Caliber One Management Company executives include Ronald S. Austin, president and chief operating officer (seated) and (standing, left to right) Stewart J. Gerson, CPA, senior vice president and chief financial officer; Alan S. Ogilvie, vice president, legal and e-commerce; and James T. Dowdy, vice president, property division.
Late in 1997, PMA Capital Corporation, an insurance holding company, embarked on a venture designed to diversify its property/casualty offerings to include excess and surplus lines. At that point, PMA already operated a reinsurer, PMA Re, and a primary insurer, PMA Insurance Company, which primarily writes workers compensation and disability.
PMA Capital formed Caliber One Management Company in 1997 to acquire Lincoln Insurance Company from Markel Corporation. Markel retained the liabilities, so in essence the company came to PMA with no business on the books. It was renamed Caliber One Indemnity Company and began operations on January 1, 1998, with four employees.
Stewart Gerson says, "We're excited about 2001 and believe we have a good franchise to take advantage of the improving turn in the underwriting cycle."
At the end of 2000, Caliber One had 80 employees--70 in its home office in Yardley, Pennsylvania, and the rest in the Seattle, Washington branch. Direct premium writings totaled about $95 million, placing it among the top 25 E&S writers in the country. Business is placed by appointed surplus lines brokers from about 65 distribution points around the country. The mix of business is about 65% casualty and 35% property.
Alan Ogilvie points out that Caliber One is "handling risks online, even risks that don't fit a particular model. Our objective is to provide ease of use to our brokers."
Ronald S. Austin, president and chief operating officer, joined the company in 1997 charged with "building an E&S company to provide diversification for the holding company." He came to PMA from General Star Management Company, the E&S subsidiary of General Reinsurance Corporation. "PMA looked at this as a long-term play and asked me to build something of quality in the right way. They wanted to establish a company that would add value to the marketplace over the long term," Austin explains. PMA recognized that, over time, "surplus lines has produced better rewards," he says, referring to a study by NAPSLO. "I was attracted to the opportunity because PMA was looking to build a strong franchise and earnings over time."
Focus on mid-market risks
In the casualty area, Caliber One focuses on mid-sized commercial accounts with an average premium of around $35,000 per account. "In my experience," Austin says, "there is a better opportunity to participate profitably in this part of the market. There are fewer competitors, and with the proper infrastructure, this business can be handled efficiently." He continues that the company enjoys a key advantage by being a new player in the market: "We don't have any legacy systems to deal with."
The company focuses on "severity-driven business," according to Austin. This includes product liability on such products as chemicals, toys, pharmaceuticals, machinery/equipment, sporting goods, cosmetics, pollution control devices, and medical devices. Professional liability coverages are available for medical labs, environmental consulting firms, product testing labs, product design firms, scientific testing firms, and vocational training institutions. Coverage for contractors includes environmental cleanup, demolition, railroad, welding, and specialty coverages.
From an underwriting standpoint, "we look at the quality of the company and its product and what the company's experience has been. We rely on the cumulative experience and further mitigate the risk through the use of reinsurance."
The property division handles two distinct areas--property and wet marine. On the property side, builders risk is the largest segment. The average property premium is around $45,000 to $50,000. On the cargo side, the average is $20,000 to $25,000. Industries for which property coverages are provided include contracting, hospitality (hotel, motel, entertainment, etc.), health care, financial institutions, and "we just started to get into the mining business," according to James Dowdy, vice president, property division.
No cookie cutter coverages
"We also do some unusual stuff on the property side. We write on-track physical damage for race cars, for example. We also provide bonus indemnification coverage," adds Dowdy, who joined Caliber in 1998. Prior to that, he was vice president, general property for Lexington Insurance. "A portion of our property book does include catastrophe coverage, but the majority is non-cat exposures," he points out.
"We've done some unusual things on the casualty side as well," Austin interjects. "We can get very creative. For example, we've written excess limits on known claims. These are principally small claims-single-person injuries and the like. One of the deals involved an apartment building that was being sold and the lender was uncomfortable with the current limits. We wrote the excess. By the way, the claims were settled within the limits." Austin emphasizes that the company is very careful when entertaining such business. "We look at where the risk is in the claims life cycle, determine what we believe the liabilities are, and make an assessment on whether the limits might be broken and stick with relatively small risks."
Stewart J. Gerson, CPA, senior vice president, chief financial officer, and treasurer, points out that the company is "seeing improving fundamentals in the marketplace. The ability to get adequate rates has improved. We're excited about 2001 and believe we have a good franchise to take advantage of the impending turn in the underwriting cycle. We like our position," adds Gerson, who joined Caliber One from Reliance Insurance Group where he was senior vice president, CFO, and treasurer. "We're beginning to gain name recognition in the surplus lines community, and our capacity is growing."
"We use online rate quoting and policy issuance to enhance our service to our wholesale brokers," according to Alan Ogilvie, vice president, legal and e-commerce, and corporate secretary. "We're also handling risks online, even risks that don't fit a particular model. Our objective is to provide ease of use for our brokers," says Ogilvie, who was managing executive - distribution for Wausau Insurance's Internet operation before joining Caliber One. "We're planning to roll out a series of niche products this year that will be handled on the Internet, as well as through regular channels. Right now, our brokers can communicate with us via the Internet to print out loss runs, production numbers, and other information. Our CIO has done a beautiful job of making this a 'user friendly' environment."
Austin concludes that the emphasis at Caliber One is on service. "Our goal is quick turnaround. We respond quickly to requests even if we can't help. We don't leave anyone hanging. Policies are issued within 10 days. We're really focused on the fundamentals." *
For more information:
Caliber One
Phone: (800) 643-0860
Web site: www.caliber-one.com