While program carriers have found property and casualty businessopportunities in everything from auto repossessors to fine arts inrecent months and years, some are eyeing new business potential inthe accident and health space.

Craig Fundum, president of Zurich Programs and Direct Markets,explained that while there aren't necessarily a lot of new a&hprograms popping up in the marketplace, Zurich sees a "greenfield"opportunity on the a&h side of the program business insurancesegment because the Schaumburg, Ill.-based carrier has just writtena&h on a program basis before.

He explained that Zurich, which has previously written a&hinsurance through worksite marketing and individual risk groupapproaches, is now "going to be aggressively looking for programpartners."

"Zurich should be in all those spaces, and really it's our turnon the program side to step it up and grow that business," Mr.Fundum said.

Zurich's programs team will emphasize the 'a'--the accidentaldeath and dismemberment part--of a&h, he said, noting that arecently launched a&h profit center is currently being staffedwith some experienced AD&D professionals. "There's hugepotential out there," he said.

QBE the Americas, which was a relatively small a&h player onthe reinsurance side ten years ago, made the transition to theprimary side and started building a portfolio of a&h insuranceprograms in 2001. The current portfolio of 10 specialty a&hprograms includes employers stop loss, student medical and studentaccident, and QBE's newest program, Complication Insurance,according to Stephen Fitzpatrick, president of QBE SpecialtyInsurance.

In September, 2009, QBE added to its a&h portfolio byacquiring the CIGNA special risk, student and sports accidentinsurance book of business, and in February, the company announcedthe launch of Complication Insurance, a start-up program providingfinancial resources to patients in the event of adverse outcomesfollowing any one of 80 covered elective surgical procedures.

QBE will entertain a start-up, but only "if it's got the rightbusiness and the right story," Mr. Fitzpatrick said. (ComplicationInsurance was described fully in the last edition at http://bit.ly/djmVwW.)

Typically, the carrier looks for programs that "can get to $5million in a reasonable period of time," he said.

BEYOND A&H

Beyond the a&h unit, the overall program business portfolioat QBE the Americas has grown substantially in recent years,according to Mr. Fitzpatrick, who put the active program count at85.

While Mr. Fitzpatrick attributed a large part of a 17.4 percentpremium jump in 2009 to the acquisition of a large programadministrator, new appointments also fueled "meaningful growth lastyear, even though the industry was sluggish," he said.

He said QBE, which first opened its offices in the United Statesin the early 1990s, is probably one of the nation's largest programbusiness writers today. Within QBE the Americas, the specialtyprogram business unit is the largest single unit, representingnearly $2 billion in premiums, he said.

In addition to the 10 a&h programs, the expansive scope ofp&c insurance programs includes most lines ofbusiness--admitted and nonadmitted--with a broad range of sizes.The smallest program is a $0.5 million prize indemnificationadministered by Hole In One International in Reno, Nev., while thelargest--a program of forced-placed property coverage for financialinstitutions managed by Atlanta-based Sterling National--garnersseveral hundred million in premiums.

The common thread for QBE's programs, he said, is that they allrequire a certain level of specialized skill from the PA. Actualexamples include:

o A program for a difficult class, like anassisted living facilities program QBE signed onto last year, whichrequires specialized underwriting expertise.

o Business that lends itself to uniquecoverages customized for a specific industry, like a newstaffing industry program. In addition to general liability insuredwith a package, there is coverage for "malplacement"--aprofessional cover.

o Programs that require specialized approachesto loss control or claims settlement, like a longtime fine artsprogram through which QBE provides personal inland marine coveragefor large private collections and museum collections.

"Some programs we undertake would be considered to be moredifficult to underwrite as you look at the spectrum of programbusiness," Mr. Fitzpatrick noted, listing a program for smallchemical operations and another for West Coast contracting businessas examples. "We're willing to entertain more difficult exposuresprovided we find best-in-class PAs" to manage them, he said.

ZURICH'S BIG PUSH

At Zurich, Mr. Fundum said the carrier's big push into theprogram business arena came four years ago, even though itsparticipation in the segment actually spans four decades.

"We have several programs with relationships that have been inexistence upward of 40 years," he said, explaining that thedefinition of a program centers on business for which the carrierhas outsourced the transactional underwriting, marketing, policyprocessing and issuance to an MGA, MGU or PA, adding that sometimesclaims are outsourced to third-party administrators as well.

