Growing its program count by 100 percent may seem like an aggressive goal, but having signed onto only three programs to date, one carrier's real ambition is to be an enduring market, an executive there says.
Ted Nienburg, vice president of casualty programs for Liberty Insurance Underwriters in New York, a division of Boston-based Liberty Mutual, described some of the strategies of LIU's three-year-old program division last month during the midyear educational conference of the National Association of Professional Surplus Lines Offices Ltd., held in Scottsdale.
"LIU is committed to this. We're expanding [where we can], realizing it's a soft market. But we're not going to be a flash-in-the-pan program writer. We're going to do it gradually over time, focusing on profit," Mr. Nienburg said.
Like an older member of the program business insurance market–Hudson Insurance, profiled in the accompanying article–LIU aims to participate for the long haul, and to do so with partners who have an underwriting culture and a focus on some very well-defined niche.
"We look for real niche-oriented programs. We don't have any general casualty pen," Mr. Nienburg said.
While he suggested there's little more in the way of formal requirements, these two rules have made LIU very choosy in its selection of program partners so far.
"In my first year on this job, I looked at over two dozen opportunities that were either pitched formally or informally– through an executive summary or a full submission. Out of those, we wrote two," he added. "Currently, we only have three programs," he said, noting that there's an extensive due-diligence process involved.
The three opportunities that made the cut to get an LIU contract so far are a liquor liability program, a small-accounts product liability program for nonconsumer goods, and a painting contractors program.
The liquor liability program illustrates another strong preference at LIU–programs with a good track record over seven-to-10 years, he said.
Chittenden, the program manager in this case, has been around for 20 years doing liquor liability, he reported, noting they came to LIU with a nine-state territory and a well-run facility. "We believed there was a great opportunity for us and for them if they went countrywide," he said.
By expanding a marketing territory, he added, administrators have the opportunity to write business where it's profitable, instead of hitting goals within tightly confined areas, adding that in this way, they also "set themselves up for the market turn."
Going on to describe the small-account products program, Mr. Nienburg said an appealing characteristic there is a synergy with existing business at LIU–individual risk business written through wholesalers.
The product liability program accounts "go from very small $3,000-to-$5,000 accounts up to $25,000, and our wholesalers are encouraged to access them. But once the account size gets over $25,000, they come into the traditional individual risk unit."
Mr. Nienburg said his target is to add three more programs in 2008. "We have several in the pipeline," he noted, declining to reveal more information due to nondisclosure agreements, but adding that research and actuarial studies on these have been in the works since last fall.
He said there is increasing competition for programs from existing program insurers and new entrants, but mainly on larger programs. "Our wheelhouse is in the $3-to-$5 million range, and there isn't in my opinion as much competition in that arena."
Beyond setting itself apart by bringing financial strength and brand recognition to the table, Mr. Nienburg said, "We like to know our [program] managers."
"I've come to find in going through the two dozen [proposals] that carriers weren't actively involved with the administrators. They hadn't been out to visit them."
In contrast, he said, "I want to know what works, what doesn't, [and] to try to demonstrate it's a fluid relationship. After all, we identify them [program managers] as experts in their niche."
He said LIU works to bring efficiencies to program business–noting, for example, that the company has built front-end underwriting systems allowing him to do desk audits of program underwriters.
"That exchange allows me to be proactive instead of reactive," he said. "On the face of it, that sounds like the right thing to say, but it's actually the right thing to do. We see a lot of real-time information, and we share that information with all the program administrators."
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