Hybrid Companies New Factor In Market

Hybrid insurance carriers providing both primary and secondary coverage have created a new factor in competition, according to participants at an industry conference yesterday.

Their observations were made at the Professional Insurance Wholesalers Association conference in Pearl River, N.Y.

George Daddario, executive vice president of Towers Perrin Reinsurance Co., told the group these companies, many based in Bermuda, have decided to write primary or secondary policies whenever either one can make a greater profit.

Everest Re has carried out this strategy most effectively, he said. Other carriers falling into this category include Axis, Endurance and Aspen.

The dual roles have created some conflict as reinsurers attempt to serve clients who in some instances they are competing against, Mr. Daddario said.

“This is why I think program business will be making a comeback,” he said. “Companies will segregate a very specific line such as tow-trucks in some particular state and then write that.”

Mr. Daddario also recalled inviting one of the top insurance equity analysts–V. J. Dowling–to his company's annual meeting only to hear from him that “reinsurance always was, and always will continue to be a lousy business,” he said.

“At least he said 'always will,' because I don't plan on retiring for quite some time,” he said.

Those remarks were in keeping with the general theme that reinsurers were the ones who took the main hits from the record catastrophe losses of 2005 and the sector will face severe upheaval in their aftermath.

Everest Re Insurance Co. executive vice president Dan Janczewski said the reinsurance broker sector is facing a lot of belt-tightening with regional offices closing and companies no longer providing the level of service they once did.

Also, a severe lack of facultative reinsurance coverage plagues the market as the number of writers have gone from about 35 to “just a handful.”

As for specific geographic markets, London activity seems to have picked up a bit recently, “but Bermuda continues to be where it is at,” said Mr. Janczewski.

But other speakers said there is a challenge in attracting underwriting talent to Bermuda.