President's Report -
Foundation in good financial shape; continues work on meeting mandate

As the Foundation embarks on its thirteenth year I am pleased to report that the Foundation is financially sound and has a number of programs underway that help fulfill our mandate:  to educate insurance buyers, insurance providers, insurance regulators, legislators, risk managers, and anyone else that will listen, about the Excess and Surplus Lines Insurance Industry.  We have come a long way over the past twelve years and we have made significant progress with our charge, but there is still more to do and additional results to be achieved.  

It gives me great pleasure to highlight some of our achievements this past year.  First, I must say a heartfelt thank you to all the contributors and volunteers that make our work possible.  Without the generous donations and the dedicated Board members, Committee volunteers and NAPSLO Staff, all our efforts would fall far short of my expectations.  I truly feel the Foundation has made a significant difference but it is only possible with committed resources and people.  Thank you.

Associate in Surplus Lines Insurance - We conferred a significant additional number of designations at the 2003 NAPSLO Annual Convention in San Diego bringing the total number of designees to well over 500.  Part of this large class was due to a modification by the Insurance Institute of America in the course work that qualifies for the designation.  The basic course work, ASLI 161 and 162 remained the same, but additional courses from CPCU and IIA courses were allowed to be accepted in order to qualify for the four course requirements.  This was a modification that the Board had advocated and we are pleased that the IIA saw fit to accept this change.  Congratulations to all designees.  We applaud your professionalism.

A.M. Best Annual Review of the E&S Industry - The Board of Directors commissioned the 10th study of the surplus lines industry through the A.M. Best Company and was pleased to have another testimony to the financial solvency of the E&S industry as well as an analysis of several relevant topics relating to surplus lines.  When we first commissioned the solvency study back in 1994 the Board was not sure what to expect.  We all felt that the industry was financially sound and provided much needed services to the insuring public.  The results of the financial analysis confirmed what we all felt was the case; the E&S solvency record was as good if not slightly better than the standard lines insurance industry.  This record for the most part has remained intact today.  What has become a significant aspect of this study is the growth of the E&S segment and its percentage of the overall commercial lines volume of business.  

With over $25 billion of premium volume in 2002 the Surplus Lines Industry is a substantial contributor to the security protecting corporate America.  The other heartening aspect of this study is the number of times the data is quoted in news articles, speeches and most any discussion relating to Surplus Lines.  We distribute this study not only to all NAPSLO members but also to other insurance trade associations, all insurance departments around the country and numerous other outlets we feel that will benefit from this valuable  resource.

Scholarships and Grants - The Scholarship Committee has its work cut out for it each year, choosing the deserving college students that should receive our assistance in pursing an undergraduate or graduate degree in a field that relates to the insurance industry.  We are pleased to have four funds from which we award these scholarships: the Rollie Wiegers Fund, the Kevin McLaughlin Fund, the Scott Polley Fund and the Herbert  Kauffman Fund.  Our biggest problem is the escalating tuition costs at most educational institutions and the declining investment returns on the scholarship funds.  It is imperative that we increase the scholarship funds with additional contributions so that additional investment returns can be generated to meet the increased tuition needs.  

We have two active grants providing college symposiums which expose students pursuing insurance and insurance related degrees to the E&S industry.  These programs bring industry leaders on to college campuses and help tell students about our side of the insurance business.  An additional benefit that we have noticed is an increased interest in the NAPSLO Internship Program from a number of the students that attend these programs.  It is efforts like this that are starting to help build the next generation of employees and entrepreneurs that drive this segment of the insurance industry.

Fund Raising - In 2002 we successfully completed our Campaign 2000 to raise an additional $1 million in cash and pledges to increase our total funding in excess of $3 million.  With the decline in investment returns however, we decided last year we could not stop our fund raising.  Our expenses were not going down but our investment returns were.  So, it was back to the sources of capital that makes our job possible.  We are asking previous donors to re-up their pledges when they are finished and we are asking for commitments from others that may not have given us anything in the past to reconsider their support for our worthy cause.  

We have had some success and I am pleased to note that we have one major contribution to start 2004 from the Council of Lloyd's.  Lord Peter Levene, Chairman of LloydÕs, has just confirmed a significant commitment to be funded over the next several years.  We are quite pleased with this significant contribution and welcome the support from the Council and its supporting underwriters.

2003 was a very good year for the Foundation as well as the surplus lines industry in general.  We have a number of challenges to face in the New Year but with the help of dedicated supporters, a very capable Board of Directors and the financial backers to our cause we can and will meet these challenges.  

I thank you for the opportunity to work on your behalf and would welcome your input and support to our worthy cause.

Respectfully submitted,

Joseph D. Timmons, CPCU, ASLI
President
Derek Hughes/NAPSLO Educational Foundation, Ltd.