--Don Nicholson, president, Irving B. Green & Associates, Orlando, Florida
The prolonged soft market has had a profound and disruptive effect on the insurance marketplace. The line distinguishing surplus lines writers from traditional insurers has blurred. Business that once never would have been considered by the admitted market now is being sought after by admitted companies. "And we have surplus lines carriers that are writing personal lines on an admitted basis," notes Don Nicholson, president and owner, Irvin B. Green & Associates, Orlando, Florida. "The soft market has really mixed up the business."
Another example of the blurring lines is the fact that "reinsurers are going directly to MGAs and even retailers," Nicholson adds. "We live on long-term relationships and won't betray our source of income, but this does add another dynamic. I always give my company partners a fair shot at any piece of business."
Dale Schueffner, vice president of agency development, Northland Insurance Company, St. Paul, Minnesota, agrees that the market today is "very difficult. You don't find a niche in the E&S business anymore. You just protect what you have." Schueffner continues that the prolonged soft market has forced companies to be "very proactive. If an opportunity opens up, you have to exploit it very quickly. We rely on our wholesalers to spot hidden opportunities. For example, a brief window may open if another company leaves a market."
He adds that this has proven to be exceptionally difficult for underwriters who are "being asked to be more aggressive. They've turned from gatekeepers to gate openers. At the same time, they're well aware of the fact that the risks haven't changed."
Nicholson described it as a "black hole out there. You like to plan and project the future, but you can't. No one knows when it's going to end. It's only a matter of time. The margins are so thin and the market just keeps getting softer. The wind blows and you can lose everything."
He notes that one way companies are protecting themselves from the possibility of being ruined by a localized catastrophe is by taking smaller pieces of business in any particular area. "We've reached that point Ben Franklin spoke of when he said: 'We must all hang together, or assuredly, we shall all hang separately.'"
A spokesperson for IMR (Insurance Market Research) Corp. agrees that the soft market has reduced the number of "excellent" niche markets as shown by MarketDex data. However, he adds that "there remain pockets of opportunity that many brokers and MGAs have used to their advantage."
He continues that there is a significant variation in what MGAs are looking for when they approach IMR. "It really shows how creative MGAs are in developing market opportunities. We've had agents come to us looking to establish regional or national programs for A-rated markets (those identified as 'excellent' by IMR's MarketDex) and others who are looking at the Fs with an eye toward rehabilitating those markets. It really depends on their appetite and their area of expertise."
The soft market clearly has created havoc within the MGA ranks, but it also has shown just how resilient and opportunistic MGAs are. As one MGA concludes, "The only constant in this business or any business for that matter is change. The difference today is that changes are coming faster. We have to be more proactive than ever, moving quickly whenever opportunities open up and hunkering down when things turn sour. It's difficult, but it also makes this business exciting and interesting. There's never a dull moment." *
©COPYRIGHT: The Rough Notes Magazine, 1999