Why So Quiet?

Jeremy Johnson, CEO of AIG's Lexington Insurance Co. says the industry has been “relatively quiet,” though notes trade groups are becoming more active, on the issue of the impending sunset of the Terrorism Risk Insurance Program Reauthorization Act.

Johnson says uncertainty related to the act's reauthorization hasn't yet had wide effect on policies, but it will “in three months or so,” when risks come through the portfolio and need to be addressed despite knowing the fate of the backstop.

AIG has put thought into how this situation will be handled but is not disclosing any plan. Customers and the economy “are potentially going to suffer if TRIPRA is not reauthorized,” Johnson says.

The federal backstop expires Dec. 31, 2014.

Following Demand

Burns & Wilcox CEO Alan Kaufman (pictured) says the company's hiring of Denis Brady as president of Burns & Wilcox Brokerage, an independent business unit that will be solely dedicated to wholesale insurance brokerage, was a response to client feedback.

“Our move to be bigger in brokerage was based on demand,” he says. “Our clients wanted us to be a involved in a bigger segment of the wholesale buy.”

Kaufman says private ownership and financial strength has worked in B&W's favor. “There is a heightened interest now in working with financially-secure partners.” He says there will be some additional acquisitions of wholesalers–some who are “selling based on anticipated growth rather than current growth.”

Count, Not Rate

Kaufman says growth isn't coming from a traditionally hard pricing market where rate increases are in the low to mid-single digits. Instead, growth is coming from risk returning to market from the standard carriers. This is a trend that has continued since at least last year.

“We're seeing more policies–property & casualty–in the surplus market due to standard lines retreating from some risks,” he says. “This puts us in a great position to increase policy count.”

Mario Vitale, CEO of Aspen Insurance, as well as others stopped during the conventions, agree. Standard lines continue to shed risk traditionally insured in the E&S market.

“Standard lines seemed to have learned some lessons,” Vitale says. “They are staying disciplined and pulling back,” especially from middle-market surplus risk such as restaurants, for example.

Signs of Improvement

Aspen's Vitale says slight signals of an improving economy are being seen. For instance, sales for clients are improving, leading to more hires. There are more construction starts. Cargo and manufacturing industries are enjoying an upswing. In April, the company opened a marine, energy and construction unit to respond to growth in these areas.

“Growth is coming from the exposure base–insurable interests,” he says. “There is definitely a slight improvement in the economy.”

Terms and conditions and pricing in the market are “pretty good,” says Vitale. Prices needs to go up, he adds, but at least they aren't going down. Rates are up about 3-6 percent in the marketplace, he adds.

Advice for the Next Generation

At Tuesday's Next Generation panel discussion, titled “Stepping Up When it Counts,” featured participants Gerald Dupre, senior vice president of general property, Torus Insurance; Brenda (Ballard) Austenfeld, executive vice president, property division, Westrope; James Drinkwater, president of the brokerage division at AmWINS; and Scott Culler, president, West region at Markel Corp., fielded questions from Next Generation President Yiana Stavrakis and young participants in attendance on selecting a career path, communicating changes in market strategy to clients, and taking advantage of opportunities provided by retrenchment by primary-market carriers, among others.

Dupre revealed to the audience that before he entered the insurance industry in 1977 that he was a pre-med major, which at the time seemed like a fine idea until “I realized I didn't like sick people,” he said, adding that he got too emotionally attached to patients.

“I've been in this business for 35 years and I've never been bored,” he added. “It's been a blast. I'm learning something new every time I pick up a risk.”

“There's never a dull moment in this business,” said Next Generation co-chairman Culler, echoing Dupre's sentiment. He encouraged NAPSLO interns to focus on their technical expertise and learn the fundamentals of underwriting as the foundation of their skill set. “Go spend a week with a firm and learn what their process is all about,” he said. “Find mentors in this business who are committed to making you successful and to your professional development.

“Be patient and learn, and the opportunities will come—and they will come quickly.”