Wholesalers Step Up Marketing Efforts As Softer Conditions Take Hold In E&S

In the Dallas, Texas office of Swett & Crawford, Simon Bancroft, branch manager, offers a similar assessment. "We're out selling a lot more," he said.

"We've organized ourselves into practice groups so that we can bring all of the resources of Swett to bear on an individual risk, rather than just being a one-point contact," he added. In other words, he said, each retail broker "now has access to all the intellectual capital of Swett."

In Buffalo, N.Y., Kurt Bingeman, owner and president of Russell Bond & Company, also said his firm's external sales efforts start with an internal focus.

"We have a rather aggressive internal program [devoted to] teaching all the broker underwriters and their support staffs better techniques as far as team building and sales," Mr. Bingeman said, noting that instruction in techniques for sales calls–"whether they be in person or by telephone"–is part of the program.

"We're trying to give them better tools as far as how they communicate with the retail brokers," he said, noting that this involves getting the brokers "a little more focused on finding out exactly what it's going to take to write the account, and to be able to offer terms and close the deal."

In addition, Mr. Bingeman said Russell Bond has also expanded its core marketing territory to include a lot of adjacent states. "So, we're building new relationships in new territories, and that's helping to drive some of our growth," he said.

The brokers had mixed views on how the current soft market compares to those they've lived through in the past, but most said they're prepared for a long haul.

"We have not yet experienced an aggressively soft market, and so I don't think this soft market is as bad as the one we went through…prior to the most immediate hard market," Mr. Bingeman said, noting that soft market persisted for a dozen years or so.

"Absent some major catastrophe"–either in the financial markets or a physical natural catastrophe–"this soft market could continue on for awhile, and further deepen as time goes on," he speculated.

Mr. Schneider said operating in the current environment is "business as usual."

"We've been in business 33 years, and I think we have maybe seen five hard markets. They don't last long–maybe a year, year and a half total," he said. "So, the majority of time we've been in business, we've operated in this type of [soft] market."

Mr. Schneider added, "I think that barring a major catastrophe, this is going to be another long, prolonged soft market that we're going to have to deal with. Those who are waiting around for the next hard market are probably in for a long wait this time."

Gregory Crouse, president of Crouse & Associates Insurance Brokers in San Francisco, observed that "the last hard market (1984/85) resulted from a lack of capacity and slowly softened over about 15 years."

In contrast, he said, this hard market wasn't about capacity. Because carriers are so driven to grow, and capital is so readily available, "we are seeing it soften much faster–probably twice as fast as last time, excluding catastrophe property," he said. "Just look at how fast and easy it was for many carriers to raise capital after Katrina."

"With so much easy money out there, it could be a while longer than it should for this market to harden. But at this pace, it will surely be much sooner than the last time," he said. "Best guess–a hard market in half the time," he predicted.

Mr. Bancroft also commented on the accelerated speed at which this soft market has progressed. "I think this market has gone down faster than certainly I anticipated."

"The speed of the decline has been what's most impressive, or depressing," he said. "If the wind doesn't blow this [year]–which it doesn't look like it's going to now–I would suspect that this softening market will last at least for another couple of years."

"It's as difficult a market as I've seen in my career," Mr. Bancroft added, noting that the market seems to be worse than the last cycle. "I think there's a lot more capacity around that's looking for a home."

"It's rare for us to lose a piece of E&S business to another E&S market," he said. "If we lose it, we'll generally lose it to a standard market."

Mr. Bingeman also noted that while there is a great deal of competition among E&S surplus carriers represented by the wide number of quality wholesale brokers in the marketplace, there's a lot of competition from the standard market.

"We hear many stories from brokers telling us about phone calls from standard lines companies they represent who have gone back through their records and seen that they quoted a risk a year or two, or three years ago, and turned it down," he said.

"Now they're calling and saying, 'If you still write that account, we'd really like to write it–and in fact, we might be able to write it for a good amount of dollars.' So, there's a lot of activity there."

Mr. Bingeman noted insurers and brokers alike are now armed with better technology, allowing them to retain data and keep track of accounts quoted in the past. With this information, he added, carriers can now review once-rejected accounts in the context of expanded appetites for business.

"Years ago, that would have been very hard to do. But nowadays it's fairly easy to go back into your system and take a look at accounts that you might have seen once before," he said.

In the Midwest, Mr. Schneider said three regional insurance carriers that have started their own E&S companies. "They've hired people with excess and surplus lines expertise, and they're coming after the traditional E&S business, and they're doing this through their appointed agents primarily. If you're an agent of Western National, for example, then you now have access to their surplus lines company."

Mr. Crouse, focusing on the level of competition between E&S insurers, said "the last look will usually win the deal. This is not to say that all markets and underwriters are irresponsible. But given that last look, most brokers know which underwriters will get silly to win a deal."

He added that "ironically, we are seeing some companies so hungry to grow that they are creating duplicate products and divisions that actually compete against themselves," he said. "This is not a new phenomenon, but becoming more and more prevalent. I don't think I need to name names here."

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