NU Online News Service, April 11, 2:07 p.m.EST

Demand for earthquake coverage is heating up on the West Coast,according to two managing general underwriters offering coveragefor commercial and residential properties.

"We might need some more underwriters," says Susan Rivera,president and CEO of V3 Insurance Partners, which launched itsV₃antage EQ⁺ Difference In Conditionsprogram three weeks ago.

"We have over 800 submissions" for the program targeting smallcommercial businesses with primary exposures in California, shereports. "You are seeing a lot of first-time buyers."

Tony Morgan, a senior vice president for Bliss & Glennon, aRedondo Beach, Calif.-based wholesale brokerage and MGA, alsoreports interest in his firm's 10-year-old residential and commercialprograms for Oregon and Washington since the earthquake and tsunamiin Japan.

While Rivera and Morgan spoke to NU Online News Service lastweek specifically about specialty programs their firms havecreated, Morgan says he's seen a big jump in applications for risksoutside the boundaries of the two Northwest programs—for nonprogramrisks in California individually written on the wholesale side.

"We see a lot of people who typically would not buy earthquakeinsurance now buying it. It's across the board" for all threestates, he says, noting that concerns about tsunami threats arealso behind the flood of applications. "Typically, tsunamis arecovered under the flood portion of the policy," he says.

"After New Zealand and Japan, people are saying this isn't aHollywood sci-fi film. This is a real exposure. We need to havesomething in place," Morgan says.

COMPETITIVE EDGES

Bliss & Glennon offers what Morgan refers to as self-raterprograms for residences in Oregon and Washington, allowing brokersto answer a few easy questions and fill out a short application bye-mail or fax to bind coverage.

"We were always interested in doing a self-rater program," saysMorgan, noting that it's very difficult to do anything like that inCalifornia "because underwriters want the control. They don't wantto give you that authority because it's California."

"But we knew that there was a good market for quake inWashington and Oregon. We also knew insurance companies had a lotof capacity for those two states." Because they had so muchcapacity, they were much more open to the idea of finding adifferent vehicle, like a program, to use that capacity, hesays.

Referring to the residential product for Oregon and Washington,Morgan says total insured values could be as high as $2.5 million.Premiums start at $400.

"Basically, if it's built after 1950 and it's not on bay mud,and the TIV's not more than $2.5 million, you have coverage," hesays, noting that total premium volume for the program, written onLondon paper, is roughly $300,000.

For commercial, TIVs can't be more than $25 million, and limitsup to $10 million are available. Deductibles can be as low as 2.5percent. "We don't want unreinforced masonry, and we'll look atstuff as old as the early 1900s," he says.

Rivera says V3's competitive edge with its California commercialprogram is its use of risk-modeling technology and actuarialmethods to various margin calculations that considerprobable-maximum-loss estimates at underwriters' fingertips.

"We spent a lot of time building a very technical rating model"that has a direct feed out to Risk Management Solutions (RMS), shesays, referring to the Newark, Calif.-based modeling firm. "Weactually send data electronically out to RMS and it comes back toour rater on all of these small accounts. We fully model everylocation."

"Rather than worrying about modeling the account, ourunderwriters are actually spending their time analyzing the outputof the actuarial model"—asking why certain indications are high,others are low—and select business "that is best priced for whatit's doing to our overall portfolio."