During the interview, Mr. Black reflected on lessons learned after 29 years at Black/White, an agency he co-founded with Paul White in January 1979.

Having experienced several market cycles, he said that flexibility--the ability "to take a new direction--is the aspect of the MGA community that I think bodes well for the future."

"In our case, if we get a new opportunity, we can turn that over in a week or two--put together a plan, reach out to our clients, change our operations, then go off and do something else almost overnight," he said.

Although Mr. Black said this as he was mulling over the effects of the current soft market on MGAs, and was referring specifically to the ability to adapt to changing market conditions, Mr. Black's life and career reflect a willingness to accept and embrace change at every turn--whether it's moving from specialty programs to standard lines, buying and selling operations, or even giving up an opportunity to work for the Central Intelligence Agency.

Mr. Black said he started his career at a premium finance company called AFCO, which was his first job out of college. An E&S broker client offered to teach him about insurance, and he signed on to work at the client's firm in October 1977--where he met his future business partner, Mr. White.

"The clients I had in premium financing were insurance agents and brokers. I had the same clients. I was just selling them a different product," he said, suggesting a natural link between the premium finance and E&S insurance worlds.

"So much of our business is relationship and trust," he continued, also noting that skills in last-minute problem solving are necessary in both businesses. "We're there to solve specific problems."

While a standard carrier might get to put in 60 days of preparatory work on an account, "we're lucky if we get it six days in advance," he added, concluding that in this respect, wholesale brokerage work is "not unlike premium financing because it's done right at the end. It's one of the last things that gets done."

Mr. Black said that while he was working at the premium finance company, he started taking CPCU (Chartered Property Casualty Underwriter) and other courses "just so I could talk the language."

Insurance was not the only language he set out to speak early on, he revealed.

The Arizona State University graduate, who had majored in history, said he had plans to go to graduate school to get a master's degree in Chinese history--a subject he had become enamored with during the days of Mao Tse-Tung, "The Little Red Book" (Chairman Mao's book of quotations) and the Red Guards.

"I actually got accepted into a program by the CIA to be an analyst, but they suggested I go back and get my master's and learn the Chinese language along the way. That was my intent," Mr. Black said.

Responding to the immediate need to support himself and his family, however, Mr. Black looked around for a job in Seattle, where he was living after a stint in the Army there. "The best paying job was with Continental Insurance," he said, noting that Continental assigned him to its AFCO operation in Seattle after he completed the company's management training program.

He was soon transferred to AFCO's office in San Francisco--the town that would later be the initial site of Black/White. "I found insurance wildly interesting and very rewarding," he said, suggesting that he has no regrets about giving up plans for what might have seemed like a more exotic career.

Some of the more exciting risks Black/White placed in the early days included pollution coverage for Chevron dealers and coverage of transmission breakdown of closed-circuit television sporting events, such as the Ali-Frazier fights in the 1970s, he said.

Mr. Black listed a specialty niche insuring nonprofit charitable organizations among the most rewarding coverage areas his firm has been involved with, noting that Black/White had underwriting authority for American International Group on the program from the late 1970s to early 1990s, and then with Safeco for another 15 years.

"Every day we'd get submissions [from businesses] trying to help those in need. As a regular middle-class American growing up, I had no idea what this huge world of nonprofits was like," he said, listing organizations that helped immigrants, organizations, families and the elderly among the type of charities involved.

Last year, Black/White sold its Oakland, Calif.-based program underwriting division that specialized in the nonprofits area to Markel Corp. "My partner Paul [White] retired and it seemed like an opportune time to sell off that division--to help capitalize the company and pay off Paul," he said.

Years earlier, Mr. Black revealed, the two partners actually sold off the entire firm, only to buy it back with the help of a carrier partner less than two years later.

In 1996, he recalled, they sold to USI, with the intent of becoming the wholesale arm of the large retail broker. A primary motivator for the sale was a long soft market. "We were struggling to grow the business," he said, noting that plans to expand out of state, hire staff and invest in technology were not possible without access to capital.

