The financial services industry provides $5.07 billion in commercial lines premium in the United States or 3.94% of total commercial premiums written, according to data obtained from IMR (Insurance Market Research) Corp.'s database of insurance marketing information. The loss ratio is a very attractive 47.3%. This is a growing, dynamic market, requiring an expertise in fidelity and E&O coverages, along with the traditional property/casualty lines. It also is a market that is subject to mergers and acquisitions that could prove to be opportunities for some while others could see their clients swallowed up by a larger entity. It clearly is not a market for the faint of heart.
There are more than 35 subgroups in this niche market, with nine of them producing more than $100 million in premium, led by commercial banks, which provide $1.76 billion in premium and a loss ratio of 40.2%. The other eight are fire, marine and casualty insurers ($385.3 million, 38.5%); real estate operators and lessors ($370.6 million, 48.4%); holding offices ($367.5 million, 58.1%); life insurers ($348.7 million, 47.7%); security brokers and dealers ($327.2 million, 43.8%); real estate agents and managers ($188.3 million, 50.3%); commercial banks ($1.76 billion, 40.2%); insurance agents and brokers ($158.6 million, 50.3%); and hospital and medical service plans ($123.8 million, 46.0%).
"This is a market that needs to be approached with extreme care," Lindsay Smith, president of IMR Corp., one of the PLP Companies, points out. "Most of the coverages have long tails so results that appear favorable don't necessarily remain that way. The spate of mergers and acquisitions also increases the uncertainty as stockholder suits could emerge if the stock markets view an acquisition unfavorably."
There are 610,525 businesses engaged in various aspects of financial services in the United States, employing just under seven million people. There are 553,178 small financial service businesses (employing fewer than 20 people) which account for $1.52 billion in premium for an average premium of $2,750 per account. There are 48,645 medium-sized accounts (20-99 employees) providing $1.36 billion in premium for an average of $27,975. The 7,490 large companies (100-499 employees) account for $1.03 billion in premium and an average of $137,915 per account. The 1,212 jumbo accounts provide $1.15 billion for an average of $951,200.
Financial service businesses provide $1.67 billion in premium in the Rough Notes Northeast region. The loss ratio is 49.9%. There are five subgroups in the Northeast that provide more than $100 million in premium. Commercial banks represent the largest subgroup, providing $437.3 million in premium and a loss ratio of 46.2%. Security brokers and dealers are next, with $260.9 million and a loss ratio of 34.5%. They are followed by life insurance companies ($162.1 million, 54.2%); holding offices ($130.5 million, 64.8%); and real estate operators and lessors ($119.2 million, 47.4%). There are 126,351 financial service businesses in the Northeast, employing 1.79 million people. The 113,729 small financial service businesses (those employing fewer than 20 people) account for $445.0 million in premium for an average of $3,910 per account. The 10,281 medium-sized accounts (20-99 employees) provide $374.7 million in premium for an average of $36,445 per account. The 1,966 large businesses (100-499) account for $348.6 million for an average of $177,335, and the 375 jumbo accounts provide $505.8 million for an average of $1.35 million per account.
Information on this niche market is available from IMR at 39 E. Hanover Ave., Morris Plains, N.J. 07950, or call (888) 237-7066. *
©COPYRIGHT: The Rough Notes Magazine, 1998