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

NRRA IMPORTANCE STRESSED AS DODD-FRANK REPEAL THREATENED

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

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

There may be hope of saving some parts of Dodd-Frank if Romney wins the election and follows through on his repeal threats. During the first Presidential Debate Romney said there are some regulations 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 that he says is “stifling investment.” He blasted the 2,450-page document's vagueness, with countless clauses containing the word “may,” he says.

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

The former governor also praised the surplus insurance industry for its response during his tenure, which contained the 2004 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 the packed meeting room.

— Chad Hemenway

THE RUNDOWN ON RISKS

There's an overwhelming consensus that Catastrophe Exposed Property has led the charge on risks exiting standard-lines carriers for the surplus market. But what are some of the other types of exposures where the E&S market is seeing an uptick in business?

“Tougher products,” says Carol Stark, vice president of Select Risk, Casualty & Programs, at CNA Insurance. “When the market goes 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 surplus division wrote the risk for a tunnel-boring machine at a mining-equipment company, while its retail arm wrote the other risks.

Roxanne Mitchell, president of the surplus-lines unit at XL Insurance, agrees that “severity-driven” products, where admitted carriers where dabbling during the soft market, are returning to their traditional home in E&S.

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

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

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

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

“And we're seeing some growth in certain tougher Construction segments, such as Street and Road and Sewer,” says Mitchell, who adds that XL is seeing “a huge increase in interest” in its Buffer Auto product with commercial-fleet and other transportation customers—a product that XL developed after last year's NAPSLO conference, where it became clear a huge demand existed for this coverage.

— Bryant Rousseau

A GROWING CONCERN: CARRIER SOLVENCY

Retail brokers are increasingly concerned about the solvency and independence 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,” he says, adding that it is a request he's happy to fulfill. “[Brokers] are re-evaluating who they want to do business with. Maintaining relationships is important and they don't want any E&O claims for themselves.”

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

But the fact is, with so many producers still competing for pieces of the same pie, Kaufman predicts more consolidation among brokers large and small.

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

—CH

XL:WORKING ON THE RAILROAD

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

“We came out of the gate with all the coverages any railroad customer could need,” says Roxanne Mitchell, president of the surplus-lines unit at XL Insurance, who notes that she and her team have more than 100 years of combined experience with the rail market.

“The railroad business has been great, performing extremely well this year from both a top- and bottom-line perspective,” Mitchell says.

Mitchell adds that some of the traditional rail markets—and there aren't many that play in this niche space—have been retreating on coverages or significantly raising their rates, which has helped XL quickly establish itself in this space.

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

—BR

MARKEL OVERHAULS 'IT PRO' POLICY

During the NAPSLO convention Markel announced the launch of its overhauled IT Professional policy, which includes configurable first- and third-party Data Privacy and Security coverage, General Liability and Media Injury options in addition to basic Professional Liability.

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

“It also includes our unique coverage for theft of money and securities, as well as interruption costs to restore the insured's data and extra expenses while recovering from a breach,” says Jake Kouns, director of Cyber Security and Technology Risks underwriting for Markel.

—CH

THE CNA EDGE IN CLAIMS, RISK CONTROL

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

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

And in risk control, CNA Select Risk has a dedicated team of Product Liability specialists who are all Underwriter Lab-certified—and certified in Six-Sigma and Lean Manufacturing.

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

—BR

OPTIMISM: MORE LINES IN THE WATER

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

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

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

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

—CH

EXCESS CASUALTY: TRICKY BUT CAN BE 'GOLD'

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

In fact, Trimble says “small business can be gold” if you can cut the time spent on underwriting and servicing. “It's an underserved 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 via self-insurance or co-insurance.

—CH

Special Reports /

NAPSLO Notebook: Scene & Heard

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