Surplus lines brokers and insurers, who will meet to discussissues in the crosshairs of their market segment this month, willalso have an opportunity to attend educational sessions aboutbroader topics with potential market impact, organizers say.

In addition to the usual face-to-face networking opportunities,this year's midyear educational workshop of the NationalAssociation of Professional Surplus Lines Offices Ltd. offers oneeducational session that will look at the impact of private equityinvestment on the insurance industry, and another featuring apolitical expert who will speculate on the outcomes of this year'skey elections, including the presidential election.

Explaining the impetus for organizing a panel to discuss thefirst topic, Robert Sargent, co-chair of NAPSLO's Communications& Technology Committee, noted that there has been “quite a bitof an increase” of private equity investment in the market,especially in specialty or surplus lines businesses.

Private equity interest has grown steadily in recent years, hesaid, noting that while it would be difficult to point out a singleevent or time that could be seen as a start to the surge ininvestments, events such as the attacks of Sept. 11, 2001, theactions by New York Gov. Eliot Spitzer in his former role as stateattorney general as well as “the market cycle” have all played arole as “drivers” of the growth.

Mr. Sargent, who is president of Hartford-based Tenant RiskServices, said he believes there is a fairly broad spectrum ofknowledge with regard to private equity among NAPSLO members.

“My guess would be that it varies dramatically,” he said, withsome members having relatively little knowledge of how privateequity works and others having a more in depth understanding.

Private equity investment, Mr. Sargent argued, has been an“evolutionary” change to the E&S market, rather than a problemfor companies now dealing with investors that may not understandthe market, although he acknowledged that not everyone may feel thesame way.

“Opinions probably vary, but I view it as a positive,” he said,adding that private equity has provided more capital for themarket.

Chris Treanor, president and chief executive officer of MercatorRisk Services, shares Mr. Sargent's view. Mercator is backed by aprivate equity firm, Stone Point Capital LLC, and Mr. Treanor saidhe is a “big fan of private equity,” which he believes has beenvery good for both newer surplus lines companies and older oneschanging ownership.

Private equity firms looking to invest, he said, are attractedto the fact that participants in the surplus lines insurancesegment are not as restricted as those operating in the admittedsegment.

“As a surplus lines company, you just have a lot moreflexibility,” Mr. Treanor said. Surplus lines companies are able tomove into different markets, different lines or differentgeographical areas far more easily than admitted companies, hesaid.

“As a private equity investor, one of the things you want to beis more nimble,” he added.

Additionally, Mr. Treanor noted, the wholesale distributionsystem is very efficient, which also makes the segment attractiveto private equity investors.

Just as Mr. Sargent said that the insurance industry'sunderstanding of private equity is a broad spectrum, Mr. Treanornoted that the same is true on the private equity side.

“Any investor needs to understand the space that they're gettinginto,” he said. “You'll see private equity investment kind of runsthe gamut” from those who do nothing but insurance, such as StonePoint, to those who only “dabble” when they see something thatappears attractive as an investment.

In seeking to help educate members, Mr. Sargent said NAPLSO hasput together a very strong panel with significant experience ininvesting and, specifically, investing in the insurance industry.Among those who will be speaking are:

o Matthew Kelty, principal for Washington-based Allied CapitalCorp.

o John Kraska, managing principal of Hales & CompanyInvestment Bankers in New York.

o Gerard Vecchio, managing director for Boston-based CenturyCapital Management.

o Mark Watson, president and chief executive officer ofBermuda-based Argo Group International Holdings Ltd.

Mr. Sargent said the panel would provide a “great opportunityfor NAPSLO members to get a first-hand view” of how private equityinvestors view the market and how they operate.

While private equity investment plays a role in providingcapital for the industry, the second panel will examine an areathat could affect the landscape in which industry operates–thepolitical scene.

“A Pollster's Odds: Betting on the 2008 Elections,” which willfeature the insights of Jordan Lieberman, publisher of Campaignsand Elections magazine, was conceived to give NAPSLO members anidea of what they can expect once the current election cycle ends,according to NAPSLO.

Legislative activity remains important for the group–mostspecifically, legislation that would reform the regulation ofmultistate surplus lines risks with regards to the collection ofpremium taxes and regulatory jurisdiction, according to Mike Ardis,NAPSLO's director of communications and technology.

“We wanted to find out what the potential is” for the billpassing this year, he said. “And if not this year, then we'reinterested in seeing what will happen in Washington next year.”(See related story on page 17.)

Beyond that, Mr. Ardis said he hoped the discussion wouldprovide some perspective on what has been a wide open politicalrace thus far, as well as other races that could play a key role indetermining the makeup of Congress in 2009.

“A number of representatives and senators are retiring,” henoted, adding that NAPSLO is interested in hearing about theprospects for those races and any others that are viewed as “up forgrabs.”

Of course, the largest undecided race thus far is for the WhiteHouse, and Mr. Ardis noted that it is almost too early to even makeany prognostications on who will be sworn in next January,particularly in advance of Tuesday, Feb. 5, when over 20 stateswill hold their primaries.