Record Number of Faces

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If attendance at the NAPSLO Annual Convention is anyindication of the state of the E&S market, it's a goodtime to be in the business.

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With about 3,800 people wearing badges here at theconvention in San Diego, NAPSLO has set another attendancerecord.

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“I've heard people say the attendance is a barometer ofthe market,” says Brady Kelley, NAPSLO's executive director.“Judging from all the people here, the market is moving in theright direction.”

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Why So Quiet?

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Jeremy Johnson, CEO of AIG's Lexington Insurance Co. says theindustry has been “relatively quiet,” though notes trade groups arebecoming more active, on the issue of the impending sunset of theTerrorism Risk Insurance Program Reauthorization Act.

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Johnson says uncertainty related to the act's reauthorizationhasn't yet had wide effect on policies, but it will “in threemonths or so,” when risks come through the portfolio and need to beaddressed despite knowing the fate of the backstop.

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AIG has put thought into how this situation will be handled butis not disclosing any plan. Customers and the economy “arepotentially going to suffer if TRIPRA is not reauthorized,” Johnsonsays.

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The federal backstop expires Dec. 31, 2014.

NAPSLO ExecutiveDirector Brady Kelley says the association recently sent comemntson TRIA to the Federal Insurance Office. “Congress needs toact soon on this,” says Kelley. “This has and will affect morepolicies soon, as they lapse. The act adds a level of certainty forthe industry.”

Following Demand

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Burns & Wilcox CEO Alan Kaufman (pictured) says thecompany's hiring of Denis Brady as president of Burns & WilcoxBrokerage, an independent business unit that will be solelydedicated to wholesale insurance brokerage, was a response toclient feedback.

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“Our move to be bigger in brokerage was based on demand,” hesays. “Our clients wanted us to be a involved in a bigger segmentof the wholesale buy.”

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Kaufman says private ownership and financial strength has workedin B&W's favor. “There is a heightened interest now inworking with financially-secure partners.” He says there will besome additional acquisitions of wholesalers–some who are “sellingbased on anticipated growth rather than currentgrowth.”

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Count, Not Rate

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Kaufman says growth isn't coming from a traditionally hardpricing market where rate increases are in the low to mid-singledigits. Instead, growth is coming from risk returning to marketfrom the standard carriers. This is a trend that has continuedsince at least last year.

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“We're seeing more policies–property & casualty–in thesurplus market due to standard lines retreating from some risks,”he says. “This puts us in a great position to increase policycount.”

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Mario Vitale, CEO of Aspen Insurance, as well as others stoppedduring the conventions, agree. Standard lines continue to shed risktraditionally insured in the E&S market.

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“Standard lines seemed to have learned some lessons,” Vitalesays. “They are staying disciplined and pulling back,” especiallyfrom middle-market surplus risk such as restaurants, forexample.

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Signs of Improvement

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Aspen's Vitale says slight signals of an improvingeconomy are being seen. For instance, sales for clientsare improving, leading to more hires. There are more constructionstarts. Cargo and manufacturing industries are enjoying anupswing. In April, the company opened a marine, energy andconstruction unit to respond to growth in these areas.

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“Growth is coming from the exposure base–insurable interests,”he says. “There is definitely a slight improvement in theeconomy.”

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Terms and conditions and pricing in the market are “prettygood,” says Vitale. Prices needs to go up, he adds, but at leastthey aren't going down. Rates are up about 3-6 percent in themarketplace, he adds.

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Advice for the Next Generation

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At Tuesday's Next Generation panel discussion, titled “SteppingUp When it Counts,” featured participants Gerald Dupre, senior vicepresident of general property, Torus Insurance; Brenda (Ballard)Austenfeld, executive vice president, property division, Westrope;James Drinkwater, president of the brokerage division at AmWINS;and Scott Culler, president, West region at Markel Corp.,fielded questions from Next Generation President Yiana Stavrakisand young participants in attendance on selecting a career path,communicating changes in market strategy to clients, and takingadvantage of opportunities provided by retrenchment byprimary-market carriers, among others.

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Dupre revealed to the audience that before he entered theinsurance industry in 1977 that he was a pre-med major, which atthe time seemed like a fine idea until “I realized I didn't likesick people,” he said, adding that he got too emotionally attachedto patients.

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“I've been in this business for 35 years and I've never beenbored,” he added. “It's been a blast. I'm learning something newevery time I pick up a risk.”

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“There's never a dull moment in this business,” said NextGeneration co-chairman Culler, echoing Dupre's sentiment. Heencouraged NAPSLO interns to focus on their technical expertise andlearn the fundamentals of underwriting as the foundation of theirskill set. “Go spend a week with a firm and learn what theirprocess is all about,” he said. “Find mentors in this business whoare committed to making you successful and to your professionaldevelopment.

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“Be patient and learn, and the opportunities will come—and theywill come quickly.”

I'd Buy that for aDollar Dollar dollar bills, y'all. Freberg Environmental Insurance causedquite a stir on Wednesday at NAPSLO's Annual Convention in SanDiego, with a full-page ad in the third of three NAPSLO showdailies produced by NU in collaboration with the surplus linesassociation. By 11 a.m., any of the 1,000 copies of theshow daily produced for Wednesday were hard to come by, as theywere eagerly snatched up by attendees. The reason? The ad containedan actual crisp dollar bill attached by a peel-away gluestrip. Inside one of the broker lounges,attendees at one table happily tore into a stack of the mags. “See?I told you we'd make money while we were here,” one was overheardas saying, drawing laughs from his colleagues. Elsewhere in the host hotel, theManchester Grand Hyatt, copies could still be found—minus the bonusbuck.