After preparing a prospectus and spending about eight months seeking advice from investment bankers and others, Black/White found Dillon Reed, a Wall Street investment firm with a $50 million fund used to acquire agencies. Dillon Reed ultimately matched Black/White with USI.

"Unfortunately, the chemistry was wrong. As hard as we tried, we couldn't get local agencies that USI was acquiring to move their business. The inertia of doing business with people you know and trust and have done business with is pretty compelling," he said.

"We became frustrated by the inability to pierce through corporate, internal operations. They became disenchanted because we weren't making money [during a soft market]," he said.

"We bought it back in 1998," he noted, explaining that Safeco helped finance the repurchase and also helped the agency build some systems. As it turned out, the hard market returned three years later, he said--adding that when it did, Black/White was able to do "extraordinarily well as a free-standing organization."

Before and after the USI deal, he reported, Black/White grew by merging with smaller businesses, launching start-ups and opening branches throughout the United States. According to Mr. Black, the first branch opened in Southern California in 1984, and five years later came openings in Sacramento, Seattle and Honolulu.

In the late 1990s and early 2000s, there were acquisitions and mergers on the West Coast--in Salt Lake, Las Vegas, Orange County, Calif.--as well as deals in New Jersey and Illinois, and a start-up in Texas.

Looking back on the deals, Mr. Black said they all involved "specialty MGAs--people that had focus and worked off the MGA side of the business."

He said the idea in all the deals was to form partnerships. "We weren't looking to buy. We were just looking to merge--to join hands so we could bring something to the table"--such as technology, management or markets, while partners brought knowledge of a specific customer base or niche, he said.

"It didn't have to be very big. We bought agencies at that time that only did $3 million in sales," he added, noting that specialties developed through these mergers included attorneys' E&O, casinos, workers' compensation, liquor stores, outfitters and guides, and mobile home parks.

"I think we ended up with six offices" throughout the United States at one point, Mr. Black said. "Admittedly, we were in the midst of a soft market, so there wasn't resistance to do things. The organizations we merged with just didn't have critical mass. So the combination with Black/White was additive."

During the present soft market, Mr. Black finds himself at a different stage of life, taking stock and preparing for his eventual retirement. In addition to selling the nonprofit social services business to Markel last year, and three divisions to SeaBright this month, Black/White sold a New Jersey accountants' E&O business back to its management and has closed the Texas and Illinois branches, absorbing the business back into the remaining offices.

The firm's Louisville, Ky. operation, run by family members, is doing fine. "We intend to keep going for the next 30 years," he said, noting that the Nevada operation remains open for business as well.

"It's time to reassess," he said, suggesting that external changes are helping to make the reassessment process easier.

"Technology and changes in licensing have dramatically changed the value proposition of branch offices," he said, adding that it's no longer necessary to capitalize a branch in a new location and hire people to staff it to do business in a different part of the country.

The Internet and technology can take you anywhere, he said, noting that "the reason to have a branch office--to call on local agents--isn't as compelling as it was 20 years ago."

Another change that Black/White and other MGAs have embraced over the years has been a move into standard lines. "We've bee helping smaller agents get access to Fireman's Fund, Safeco, CNA and Golden Eagle," Mr. Black said, referring to what is sometimes called "the aggregator model"--which started gaining favor with MGAs and standard carriers in the late 1990s.

"To an MGA, an agent who brings $50,000 a year is a pretty good client. To a standard company, that's disastrous," he said, explaining the need for the MGA to aggregate the business to deliver profitable small business to standard carriers.

"What we're finding is that in some cases we act as an access point while an agency builds its capacity--until they can get that appointment" with a standard market. "Conversely, as the market wends its way, companies are going to say, we need to cut back on the number of agents."

As they do this, he added, MGAs "can act as a buffer to keep those agents with the standard markets...so they don't have to say to their clients, 'I'm going to have to move you.'"

Mr. Black reported that standard lines made up more than 50 percent of Black/White's business prior to the recent sales to SeaBright.

See related article, "SeaBright Subsidiary Acquires Part Of Black/White."