President’s Message
Marshall Kath, NAPSLO President

Economy, industry showing signs of improvement

 

Winter’s officially over, spring breaks have come and gone, and April 15^th is now past us.

 

At this writing, consumer confidence is being reported as rebounding this month, from a one-year low, on hopes that an improving economy will continue to create jobs.  Earlier this month, the U.S. Labor Department reported that employers added 162,000 jobs in March, the most in three years.  Nevertheless, unemployment stayed at a near 26-year high of 9.7% nationally.  And, the National Bureau of Economic Research, the official savant of U.S business cycles, reports that although “most indicators have turned up,” it’s too early to declare an end to the deep recession that began in December 2007.

 

Confidence, recovery, the predictions that go along with them, and our industry outlook for this year were the basis for many discussions at our NAPSLO Mid-Year Leadership Forum held last month in Arizona.  Our attendance reached nearly 550 people – a demonstrable increase over last year and a testimony to the revised format and agenda.

 

How firms adjust was one of themes of the meeting, including the Executive Session panel discussion featuring Neal Abernathy of Swett & Crawford, E.G. Lassiter of the RSUI Group, John Latham of Markel Corporation and Matthew Power of Lexington Insurance Company.  The session was standing room only and was as-advertised – big-picture observations peppered with real-time illustrations.  For those who missed the session you can watch it on the NAPSLO website.

 

We also held our first Town Hall meeting.  NAPSLO’s pre-eminent position as the spokesleader for wholesale lines distribution and surplus lines products was acknowledged; along with reports from the Committee Chairs about the objectives and achievements relating to their bodies of work.

 

On the Washington, D.C. front, we’ll again meet with Federal legislators later this month to make a final push for getting successful surplus lines reform language included in bills approved by the House of Representatives and recently by the Senate Banking Committee.  Admittedly, there are many issues that compete for the time and attention of the Legislative Branch of our government.  Our Legislative Day – providing live faces and voices to our message -- reinforces the day-to-day representative work attended to by Maria Berthoud and her staff at B & D Consulting.

 

As always, please contact me, any member of our Board, or the NAPSLO staff should you have any questions or need for industry assistance.

 

2010 Convention in Atlanta to open Monday, October 11

The 2010 NAPSLO Annual Convention will open this year on a Monday and the Convention is set for October 11-14 at the Atlanta Marriott Marquis and the Hyatt Regency. In addition, the Opening Reception will be moved up this year from 5:30-7:30 p.m. to allow additional time for dinners and functions.

 

William R. Berkley, Chairman and CEO of the W.R. Berkley Corporation, will present the Derek Hughes / NAPSLO Educational Foundation Lecture Series on Wednesday. Mr. Berkley has been with W.R. Berkley since founding it in 1967.

 

Tuesday will be open for members to meet with other members but all private member functions on Tuesday must take place on-site at the convention hotels. Both on-site and off-site functions are allowed on Wednesday evening.

 

Additional information regarding convention hotels, registration and events will be sent to members in early May and online registration will begin June 15. For more information on the agenda, click here.

 

Nearly 550 attend reformatted Mid-Year Leadership Forum

The 2010 NAPSLO Mid-Year Leadership Forum took place March 3-7 at the Fairmont Scottsdale in Scottsdale Arizona and nearly 550 people were in attendance. The Mid-Year meeting, updated this year to focus on leadership issues and providing attendees additional time to meet with other members, started a day earlier with the Opening Reception on Wednesday, March 3.

Thursday morning’s program featured a Town Hall meeting with NAPSLO Board members, discussing the Association. 

Friday’s program featured leaders of several of the top surplus lines insurance firms in the industry. The panel was moderated by Steve Harvill, President, Creative Ventures. Panelists included: Neal Abernathy, President & CEO, Swett & Crawford; E.G. Lassiter, Chairman & CEO, RSUI Group; John Latham, President, Markel Southeast Region; and Matt Power, Executive Vice President, Lexington Insurance Company.

The panel shared their vision of leadership and the challenges they face, as well as the accountability they feel in order to achieve superior results in these chaotic times. Both programs were very well attended.

 

Attendees get inside look at NAPSLO at Mid-Year

Mid-Year attendees got an inside look at the Association as NAPSLO Board members reviewed the activities of the Association during the Town Hall meeting at the recent Mid-Year Leadership Forum in Scottsdale.

