National Underwriter Property & Casualty had tworeporters on site at The National Association of ProfessionalSurplus Lines Office (NAPSLO) Annual Convention in Atlanta:Editor-in-Chief Bryant Rousseau, and Chad Hemenway, senior editor,markets.

NRRA IMPORTANCE STRESSED AS DODD-FRANK REPEALTHREATENED

NAPSLO Executive Director Brady Kelley says members have been toWashington to “stress to them the importance” of the Nonadmittedand Reinsurance Reform Act (NRRA) portion of the Dodd-Frank Act,which has been under fire by Republicans, including presidentialcandidate Mitt Romney.

Romney has vowed to repeal Dodd-Frank. Kelley told membersattending the general session that the trade association “has toprotect” provisions in the law dealing with nonadmitted insurers.He called the NRRA a “good, strong law,” which will take timeto implement to its fullest extent.

There may be hope of saving some parts of Dodd-Frank if Romneywins the election and follows through on his repeal threats. Duringthe first Presidential Debate Romney said there are someregulations in the financial overhaul law that are warranted.

Former Florida Gov. Jeb Bush, the convention's featured speaker,used Dodd-Frank as an example of the kind of over-regulation thathe says is “stifling investment.” He blasted the 2,450-pagedocument's vagueness, with countless clauses containing the word“may,” he says.

Remembering his audience, Bush, who calls himself anincreasingly “libertarian conservative,” says the NRRA portionof Dodd-Frank is not a subject of his criticism.

The former governor also praised the surplus insurance industryfor its response during his tenure, which contained the2004 and 2005 hurricanes seasons. The state's recovery was aided,he says, by the lack of regulatory oversight of surplus lines.

“We recovered far faster because of your industry,” he told thepacked meeting room.

— Chad Hemenway

THE RUNDOWN ON RISKS

There's an overwhelming consensus that Catastrophe ExposedProperty has led the charge on risks exiting standard-linescarriers for the surplus market. But what are some of the othertypes of exposures where the E&S market is seeing an uptick inbusiness?

“Tougher products,” says Carol Stark, vice president of SelectRisk, Casualty & Programs, at CNA Insurance. “When the marketgoes soft, heavy farming and heavy mining machinery flow into[standard carriers]. But they're coming back to us.”

Stark pointed to a recent deal where CNA's Select Risk surplusdivision wrote the risk for a tunnel-boring machine at amining-equipment company, while its retail arm wrote the otherrisks.

Roxanne Mitchell, president of the surplus-lines unit at XLInsurance, agrees that “severity-driven” products, where admittedcarriers where dabbling during the soft market, are returning totheir traditional home in E&S.

Stark adds that retail-channel markets are also shying away fromrisks associated with foreign-made goods, giving the wholesalespace plenty of opportunity on this front.

Another manufacturing class where E&S is finding additionalbusiness: sports-protective products, driven in part by all therecent media coverage (and legal activity) around the subject offootball helmets and concussions.

And in Hospitality risks, “retail markets are gettingconservative with regard to their appetite for assault &battery, so they are pulling out of anything with a large liquorexposure. So we're being very opportunistic there,” Stark adds.

Mitchell notes that “Miscellaneous E&O continues to grow incertain tougher segments, such as security guards.”

“And we're seeing some growth in certain tougher Constructionsegments, such as Street and Road and Sewer,” says Mitchell,who adds that XL is seeing “a huge increase in interest” in itsBuffer Auto product with commercial-fleet and other transportationcustomers—a product that XL developed after last year's NAPSLOconference, where it became clear a huge demand existed for thiscoverage.

— Bryant Rousseau

A GROWING CONCERN: CARRIER SOLVENCY

Retail brokers are increasingly concerned about the solvency andindependence of their potential insurance partners, says Alan J.Kaufman, president and CEO of wholesaler Burns & Wilcox.

“We've never had to send out so many financial statements,” hesays, adding that it is a request he's happy to fulfill. “[Brokers]are re-evaluating who they want to do business with. Maintainingrelationships is important and they don't want any E&O claimsfor themselves.”

Kaufman says he'd rather see his competition healthy thanotherwise. The industry then looks better overall.

But the fact is, with so many producers still competing forpieces of the same pie, Kaufman predicts more consolidation amongbrokers large and small.

