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Diving in Specialty superpower Markel goes global in marine and energy By Elisabeth Boone, CPCU When you’re an international insurance organization that eats tough risks for breakfast, you have a hearty appetite for business where your skill and experience can generate profitable results. That’s definitely the case for Markel Corporation, a leading specialty insurer that last year celebrated its 75th anniversary (see “The Markel Style” in the December 2005 issue of Rough Notes). Last fall, Markel announced plans to launch its ninth operating subsidiary to capitalize on its in-depth knowledge in one of today’s hottest markets: marine and energy risks. The new unit, Markel Global Marine & Energy, will write coverage worldwide, expanding Markel’s existing marine and energy books and also building new business. Markel’s existing commercial marine business consists of two segments: Essex Ocean Marine, which specializes in hard-to-place marine-oriented risks, and Markel Syndicate 3000, a Lloyd’s facility. John Grossenbacher, vice president of Essex Insurance in Richmond, Virginia, runs Essex Ocean Marine. At Markel Syndicate 3000, Paul Jenks heads the Marine and Energy Division. Although these two operations will be involved in Markel Global Marine & Energy, the new unit will provide separate capacity from that offered by Essex and the Lloyd’s syndicate. “The development of a larger U.S. presence, Markel Global Marine and Energy, in addition to our existing marine and energy operations in London and Richmond, Virginia, is indicative of our commitment to the global marine and energy market,” says Paul Springman, executive vice president of Markel Corporation. Steve Cullen, whose experience includes more than 30 years in marine and energy operations, has taken the helm as president and chief operating officer of Markel Global Marine & Energy. Cullen is a graduate of Maine Maritime Academy and began his career as port captain with the United States Lines Steamship Company, where he was responsible for pier operations at a New Jersey port. In 1976 he entered the insurance business, joining American Marine Insurance Group. Before coming on board with Markel last fall, Cullen had been president and global product line leader of the Marine and Offshore Energy Division of XL Insurance. “We are extremely enthusiastic about the addition of an experienced talent like Steve to our team and see his leadership as vital for the long-term growth and profitability of our operation,” says Springman. Cullen will be based in Houston, one of the largest ports in the United States and a major center for energy production. He will assume technical oversight for Markel’s existing marine and energy operations and has been charged with building a new marine and energy underwriting team in the United States. Expansion mode Given that Markel Corporation already was an established player in the marine and energy market, why did it decide to form a new entity to serve this niche? “With Essex Ocean Marine and Syndicate 3000, Markel as a corporation, is writing 90 separate product lines,” Cullen says, “and management saw an opportunity to expand the current operation.” Markel Global Marine & Energy “will assist with the growth of both the Essex operation and Markel’s London syndicate operations in the areas of marketing and production.” Plans call for the initial introduction of primary marine liabilities, excess marine and energies liabilities, brown water hull and P&I, onshore energy property, onshore energy casualty, blue water hull and cargo. Anyone who is familiar with the Markel organization is aware of its commitment to the highest underwriting standards, and Markel Global Marine & Energy is no exception. A key task is to staff the new unit with qualified professionals, Cullen notes. “We’re recruiting leaders for all the product lines we intend to write.” From the new unit’s offices in Houston, Cullen says, “We’ll be expanding to the east and west coasts as well as the central states, and we’ll be developing synergy for all of the facilities writing marine and energy business for Markel.” Cullen says that new marine and energy business will be written in two Markel units: Evanston Insurance Company and Markel American Insurance Company. As for reinsurance, Cullen explains, “Each product line will have specific reinsurance cover, and excess of those specifics, we’ll place whole-account covers. John at Essex Ocean Marine will have his own reinsurance programs, as will Timberlee Grove, president and chief operating officer of Markel American, who handles yacht and small boat lines, and Paul Jenks at Markel Syndicate 3000. Everything will continue on a stand-alone basis.” Navigating the market Marine and energy risks are big business. The exposures are tough and complex, and in the wake of the devastating 2004 