Arecent report from investment management firm Conning & Co.'s InsuranceResearch Division dispels a long-held misperception that thewholesale distri-bution channel is substantially more expensivethan the retail channel when it comes to placing specialtyrisks.

The report, commissioned by the National Association of ProfessionalSurplus Lines Offices Ltd., analyzed distribution around coststructure and ratios between the wholesale and retail channels.

Conning measured all non-loss costs relative to direct writtenpremium from 2010 to 2015 for insurance companies and found thatthe total non-loss cost ratio for the wholesale composite was lowerthan retail by 1%.

The analysis also says that the wholesale composite's commissionratio is consistently three to four points higher than the retailcomposite, but is offset by the wholesale composite'snon-commission costs ratios, which average nearly four points lowerthan the retail composite. According to Conning's analysis, in2015, the median annual non-commission cost ratio for the retailcomposite was 16.4% but for the wholesale composite was 11.8%.

The misconception that wholesaler expertise costs more than itdoes “could cause retail agents and brokers to overlook insurancesolutions offered by wholesalers when, in fact, leveraging awholesale partner to find the best and most cost-effective solutionis the best way to serve the insured,” Brady Kelley, NAPSLO'sexecutive director, tells National Underwriter. “Thewholesaler's value — technical expertise, innovative solutions tocomplex risks, access to strong and stable surplus lines insurers —adds no cost to the transaction.”