Greg Thompson is the new president of Markel Specialty, a division of Virginia-based insurer Markel Corp. In 1979 he formed Thompson Insurance Enterprises (ThomCo) with his father, Roy, and led the company for 32 years—growing it from a small wholesale operation to a large program administrator. Markel acquired ThomCo on Jan. 1, 2012.
Here, he speaks with NU about ThomCo's assimilation into the Markel fold, current pricing conditions for Specialty risks and which niches offer the most current opportunity.
When ThomCo was integrated into Markel, was there a great deal of overlap in the types of niches covered? And if so, how has that been addressed?
The fit within Markel has been amazing both from a product and people point of view. On product, ThomCo and Markel are former competitors on child-care centers, independent schools and social-service agencies. ThomCo staff has taken over the handling of all school and child-care business from Markel Richmond, and Richmond has taken over the handling of all social-service business.
Other ThomCo niches like senior living, medical transportation, fitness clubs, pest control, tanning and spa, and inflatables rental have further expanded the stable of programs offered to appointed Markel producers.
How would you characterize the rate environment in the Specialty market at the moment, and do you see it changing in 2013?
Overall, there are very modest, single-digit rate increases on Specialty market renewals, although in any given niche this can vary from renewal at expiring rates to a double-digit increase. In order for carriers to generate profit returns acceptable to most stockholders, it is widely agreed that these increases are inadequate. However, the overcapitalization of the industry seems to drive carriers to keep rates down in order to maintain premium volume and deploy as much of their capital as possible.
While market rates are no longer in free fall like the very soft market of recent years, neither is there a sizable, widespread increase in rates and a tightening of policy terms. A few exceptions are the Catastrophe [Exposed] Property market—Sandy will have some impact—and some states like California in the Workers' Comp market. So while most carriers are not losing money, the return on capital industrywide remains low. This scenario, in my opinion, is unlikely to change until many carriers are posting net income losses.
Which are some of the niches that present the most opportunity in the Specialty market right now, as well as going forward?
We believe our new, enhanced child-care and school products provide us with an opportunity to increase penetration in both niches. We also believe our fitness-club, inflatables-rental and pest-control programs are well positioned for growth.
Charter & independent schools in particular are said to be a niche that's heating up, too.
Charter schools are growing as more states enact favorable laws and as parents seek alternatives in areas where traditional public schools are not a great option. The latter issue has also resulted in the growth of independent private schools. Our sweet spot is in small to medium-size schools where there is [potential] growth and where there is less competition.
You formed ThomCo with your father more than 30 years ago. What wisdom of his do you still look to these days?
My father was a long-term thinker. When his insurance company was acquired by a publicly traded company, he hated it when he was asked about his company's upcoming results for the quarter. Our organization needs to manage our underwriting and pricing to produce good long-term results, even if we may lose some premium production in the short run.
—Interviewed by Shawn Moynihan
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