 

All of the activities, from education to legislative, and from meetings to communications and technology, were reviewed, both from what the Association has done in the past to the current and future projects.

 

Copies of the NAPSLO annual report were distributed to attendees and copies also may be downloaded from the NAPSLO website, under the Publications section.

 

Bob Sargent, Chair of the Budget, Audit, Finance and Investment Committee, said the committee’s responsibilities, which involve the budgeting, financial reporting, and investments for the Association, had kept them very busy with the economic events of the past year.

 

Activities undertaken to attract new people to the industry were reviewed by Steve Gross and Gary Tiepelman, Co-Chairs of the Career Awareness & Internship Committee. They noted that the two committees recently merged as many of the activities are related in bringing new people into the industry. Mr. Gross noted that the committee had worked on the formation of the Job Portal and the Next Generation group. Mr. Tiepelman reviewed the goals of the Internship program in attracting college juniors and senior students to the industry. Since 1990 he noted that 146 students have participated in program and 65% are still industry, and 72% of those are in the surplus lines industry.

 

Communications & Technology Committee Chair Matt Nichols reviewed the communications and technology goals of the committee, including sponsoring the keynote address at the AAMGA Automation Conference, working with ACORD on the London reporting bordereau, and keeping members up to date on technology options available. On the communications side the group has worked on promotion of the wholesale brokerage system. Much of the promotional campaign had been performed by an outside consultant but going forward NAPSLO is working towards adding an in-house staff member to handle the responsibilities.

 

Convention Committee Chair Tim Makowski noted the committee works to provide a forum for members to network and for the Association to conduct annual business. Sites are chosen several years in advance and he said that the meeting would rotate between Atlanta and San Diego over the next four years, with the 2010 meeting in Atlanta.

 

Education Committee Co-Chair Dave Leonard noted that education, along with networking and legislation activities are the major focuses of the Association. Education Coordinator Marcus Payne noted that more than 1,500 students have gone through the E&S School, designed for people new to the E&S industry, since it was established in 1990 and that nearly 1,000 people have gone through the Advanced School since it was founded in the mid-1990s. The newest program is the Executive Leadership School, formed in 2009, which takes place at the University of Virginia under the direction of the Darden School of Business.

 

In addition every other year NAPSLO works with the NAIC to offer a school for regulators and NAPSLO, in conjunction with the Derek Hughes/NAPSLO Educational Foundation, also supplies speakers for insurance symposiums at Troy University and Olivet College.

 

Co-Chair Gil Hine noted that following an educational survey the Committee is now offering members CE courses online and CE credits are available through the E&S and Advanced schools. In order to not to compete with other industry educational programs the committee looks at unique areas of unmet educational needs. Mr.  Leonard noted that all of the instructors are volunteers and thanked speakers and firms for their time. President Marshall Kath noted that Mr. Payne had been working with the schools for over 20 years.

 

Mr. Nichols, who also serves as Chair of the International Committee, said that he tries to visit with London and Bermuda leaders each year to review industry and legislative issues and also current NAPSLO activities. He said the committee put together an international panel at the NAPSLO Advanced School and worked to help establish an internship hosted by Bermuda member firms.

 

Legislative Co-Chair Tom Mulligan talked about the committee’s advocacy role, which is assisted by Executive Director Dick Bouhan and Director of Government Relations Steve Stephan, regarding regulation of surplus lines. He also reviewed the guiding principles the Association established regarding legislation.  He said over the past few years NAPSLO has increased its activity at the federal level, in addition to the state level, with the hiring of a government relations staff person; engaging B&D Consulting in Washington D.C. as a lobbying firm; and using Westlaw to track changes in regulation.  He noted that NAPSLO now leads the coalition promoting the NonAdmitted Reinsurance and Reform Act and that it has passed the House three times and is also included in a pending Senate bill.   On this bill and others, he noted that NAPSLO is sought after for its input at the federal level. Additionally, each year NAPSLO hosts a Legislative Day in Washington D.C. to bring members in to promote the industry’s views.

 

Membership & Ethics Chair Greg Crouse reviewed the committee and the application process. He discussed how the Board reviews applications each year and noted that 51 applications were reviewed in 2009 and 39 new members were approved.