and 2005 hurricane seasons, premiums are rising and restrictions increasing. We asked Cullen to identify the key trends he’s tracking in this challenging market and comment on how his new unit plans to respond. “As you can imagine, after hurricanes like Katrina and Rita, the offshore or upstream energy market is in turmoil,” Cullen says. “Aggregates have to be exact, and they must be related correctly to reinsurers, because they’re quite keen on capping their exposure as we move into what is projected to be a severe hurricane season in 2006. The market has started to change quite a bit subsequent to all these storms. We need to work with our clients and our brokers to refine and define where we’re going to lend our capacity in the Gulf of Mexico and around the world,” Cullen asserts. “The market has become quite hard.” On the onshore energy property side, he says, “It’s basically the same thing. We’ll be writing throughout the U.S., but we have to be very careful, again, when it comes to aggregation and very selective about where we’re lending our capacity.” Cullen says that ocean marine cargo “is an international portfolio where we have to look at our warehouse exposures. Taking New Orleans as an example, we also have to consider product exposures, whether it be coal or lumber or products that are stored outside. There’s a container exposure as well, with refrigerated contents in wind- and quake-zone territories throughout the world. We need to be sure we’re properly controlling those exposures.” In the ocean marine cargo market, Cullen observes, “There’s still quite a bit of capacity out there. Our primary competitors will be AIG, Zurich, ACE, XL—all the large companies that are heavily involved in the market. We have to pick and choose our spots on a very niche basis.” Commenting on the brown water hull and P&I product line, Cullen says, “Here our book will be very heavily focused on domestic exposures, and we’ll be writing this line in the U.S. only. Here we have to be sure that our clients—those with vessels, those who are servicing the offshore oil industry—are mobile enough when a storm comes. Do they have a disaster plan?” Another product line Markel Global Marine & Energy plans to write is onshore exploration and production. “Visualize an offshore rig drilling for oil in the Gulf of Mexico and then picture a land-based rig,” Cullen says. “We will be availing capacity for this line of business. Here we have to look at location of equipment, and we also have to consider aggregates for wind and quake.” Another product line is commercial blue water hull, which, Cullen says, consists of “oceangoing container vessels, tankers, bulk carriers, passenger vessels—in general, commercial ships—typically in excess of 2,500 gross tons. We’ll be lending capacity to those risks but, again, this line of business has become quite competitive, and we have to make sure that the individual we hire to run this product line is well aware of the international marketplace because there’s quite a bit of capacity.” As in ocean marine cargo, Cullen remarks, “We’ll have to pick and choose our spots.” Primary and excess marine liability, like brown water hull and P&I, will be written only in the United States, Cullen says. “Here we’re dealing with shipyards, ship repairers, terminal operators, stevedoring operations, offshore oil field contractors. There are two distinct product lines.” The Markel advantage How will Cullen seek to position Markel Global Marine & Energy in the marketplace? “A key advantage we have is that we’ve been around a long time,” Cullen responds, “and those we’re hiring will be specialists and leaders in their fields. It’s a small community, and everyone is aware of our intent to hire the best; in fact, they’re already knocking on our doors. “Within every one of the product lines we offer, our attraction is our ability and capability in this marketplace,” Cullen says, “and we’re recognized as leaders in our field.” John Grossenbacher of Essex Ocean Marine observes, “Markel is noted for its ability to look at an area and see a profit opportunity and move into it. There are problems in the energy field right now—shrinking capacity and certainly increasing rates—and to us that’s an opportunity, particularly in Houston, where much of the energy business originates. Tomorrow we may see another opportunity and seek to take advantage of that.” Michael Keely, ocean marine product manager of Essex Ocean Marine, talks about Markel’s commitment to customer service. “The customer service we seek to provide at Markel is designed to compete and hopefully exceed that which is offered by our competition,” he asserts. “Steve has an established reputation in the market for outperforming competitors on customer service. I think this is a great match with Markel.” * For more information: |
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