Reinsurance intermediary backs program administrators association
By Phil Zinkewicz
Benfield Blanch executives include (from left) C. Douglas Bennett, senior vice president; Thomas B. Kearney, executive vice president; and Marc A. Lauricella, senior vice president.
In the 1970s, a book called Future Shock was on the bestseller list for a very long time. The point of the book was that the world was changing at an ever-increasingly rapid rate, and that future generations would have a very difficult time adjusting to the jolts of progress that were in the offing. Today, we realize that the book was almost prophetic. All one has to do is walk down the street and see men and women from all different races and creeds with their hands cupped to their ears, holding cell phones, and it becomes clear that technology--the future--has just about taken over.
For the property and casualty insurance industry, however, it's not "future shock" that is dominating the scene today--but rather a kind of "history shock." That's one way to describe what agents and brokers are experiencing in today's P-C insurance environment. After all, the last really hard market was back in the mid- to late-'80s. Many producers have never been involved in a hard insurance market at all, let alone one as difficult as this one. It's easy to blame September 11 for current market conditions. After all, insurance companies suffered upwards of
$60 billion in losses, and those were not from long-tail exposures. The losses came about as the result of one sudden and dramatic hit.
In reality, however, the market had been showing signs of hardening ever since the beginning of 2000. September 11 certainly exacerbated the situation but prior to that, it was clear that the property/casualty insurance industry could no longer sustain the unrealistically low pricing that dominated the industry throughout the previous 15-year soft market.
All producers are feeling the crunch of today's hard market, but probably the ones being hit hardest are managing general agents (MGAs) and program administrators (PAs). During the soft market, which really lasted as long as it did because of a booming stock market that produced serious investment dollars for carriers, MGAs and PAs didn't need to haggle with carriers over price and contract conditions. Producers were pretty much in the catbird seat because competition among carriers was so fierce. Today, MGAs and PAs are learning that they really have to establish strong relationships with carriers to assure that those carriers will be there, not just during this hard market, but in future hard market times. Unfortunately for producers, it's sort of an on-the-job learning experience.
Thomas Kearney says that Benfield Blanch's new division specializes in "marrying" MGAs and PAs with profitable carriers.
"In today's hard market, with some carriers disappearing altogether, some only pulling away from program business, and others being seriously selective about the program business they are willing to write, MGAs and PAs need to access capacity from all over the globe," says Thomas Kearney, executive vice president of Dallas-based Benfield Blanch, Inc., which is the U.S. subsidiary of the U.K.-based Benfield Group, the third largest privately owned reinsurance intermediary in the world. "Many have never had to do this before. But today, the model for program business has changed. In the 1990s, property and casualty insurance carriers were chasing after program business, especially because they brought in more premium dollars to invest. Everything was up for grabs--professional liability, errors and omissions, directors and officers, commercial auto programs and BOP programs.
Benfield Blanch is the exclusive reinsurance intermediary for the Target Markets Program Administrators Association. Marc Lauricella says that "fits in very nicely" as a conduit for linking small producers with carriers.
But a couple of years ago, when the stock market turned and investment income was not what it had been, carriers began to realize that some of the program business that MGAs and PAs were producing was not bringing in enough revenue to compensate for losses," Kearney continues. "Many carriers decided to get out of the program business altogether. Others remained, but they are being more selective regarding what they write. What MGAs need to do now is find those carriers in all parts of the world who still want to write program business and establish relationships with them."
C. Douglas Bennett says that the "majority of the program managers in Target Markets are small PAs, but we have several very large ones as well."
And, according to Kearney, that's where Benfield Blanch--or rather its new division called Benfield Blanch Program Solutions (BBPS)--comes into the picture. Kearney says that this division specializes in "marrying" MGAs and PAs with the carriers that are still in the program business and are willing to work with producers who proved that, even during the soft market, they were proficient at running programs profitably. BBPS, says Kearney, offers to MGAs everything from locating carriers, to devising new program templates, electronic submission and evaluation and free reinsurance reviews. "Reinsurance, after all, drives most MGA business, and reinsurance is what we do," says Kearney. "Also, our relationship with our U.K. parent and their contacts gives us access to worldwide carriers and reinsurers."
So that's BBPS' game plan--to target large and small MGAs and PAs, assisting them in finding markets. Recently, BBPS became the exclusive reinsurance intermediary for a new association, Target Markets Program Administrators Association (TMPAA), a group of program administrators that have banded together looking for assistance in dealing with the new hard market. "Most of the MGAs and program administrators that we work with are the large producers," says Marc Lauricella, senior vice president for BBPS.
"Most insurance and reinsurance carriers want the larger producers, ones with several programs, that have proven track records. These are the ones who survived the soft market and who can demonstrate that they know how to run programs properly," explains Lauricella. "But the smaller MGAs and PAs, the ones who perhaps have only one program, are not all that attractive to some of the carriers that have stayed in the program business. In our search of the marketplace, we have found the insurance company markets that will entertain smaller, niche programs. What we were looking for was a conduit to bring these smaller producers together with the carrier markets that are out there, and Target Markets fits in very nicely."
According to C. Douglas Bennett, senior vice president of BBPS and the man responsible for all MGA business development, TMPAA is a relatively new association dedicated to assisting program administrators in the five following areas:
* Technology. The association assists members who want to take maximum advantage of automation and the Internet.
* Skills. TMPAA conducts workshops on various issues that are important to program administrators in order to keep them informed about market developments.
* Meeting the markets. TMPAA assists program administrators in communicating with those carriers that have an appetite for program business, providing a starting point for a valuable exchange of information.
* Networking. At seminars and summit meetings, TMPAA encourages members to share experiences and learn from each other.
* Cross-selling. TMPAA provides an opportunity for program administrators to contact each other and perhaps form partnerships to cross-sell certain products.
The association will hold a national summit for members, October 21-24 in Tempe, Arizona, which will feature events for each of the above areas.
"The majority of the 120 program managers that are in Target Markets are small PAs, but we have some very large ones as well," says Bennett. "The members pay a fee to belong to the association and then they have access to all of the advantages of TMPAA, including actuarial resources, modeling tools and MGA systems. With our exclusive representation agreement with Target Markets, we have developed a much more efficient way of accessing markets for program administrators. Right now, we are in the process of creating an online service to get program business information to the carriers more speedily. This is important because we work with carriers both here and overseas," says Bennett.
Kearney adds: "Our goal is to develop the most effective solutions to assist the MGA or PA in the broadest markets possible. We are in this business for the long term. We have made huge investments in people and in technology, and we spend a good deal of time analyzing carriers' portfolios of risks. We know what the carriers want. Therefore, we believe that what we have to offer to MGAs and PAs is valuable."
Even though Benfield Blanch has been in the United States for only five years, Kearney says that the firm's commitment to the American market is clear in that its U.S. business today is just about equal to the U.K. parent's international business. "We see these hard market times as a tremendous opportunity for us," says Kearney, "and we plan to be aggressive in growing our BBPS business a great deal further." *
For more information:
Benfield Blanch
Web site: www.us.benfieldgroup.com
Target Markets Program Administrators Association
Web site: www.targetmkts.com