 

Kevin Westrope, former PAC Committee Chair and current Co-Chair of the Communications & Technology Committee, reviewed the importance of the PAC Committees and its role. Last year he noted that 120 contributions were made to the PAC, raising around $50,000 and that the funds were important in promoting the views of the industry.  He noted that contributions must be from personal funds; an individual may give no more than $5,000 per year; and PAC contributions are not tax deductible. Mr. Kath said that in this election cycle the PAC will play a large role and that contributions of all levels are needed.

 

Past President John Wood noted that members of the Past Presidents’ Council use their experience as leaders of the organization to provide input to the Board and work on special project when needed.

 

During the question and answer session, Executive Director Richard Bouhan noted that NAPSLO had been more involved legislatively as the growth in the industry has meant the industry has come under additional scrutiny. In addition, NAPSLO has taken on a greater role in Washington as the Association, and others in the industry have been promoting the NRRA, which has passed the full House and the Senate Banking Committee.

 

Funding and expenses related to the PAC were also brought up and Mr. Westrope noted that based on the size of the industry the amount that has been contributed was disappointing and part of that was due to the current economic situation and part was due to the rules limiting solicitations for the PAC.

 

Since its founding the PAC has raised approximately $250,000 and currently has approximately $100,000 on hand but Mr. Westrope said that in order to be effective the PAC needed to raise approximately $250,000 per year.  Ms. Heaton noted that while there are a number of people who can contribute the maximum annual amount, donations at all levels are needed and a large number of smaller contributions can be very effective.

 

Mr. Westrope said it was important for higher-ranking people in organizations to share with their employees the value of the PAC and encourage contributions to the PAC.

 

Current leadership issues reviewed during Mid-Year Panel

More than 175 people attended the special Mid-Year Executive Session panel discussion featuring top leaders of the industry and an industry consultant examine leadership issues and challenges facing the industry during the special program at the 2010 NAPSLO Mid-Year Leadership Forum in Scottsdale in early March.

The moderator of the program was Stephen Harvill, President, Creative Ventures and the panelists were Neal Abernathy, President & CEO, Swett & Crawford; E.G. Lassiter, Chairman & CEO, RSUI Group; Matt Power, Executive Vice President, Lexington Insurance Company; and John Latham, President, Southeast Region, Markel Corporation. The session was filmed and can be watched online at the NAPSLO website. 

Each panel member discussed their experiences with challenges in the workplace and Stephen Harvill gave an overall view of trends in the world today. Mr. Abernathy touched on two areas: how to utilize technology and make the changes in business without disenfranchising the prior generation, and his thoughts on younger people coming along in the industry.

“Today we are paperless, files are stored in a computer, Fedex has been replaced by the Internet. Face to face has gone to video conferencing. Our challenge is how do we use that technology to make sure we maximize the opportunities for us as a business,” said Abernathy.

He also discussed that a whole new group of younger people is coming into the business.  “They have less social skills than the older generation. Texting and e-mailing are not communicating,” said Abernathy.  He expressed that when the younger generation comes into the business environment, they are not going to know how to get along socially. Abernathy said the younger generation needs to learn empathy and be better informed. “You have to be rounded, know what’s going on in the industry, business and the world in general to be effective,” he said.

Mr. Lassiter explained the challenges his company is dealing with a highly professional customer base. “Wholesalers work at a fast pace. We have to be prepared to work at a high rate of speed and so do our customers, that makes us collectively more effective,” he said.  “Market cycles pressure these returns and the ROE and it challenges our capital deployment.  Another thing that pressures us is the standard for developing leverage was 3 to 1 premium. If we did that today, the rating agencies would just downgrade us. As a result of declining premium, we have expanding expense ratios, which are managed through attrition,” he said.  Mr. Lassiter also said that one of the weaknesses is that retailers test the market by using “your time and our time” and if employees aren’t qualifying the accounts, then everyone loses.

Mr. Latham touched on the fact that their company decided to be more serious about what they were doing internally to strategize for the future.  “We felt we had to position ourselves for the future. We needed to better serve our agents by being closer to them and providing broader access,” said Latham. He explained they set out major strategic objectives including having the ability to interact with more readily, provide access to more of our products, and the need to gain some efficiency.   “Finally, one of the key strategic goals at Markel has always been underwriting profitability. We began to recognize a company that isn’t growing wasn’t going to revitalize itself.  Culturally we had to change our way of thinking.  At a time following record profits, we were willing to examine ourselves and set about to reinvent Markel. At my age, change is not a lot of fun, but it is exciting,” said Latham.