"In 2006, we decided to capitalize on our experience and marketposition, and to really put a heavy emphasis on growing the programbusiness, leveraging a position of strength to become even strongerand bigger," he said, noting that the company created a newprograms team that is dedicated 100 percent to evaluating newprogram opportunities.

"That's all they do everyday," he said, noting that today theteam has 300 people organized in five strategic business units (notcounting the new a&h unit).

The "re-energized, rejuvenated approach" to a long-term play hasresulted in 70 programs in place today--with roughly half of thoseadded in the last three years. In 2009, Zurich brought on 14 newprograms, Mr. Fundum said.

His description of Zurich's latest foray--into a&hprograms--similarly highlights a move to capitalize on a strengthof the company, in this case a strength that existed in other partsof the world. "We identified a&h globally as an area for hugegrowth potential," he said, noting that the company has enjoyeda&h success in Europe.

Today, Zurich has no a&h programs in its U.S. portfolio, butseveral large opportunities are under review, he said. In additionto the a&h unit, Zurich's program SBUs include:

o Transportation programs.

o Construction services programs.

o Segmented programs, focusing on professional lines, workers'comp and others areas that aren't categorized as eitherconstruction or transportation.

o Alternative programs.

o A new programs team, performing due diligence.

Mr. Fundum explained that the "alternative programs SBU" writesprograms that have some form of alternative approach, such asalternative distribution, where policies might be distributedthrough a bank or a homebuilder.

Alternative risk mechanisms fall under the purview of this unitas well, where a program-based captive or risk retention groupmight be involved.

Zurich acts as a reinsurer on some programs, including a cropinsurance program with Rural Community Insurance Services, a unitof Wells Fargo.

Other successful programs include:

o A builders risk program for custom homebuilders administeredby ZIS in Jacksonville, Fla., which has been with Zurich for atleast 25 years.

o A partnership with San Diego-based Arrowhead General InsuranceAgency on a California quake program.

o An ambulance program with Kennesaw, Ga.-based Thomco.

Also highlighting lawyers and veterinary professional liabilityprograms, and a recent plaintiff contract liability insuranceprogram with Los Angeles-based Sonoma Risk Agency (described fullyin the last edition of E&S Extra at http://bit.ly/djmVwW), he said twoevaluations take place when Zurich is deciding whether to team upwith a PA on a new program.

First, the PA is evaluated to determine if it has the rightexpertise, the processes to handle rate-quote-and-issue functions,marketing wherewithal and financial stability, Mr. Fundum said. Thesecond evaluation involves "the risk class itself. Do we want towrite veterinarians, lawyers or crop insurance? Why is a particular[PA book] performing better than an industry aggregation ofexperience?"

Given that process, doing business with a new PA or a start-upprogram like the PCLI program is rare for Zurich, he suggested.Typically, "my team would be looking for an existing program, [and]we would like that to be at least $5 million, probably closer to$10 million with a plan to grow it."

Once Zurich becomes comfortable with a PA, the company tries towork very closely with its best PA partners to do multipleprograms, Mr. Fundum explained.

Both Mr. Fundum and Mr. Fitzpatrick said their companies don'tcurrently do any medical malpractice programs, although Mr.Fitzpatrick said it is an area that QBE might consider in thefuture.

"We're putting a long-term strategic plan together and lookingat various segments where we don't write a lot of business today,"he said. "We're willing to look at just about any type of businesswith the caveat that we would want to develop the underwritingexpertise if we didn't have it in house already."

Mr. Fitzpatrick said QBE also looks to grow its programs segmentby partnering with PAs on multiple programs, or by adding lines andstates to existing programs.

Currently, QBE owns six PAs in the United States, includingSterling National, which was acquired in 2009. "Our [acquisition]strategy, I would say, has been more defensive than opportunistic,"he said. Explaining the distinction, he said that these weresituations where a PA partner may have had succession issues andapproached the carrier about making a deal.

In some instances, QBE also assists retail agents thatspecialize in particular business segments in making the transitionfrom being a retail agent to a PA.

"We have had situations where [initially] our own underwritingstaff handled the risk selection and pricing on the business, andthen over time, through training and just experience, we were ableto transition, on a graduated basis, levels of underwritingauthority out to that agent--and after a period of several years,they were functioning as a full-fledged PA," he said.

At Zurich, Mr. Fundum highlighted the carrier's marketingcreativity as a benefit to partner PAs. For example, he described aspecial Web site--ZProgramsMatch.com--noting that agents can go tothat site, click on a particular program, find out more about thatprogram, and if they have risks that fall into the appetite of theprogram, they can submit them to Zurich's PAs.