NU Online News Service, Feb. 28, 1:05 p.m. EST
NAPLES, Fla.—In a changing marketplace, excess and surplus lines executives affirmed the importance of, and their commitment to, the wholesale distribution system but noted that the ability to innovate and develop new products will be critical to the survival of that distribution system.
Speaking at the Executive Session of the National Association of Professional Surplus Lines Offices' (NAPSLO) Midyear Conference held here, Kevin Westrope, president and CEO of Kansas City, Mo.-based wholesale brokerage Westrope, said the erosion of the wholesale distribution system is a concern for him, noting that some companies have expanded recently and have decided to deal directly with retail outlets rather than wholesalers. "I'm not sure if that's a good thing," he said.
The wholesale distribution system has other pressures as well, executives said. Tony Markel, vice chairman, Markel Corporation, said consolidation among retail agencies means that wholesalers and E&S and specialty insurers must jointly adjust to find out how to add value to much more sophisticated and leveraged channel partners below the wholesalers. The business is still out there, Mr. Markel noted, but it is concentrated in larger, more sophisticated retail agencies that are less personal and more process-oriented.
He explained that the estimated number of retail agencies in the U.S. has dropped from 39,000 in 2000 to an estimated 19,000 in 2010. Further consolidation is expected by 2015, Mr. Markel said.
In order to survive and succeed, the professionals at NAPSLO agreed wholesalers need to continue to innovate, develop new products and deliver expertise that others cannot provide.
Joel Cavaness, president of national wholesale brokerage Risk Placement Services, said, "For us to continue to be a factor, we must continue to innovate new products." As an example, he noted that 15 years ago, no one had ever heard of cyber liability products. Continuing to roll out products that serve critical needs will be how wholesalers "continue to be a force," he said.
"If I own an idea or a product, I'll get my fair share," Mr. Cavaness said.
Mr. Markel said specialty insurers, along with the wholesalers, must continue to look for coverages and approaches that answer societal needs. Key to this, he said, is relying on wholesalers to inform insurers about clients' needs. "You, the wholesalers, are the eyes and ears on the ground," Mr. Markel said. He added that insurers like Markel are willing to listen to any wholesaler proposal that makes sense and provides a distinctive approach.
He added that Markel is committed to its wholesaler relationships and guards those relationships "zealously."
Speaking to NU Online News Service, Stan Galanski, president and CEO of Navigators, also affirmed his company's commitment to the wholesale distribution channel. He noted that Navigators recently completed a renewal rights transaction to sell the rights to some commercial multiperil business to Tower Group. "We never quite got scale in that business, which was generated by smaller retail insurance agents," he said. "We found it's much more efficient for us to work with the wholesale community for that."
He said Navigators continues to focus on what works for the company. "One of the things that does work for us is our wholesale distribution in our E&S business."
While there are always predictions of the demise of the wholesale channel, Mr. Galanski said Navigators has found that wholesalers bring valuable expertise and provide real value.
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