Mr. Power discussed innovation and specialization.  Power says that one mistake made is tending to think of the industry in terms of historic market cycles. “We are really at this point in the industry where change ultimately has to come. Innovation is more than a hobby, it’s absolutely core to our earning income stream,” said Power.  He said it is important to have a process by which you create a sustainable competitive advantage through product innovation. He recommends looking at trends to understand how changes on the horizon are going to affect your constituents. “How you build your business and how you compete is something you should think about every day,” he said.

Mr. Harvill discussed 2010 trends in a shrinking world.  “Standard thinking is one of the great strengths and weaknesses of business communities.  By expanding the way you see things, you frame it differently.  The danger of consistently looking in the same frame all the time,” said Harvill.

Harvill noted that in today’s world, two billion emails are sent each day and employees will spend 10 years of their working life on e-mail. He also noted that teenagers primarily use texting as a means of communicating.    The world wide web gets 120 billion clicks per day, 65 trillion links are accessed per day and 3 million e-mails per second are sent.

There are three trends in the industry he discussed, including connections, leverage of knowledge and the client experience.  “The new truth is that it’s a constantly connected world. Leaders do three things, they identify current reality, need to know where you are. You need to know where you are going and how are you going to get there,” said Harvill.

“We are dying in a sea of complexity, don’t let it catch you. The world is much bigger than the insurance industry. These ideas are in play right now and are valid in companies around the planet. You have two choices. You can get on board or you can not. So let me recommend something as the world spins fast by you. Get on board,” said Harvill.

NAPSLO E&S School Registration Underway and Space Available

Registration for the 2010 NAPSLO E&S School, June 22-25 in St. Louis, is underway and there is still space remaining available in the school. The cost of the school is $1,200 and the registration deadline is May 14.

The curriculum focuses on seven segments: Risk Takers-and various markets; Distribution System - purpose & variations; MGA's and Brokers-managing the business; Market Dynamics-changing environments; Cops - regulatory agencies; Where's the Money - reviewing financial statements and accounting procedures and a new topic this year, Marketing.

The school will take place at the Eric P. Newman Education Center in St. Louis. The school will open with the Perspectives From the Top presentation, given by Matt Nichols, President, All Risks, Ltd. This year’s Executive Panel will feature Glen Curley, President, Markel; David Norris, Senior VP and Property Department Manager, RSUI Group, Inc.; James Drinkwater, President-Brokerage Division, AmWins Group, Inc., and Loti C. Woods, CPCU, Co-CEO, McAuley Woods & Associates.

Registration Requirements

The NAPSLO E&S School is designed for insurance professionals with less than five years experience in the surplus lines industry. Persons with more than five years surplus lines experience are encouraged to attend the NAPSLO Advanced School, offered each Fall. 

Hotel & Facility

Attendees stay at The Parkway Hotel, located on the campus of Washington University Medical Center. The Eric P. Newman Education Center is located within walking distance of the hotel.  All sessions will be held at the Newman Education Center.

NAPSLO selects 14 for 2010 internship program

NAPSLO selected 14 students to participate in the Association’s 2010 Summer Internship Program.

 

Selected interns participate in an extensive program, spending five weeks with a NAPSLO member surplus lines insurance company and four weeks with a NAPSLO member wholesale broker.

 

At the end of the program, several interns will be invited to attend the annual convention in the fall in Atlanta.

2010 Summer Interns

Wesley Baker, a student at Florida State University with expected graduation May 2011.  His summer hosts are Scottsdale Insurance Co. and CRC-Boca Raton.

Vincent Baldino, a student at Temple University with expected graduation May 2011. His summer hosts are Western World Insurance Group and AmWins Brokerage/PRS.

Saquib Cheema, a student at Virginia Commonwealth University with expected graduation May 2011. His summer hosts are Markel, Mid South Region and Quirk & Company.

Hunter Futch, a student at Mississippi State University with expected graduation December 2010. His summer hosts are RSUI Group, Inc. and AmWins Brokerage.

