Wholesalers Optimistic Future Will See Improvement

In an interview with National Underwriter during the meeting, Alan Jay Kaufman, chairman, president and chief executive officer with the wholesale brokerage firm Burns & Wilcox, said the economic crisis has had a huge impact on the insurance markets–impacting policyholders, which in turn impacts their insurance purchasing.

While it is hard to know how long this crisis will go on, he said there is still business out there to be written. For his firm that has meant they are working harder to maintain premium volume.

"We have intensified our efforts in all areas," he said.

One big issue among retail agents, he said, is carrier solvency. Burns & Wilcox, said Mr. Kaufman, is using this issue to its advantage by placing business with well-rated carriers.

For Liberty International Underwriters, a large program business carrier with a diversified portfolio, solvency was one issue that did not come up with brokers, said Joe Peloso, vice president of liability programs for LIU, a division of Liberty Mutual Group.

Mr. Peloso said brokers were confident of the company's financial condition and that it would remain a strong player in wholesale and program markets.

Among insurers, he said competition remains intense, with some hard market signs "here and there." While there is a growing need for underwriting profit, that has done little to alter the competitive landscape, he noted.

While not naming the insurer, he indicated that the business disruption at American International Group has not created the kind of business opportunities expected for Liberty. He said it was surprising that more brokers have not moved their business in the face of those disruptions.

Margaret Zechlin, underwriting practice group leader and executive vice president for wholesale broker Swett & Crawford, said there are currently no capacity issues, but there is firming in some lines of business.

Speaking to NU in a telephone interview after the meeting, Ms. Zechlin said some lines such as property catastrophe, earthquake, and errors and omissions for financial institutions are showing increases.

"Everyone is hoping for a hard market," she said, but that does not appear to be happening any time soon.

She said many insurers at the meeting were expressing a lot of interest in program business–a few were particularly interested in inland marine–but what seems difficult to understand is why competition remains so intense when underwriters' profits are hurting.

"We thought it would have been firmer and pushing rates up, but we did not hear that, only on catastrophe property," she noted.

The markets remain competitive for placing business, she said, and retail agents "who are efficient will be there [in the future], and those who are not won't be."

"I'm an optimist," said Mr. Peloso about his company's prospects. "I feel good about this industry," and while others who entered the wholesale market to take advantage of the soft market may disappear, LIU "will be there to step in" when the markets change.

For Burns & Wilcox, Mr. Kaufman said this has been a time of opportunity, hiring experienced executives and beefing up its technology with talent that was not available before the economic downturn. It also helps to be a diversified firm with a number of business interests, including premium financing.

"The competition has weakened and contracted and given us an opportunity in certain areas," said Mr. Kaufman.

He noted, "As tough as it has been, we've taken advantage of the situation, improved our infrastructure, and we are getting ready for when the markets improve."