John K. Latham is president of the National Association of Professional Surplus Lines Offices (NAPSLO). He is president of Colony Group in Richmond, Virginia. He says the Latin phrase "Uberrima Fides" that appears in the NAPSLO logo, meaning "in the utmost good faith," reassures agents who deal with NAPSLO members that they're dealing with people with integrity and professionalism.
There's been a lot of submission activity, but it seems to be more motion than substance," says John Latham, president of the National Association of Professional Surplus Lines Offices (NAPSLO). Latham, who is president of Colony Group, Richmond, Virginia, says that agents appear to be preparing for the hard market but "haven't felt the full brunt of it yet. Price increases seem to be taking on more significance. By year end, we should see things going up." Colony Group includes Colony, Preferred National and Front Royal Insurance Companies.
Latham warns that there probably won't be a soft landing arising out of the current market change. "I see a lot of similarities to the mid-'80s," he says, pointing to "a serious lack of return on investment capital and under-reserving that's estimated to be around 25%. The excess capacity could disappear very quickly. When you measure the element of risk with the returns, there's just not a good match."
One of the interesting results of the prolonged soft market, according to Latham, has been to point out just how strong and resilient the surplus lines market is. "It hasn't been easy," he admits. "The key has been to write business in areas where pricing has not been an issue. We've had to be willing to let some business go away. During this period, we've seen the business environment change dramatically. The surplus lines industry has responded with innovation, developing new products to respond to the changes. Freedom of rate and form has allowed this industry to prosper at a time when many believed we would shrink."
In fact, Richard Bouhan, executive director of NAPSLO, notes that despite the growing numbers of mergers and acquisitions, "our membership has remained pretty stable. New members have come in to replace those that left due to merger. We'll have more than 2,000 paying registrants at our convention."
Latham attributes the continued strength of NAPSLO to its reputation as the premier organization representing the wholesale insurance distribution system and the surplus lines industry. "People in the industry want to belong to the organization because the logo means something. Agents who deal with our members know that they are dealing with people with integrity and professionalism. Our members live up to the Latin phrase inscribed on the logo--'Uberrima Fides'--which means 'in the utmost good faith.'"
Legislative issues have been the primary area of importance for the association. "Dick Bouhan has done a great job working on regulatory and legislative issues," Latham says. "Dick is well respected and has done a great job of educating regulators and legislators about the function of surplus lines and its importance in the marketplace. Thirty-one regulators attended our last seminar on surplus lines."
"The legislative landscape is changing rapidly," Bouhan points out. "The Graham-Leach-Bliley bill would allow non-resident licensing. If NARAB comes into existence, then surplus lines brokers could do programs on a regional and national basis. We're keeping a close eye on this, while at the same time, working with the states to get uniform laws enacted before the NARAB deadline."
Bouhan continues that the bill "has spawned a larger discussion over some type of national activity, looking at such areas as national companies, speed to market, federal chartering and so on. The impact of banks being allowed into the insurance business also will have an impact on the way we do business. It is clear that in light of these impending changes we will need to find new ways of doing business to keep pace."
Latham continues that the association is looking to add a technology person to NAPSLO's staff. "We're hoping to find someone who can provide the same level of expertise in this area as Dick has in the legislative area. We'd like to see NAPSLO become a major resource on leading edge technology for our membership."
In addition to legislative and technology issues, NAPSLO also provides education to members to help them keep on top of their profession. "We're very proud of our education programs," Latham says. "NAPSLO schools offer basic E&S, as well as more advanced courses."
In order to attract new talent to the surplus lines industry, NAPSLO also offers an internship program under which college students can spend the summer working with various wholesale brokers and surplus lines carriers who have volunteered to act as hosts. Four selected interns are invited to attend the NAPSLO convention where one of them receives the Joseph H. Blades Memorial Scholarship, a three-week internship with a Lloyd's Broker in London.
"I'm really enjoy working with NAPSLO members and staff," Latham concludes. "As president, I'll be working with a tremendous group of people." *