Jordan Hinck, a student at Missouri State University with expected graduation May 2011. His summer hosts are Scottsdale Insurance Co. and Westrope.

Terri Ketzner, a student at Indiana State University with expected graduation May 2011. Her summer hosts are XL E&S - Exton and Hull & Company.

Brian Lock, a student at Bradley University with expected graduation May 2010. His summer hosts are Markel, Midwest Region and Travis-Pedersen and Associates.

Jessica May, a student at St. Johns University with expected graduation May 2011. Her summer hosts are Liberty Surplus Insurance Corp. and CRC-Chicago.

Kate McCulloch, a student at the University of Alabama with expected graduation May 2010. Her summer hosts are Endurance and Swett & Crawford.

Zach McMunigal, a student at Olivet College with expected graduation May 2011. His summer hosts are Great American Custom and Benchmark Management Group.

Jacob O'Neal, a student at Troy University with expected graduation December 2010. His summer hosts are Catlin Specialty Insurance Co. and Burns & Wilcox.

Jourdana Passaro, a student at the University of Georgia with expected graduation December 2011. Her summer hosts are Nautilus Insurance Group and The Sullivan Group.

Raymond Tate, a student at the University of North Texas with expected graduation May 2010. His summer hosts are American Safety Indemnity Co. and Healthcare Professional Services, Inc.

Tamara Ward, a student at the University of Louisiana at Monroe with expected graduation May 2010. Her summer hosts are Markel, Southeast Region and W.E. Love & Associates, Inc.

 

Technology Update

Approximately 225 people attended the 2010 AAMGA Automation conference in Orlando in mid-March to hear updates on a number of technology projects, including the E&S Working group, the CIAB LexisNexis insurance exchange project, and a keynote address on changing trends in technology.

 

The keynote address was delivered by Dr. James Senn and Dr. Upkar Varshney of Georgia State University and covered some of the major technological leaps that took place over the past 30 years.

 

Dr. Senn noted that a dawn of a new era of technology started in 1981 when IBM came out with the first personal computer. While it offered limited technology, such as 140k of memory, it proved to be the onramp to the corporate data center. Today, the personal computer is viewed as a mature product.

 

In 1991 Nokia made the first GSM cell phone call and its engineers also developed text messaging. The same year the http, html and url protocols were developed and released to the public, along with the Linux operating system.

 

In 2001 Apple came out with the iPod, which has integrated music with the personal computer. The next biggest product was the Smartphone, introduced in 2007. He characterized the products as a move toward seamless integration and noted that the world is moving to a place where WWW will stand for “world wide workplace” and employees will find that they are always connected.

 

LexisNexis Insurance Exchange

Frank Senter of the Council of Insurance Agents & Brokers and Michael Mayo and Clyde Owen of LexisNexis discussed the insurance exchange, announced by the CIAB in 2009.

 

The exchange is intended to provide a single, on-demand electronic system through which agents and brokers will submit risks in real time to multiple insurance carrier partners and wholesalers and collaborate with them on the underwriting, pricing and placement of insurance coverage for those risks.

 

They said the concept is to take data from agency management systems and put into the exchange, and then within the exchange create a submission, which will be marketed to one or many carriers, depending on what one wants to do with that submission. Once the item is submitted the agent would be informed, based on appetite rules established by the individual carriers and brokers, who was interested and if additional documents are needed.

 

In order to ensure that firms could continue to deal with any firm they wanted, Mr. Senter said that firms would not have to be a member of the exchange to participate, however  there would be benefits from being a member, such as tracking the conversations made through the exchange in the placement process.

 

The Insurance Exchange Trust will oversee the exchange and the trust will have representatives from all areas of the industry. Members will pay a membership fee and a monthly support fee, and possibly some customization fees. The exchange is expected to start later this year with mid-market commercial risks and then move to other risks.

 

Working Group

The E&S Working Group reviewed progress on several project it has been working on, including potential transferring of data from MGAs to carriers. Several proof of concepts demonstrations on transferring data from an MGA agency management system to a carrier system were made as part of a presentation.  In addition, progress on working to standardizing supplemental forms was reviewed and promotional campaign to talk about the workgroups efforts was also reviewed. A free webinar on the progress is scheduled for April 19.

See Part 2 of Full Newsletter