Kaufman says B&W has increased market share by hiring more“ambitious, eager and innovative” young talent while spending on anintense marketing campaign. Submissions are up and the wholesaleris binding more, he adds.

—CH

XL:WORKING ON THE RAILROAD

In just over a year, XL's surplus-lines unit has expanded itsfocus from just one line of business to five—and one of these newfocus areas: Railroads.

“We came out of the gate with all the coverages any railroadcustomer could need,” says Roxanne Mitchell, president of thesurplus-lines unit at XL Insurance, who notes that she and her teamhave more than 100 years of combined experience with the railmarket.

“The railroad business has been great, performing extremely wellthis year from both a top- and bottom-line perspective,” Mitchellsays.

Mitchell adds that some of the traditional rail markets—andthere aren't many that play in this niche space—have beenretreating on coverages or significantly raising their rates, whichhas helped XL quickly establish itself in this space.

“It's a very volatile business, and railroad exposures arereally different from anything else,” Mitchell notes, citingderailments as just one example. “But we really know this businessand have great relationships, and it's a line we're committed toand excited about.”

—BR

MARKEL OVERHAULS 'IT PRO' POLICY

During the NAPSLO convention Markel announced the launch of itsoverhauled IT Professional policy, which includes configurablefirst- and third-party Data Privacy and Security coverage, GeneralLiability and Media Injury options in addition to basicProfessional Liability.

The policy includes coverage for regulatory fines and penalties,including Payment Card Industry as well as Health InsurancePortability and Accountability/Health Information Technology forEconomic and Clinical Health fines.

“It also includes our unique coverage for theft of money andsecurities, as well as interruption costs to restore the insured'sdata and extra expenses while recovering from a breach,” says JakeKouns, director of Cyber Security and Technology Risks underwritingfor Markel.

—CH

THE CNA EDGE IN CLAIMS, RISK CONTROL

When asked what sets CNA Select Risks apart from its competitiveset, both Carol Stark, vice president of Select Risk, Casualty& Programs, at CNA Insurance, and John Angerami, the head ofSelect Risk, both zeroed in on their claims and loss-controlcapabilities.

“We have a claims group dedicated to E&S—and that's veryunique,” says Stark. “Especially on the E&S Casualty side, youneed claims specialists with the 'intestinal fortitude' to fightthose claims that need fighting.”

And in risk control, CNA Select Risk has a dedicated team ofProduct Liability specialists who are all UnderwriterLab-certified—and certified in Six-Sigma and LeanManufacturing.

“This gives them a unique perspective on tough product andmanufacturing risks,” says Stark. “We can achieve good results froma Product Liability and Premises standpoint just by having themimprove manufacturing processes. And insureds have really seen thevalue of that.”

—BR

OPTIMISM: MORE LINES IN THE WATER

Hank Watkins, president of Lloyd's America, says those he hastalked to at NAPSLO have expressed optimism for the U.S., driven bymore activity—that is, more submissions. These submissions aremerely lines dropped in the water—producers seeing what's out therefor their clients—but eight months ago they were “passing thelake.”

“It feels better around here than it did a year ago,” Watkinsobserves of the general NAPSLO atmosphere.

On the industry response to emerging risk, such as ContingentBusiness Interruption and Cyber Liability, Watkins says it takestime to understand exposure. He uses Employment Practices Liabilityas an example. It used to be a big unknown, with products rolledout little by little. But now it is “freely underwritten.”

“Will Cyber ever get to that point? I don't know. It's such ahigh, global risk,” he says.

—CH

EXCESS CASUALTY: TRICKY BUT CAN BE 'GOLD'

There a couple competitors “in the trenches” writingsmall-market Excess Casualty, but many carriers avoid it. Theeffort just doesn't pay—even though loss ratios are good—becausethe premiums aren't high: Expense ratios can cancel out the moneycoming in. But Linc Trimble, head of Excess Casualty at Torus, saysthere is money to be made if you're efficient.

In fact, Trimble says “small business can be gold” if you cancut the time spent on underwriting and servicing. “It's anunderserved marketplace and we can make a difference,” he says.

—CH

SAY GOODBYE TO AS-IS RENEWALS

Yes, there is some positive rate movement—but with that comes“more trading and bargaining” at renewals, says David Bresnahan,president of Lexington Insurance Co. The “as-is” renewal is rarer.In the end, some insureds are prepared to take on more risk viaself-insurance or co-insurance.

—CH