium properties). At that time, he said Aspen put plansin place to diversify the property book and to bring a “specialistunderwriter culture” to casualty areas like professionalliability.

Fast forward to the end of 2009, and Mr.O’Kane was detailing losses in the U.S. casualty insurance arena. U.S.insurance has “been the least successful thing that we've done, andin some places, it's been unsuccessful,” he said, referring, inparticular, to a contractors book in New York.

In early February, during a year-end 2010 earnings conferencecall, Mr. O’Kane told analysts that Mr. Cavoores had taken “strongremedial action” on the U.S. casualty insurance business that was“not achieving acceptable results.”

Mr. Cavoores explained that Mr. O’Kane was again referring tothat N.Y. contractors book and to residential construction businesson the West Coast—both of which Aspen has stopped writing.

“There was a point in time in the market when the pricing onthat business was actually okay, but the exposures [ultimately]didn’t really match the pricing no matter what you charged,” Mr.Cavoores said. “At the end of the day it’s safe to say it was amistake doing it.”

“That was really the main event” in terms of remedial actions,setting the stage for a new casualty team to come on board.

With the casualty business shrinking, the majority of Aspen’sgrowth in the United States over the years has come from theproperty class, Mr. Cavoores said.

According to a recent NU analysis using Highline Data,a data affiliate of National Underwriter, Aspen sprinted up U.S. E&S insurer rankings, tripling itsE&S writings for the first nine months of 2010 compared tothe same period in 2009.

The casualty business represented 15-20 percent of the 2010 U.S.insurance total, Mr. Cavoores reported. Within casualty, he said,there was some specialized casualty business, like a successfulenvironmental E&O product, that has now been moved over to theprofessional-liability team.

DISTRIBUTION STRATEGIES

All of Aspen’s U.S. insurance business so far has been writtenon an E&S basis, primarily through the larger nationalwholesale brokers, but that will change in the years ahead.

After acquiring an admitted insurer last year, Aspen now hasmore than 30 licenses to write admitted business as the companygoes through a filing-approval process, Mr. Cavoores said.

Responding to the question of whether he foresees Aspen workingthrough some of the bigger national retail brokers, given Mr.Vitale’s relationships in that part of the distribution chain, Mr.Cavoores said that will happen.

“We have obviously been working primarily with the largerE&S brokers, but as we become more visible in the admittedmarket, it’s pretty clear that in certain lines of business youneed to be in business with the top brokers,” he said, adding that“there is a pretty significant regional penetration” that can alsoprovide the business Aspen is seeking to write—both wholesale andretail.

“It won’t be a massive effort to appoint and work with thousandsof brokers. But I think we’re going to be very selective and makesure that the brokers we’re working with want to be partners withus, and that there’s business available that helps us meet ourfinancial objectives,” he said.

On the wholesale side, Mr. Cavoores said that Aspen has recentlycut the number of partners in the casualty area, but that Mr.Schnell and his team bring new relationships that will lead to newappointments.