Phoenix–Sixty days after opening for business, the boss of the nation's newest surplus lines insurance operation said it is doing fine, “but we're crawling”–and that's according to plan.

With $145 million in capital, Rock Hill doesn't want to be seen as coming into the marketplace and “causing disarray” because it failed to make intelligent use of the cash, explained Terry Younghanz, Rock Hill chief executive officer and president.

The company, he explained, has no production goals and is focused instead on an annual return above 12 percent.

Because the firm is privately held, he explained, the operation has a platform to use capital where it is most needed. Mr. Younghanz noted that the amount the company has put in play is far below the subscribed $400 million.

Mr. Younghanz and Richard T. Parks, the company senior vice president and chief marketing officer, were attending the National Association of Professional Surplus Lines Offices, Ltd. mid-winter meeting here. They voiced the view that too much capital on hand could force bad top line-driven decisions.

Rock Hill, the first surplus start-up to arrive on the scene in three years, decided that rather than be an all lines operation, it will function as a specialty operation going after niche business, Mr. Younghanz said.

Rock Hill focuses on three lines. One is an umbrella product providing protection for middle market business, primarily small commercial contracting and manufacturing.

The other two lines include insurance for home builders in five states where the law attaches extended liability for construction defects and protection for commercial properties in wind-prone areas.

Their ability to focus on the wind-prone business meant that the arrival of Hurricane Katrina made the firm's opening “extremely lucky with our timing,” Mr. Younghanz said, noting that their company had no trouble attracting brokers and has contracted with 52 of them.

“We turn down three to every one we appoint,” Mr. Younghanz said, explaining that “we want them to feel an appointment with them is worth something.”

The firm, which seeks to hire underwriters with the best track records, now has 30 employees. In addition to its Kansas City, Mo., headquarters, it is leasing new space for staff in Kansas City, as well as Atlanta, Chicago and San Francisco.

Mr. Younghanz said he expected that in the future the surplus lines business will see entries from the London market with various syndicates seeking a U.S. presence–and filtering down some capital that has been directed at the reinsurance market.

His company, which morphed from being a managing general underwriter, was able to secure funding, he said, because his track record was appealing to investors.

His extended background with numerous firms includes 12 years at RLI, where he was senior vice president and managing general underwriter, and a stint with GE Commercial Insurance as chief underwriting officer.

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