Special Section sponsored by

PROGRAM ADMINISTRATOR

CoverX

Specialties include: specialty casualty, security, professional lines, hospitality & indoor recreation, and contract underwriting

Over the past three years, MGU/wholesaler CoverX has grown by more than 50 percent, through a mix of organic growth and acquisition of underwriting talent. CoverX Senior Vice President Tom Greene says, “We have expanded into several new product areas by adding underwriting teams from other carriers with established books of business and track records. This has enabled us to significantly increase our reach while maintaining tight underwriting controls.”

CoverX, a unit of First Mercury Financial Corporation (FMFC), writes on behalf of another FMFC subsidiary, First Mercury Insurance Company. Formed over 35 years ago, CoverX remains committed to its core franchise of general liability insurance for the security industry—security guards and detectives, and alarm and safety equipment installation and service businesses—but has looked beyond that narrow segment into a number of other disciplines.

“We started writing a more diverse book of E&S casualty business at the start of the decade,” Greene explains. “This initiative began with our specialty GL operation, but has since seen the addition of our contract underwriting group, hospitality & indoor recreational team and, most recently, a professional liability/EPLI operation.”

Further expansion for CoverX parent First Mercury came via the 2008 acquisition of American Management Corporation, a Conway, Arkansas-based MGA specializing in petroleum product distribution firms and related businesses. “They are an MGA wholly owned by FMFC, but unlike CoverX, writing on behalf of other carriers,” Greene explains. “Their business is almost entirely done on an admitted basis—we remain an E&S company.”

In late 2007, First Mercury welcomed a new affiliate, First Mercury Emerald Insurance Services, which underwrites primary casualty, umbrella and property business through offices in New York, Atlanta, and Los Angeles.

Particular growth at CoverX has come within CoverX Specialty GL, which operates through offices in Dallas, Chicago, Boston, Atlanta, Seattle and Los Angeles. Ted Camp, CoverX chief underwriting officer—specialty casualty, says his operation is focused on profitable growth. “We’re working to expand our products, distribution network and geographic footprint to grow even more.”

Recently, CoverX opened a transportation department. “We do excess wheels business, with a $2 million capacity,” Camp says. It also started writing project policies. “We can do up to a three-year project policy and provide a stated ten-year extended completed operations cover,” he adds. “We also write wrap-ups, offering the same ten-year extended completed ops cover.”

CoverX Specialty GL recently nabbed a Colorado Association of Home Builders endorsement, which opens opportunities for condo and tract home residential general contractors who are association members. The unit also developed a product for EIFS (exterior insulation finishing systems) contractors. Camp says, “It has been a huge problem for the industry. Most competitors exclude this business.”

Camp’s operation also partnered with a California MGA to provide residential wrap-ups for construction projects under duress. “It could be something a bank took over because the developer filed bankruptcy, couldn’t meet collateral obligations or lacked financial strength to do the job,” he says. “This is clearly a function of our economy.”

Contract underwriting has been another area of significant growth for CoverX. “Contract underwriting is our name for MGA or ‘program’ business at CoverX. We have been involved with these third-party underwritten accounts since 2004 and have tremendous respect for the abilities and expertise of our partners in this area,” Greene says. “There are many well qualified MGAs with unique books of business, differentiated by product line or distribution and we are interested in partnering with those firms. We are looking for proven operations that realize the bottom line is the key to long-term success.”

Greene believes CoverX stands apart in a number of ways, especially its underwriting focus. “We remain a lean and nimble operation, true to our entrepreneurial roots,” Greene says. “Whether looking at teams of talent, MGA opportunities, or individual accounts, we quickly assess opportunities and offer constructive feedback. We’re blessed with a great platform and terrific group of underwriters.

“Our status as an E&S underwriter provides tremendous flexibility,” Greene notes. “There aren’t many things we can’t do. Our underwriting managers are all very experienced and have the autonomy they need to be creative and responsive.”

Camp adds, “We have local geographic presence with extremely experienced underwriters. Plus, we have some of the most comprehensive forms out there. We’ll entertain risks at no minimum premiums and no minimum attachments. At the same time, we’re able to handle the mega-risks.”

Greene, who has participated in Target Markets Program Administrators Association events for the past few years, says, “Target Markets provides an opportunity to establish leads for new MGA relationships and engage interested groups of underwriting professionals. It’s a great venue for catching up with old friends and making new ones. In this business, you can never have too many friends.”