Specialty supermarket
Wholesaler WKF&C combines a broad appetite with high—tech savvy
By Elisabeth Boone, CPCU
As folk singer Arlo Guthrie famously told us, “You can get anything you want at Alice’s restaurant.” Virtually the same thing can be said of WKF&C Agency, Inc., an excess-surplus lines MGA that entertains a wide variety of specialty risks. From amusement parks to weddings, WKF&C has A+ or A rated markets, solid underwriting expertise, and a top-notch automation system that it developed itself and now markets to other MGAs. (See “How’s the Weather?” in the June 2004 issue of Rough Notes.)
Established in 1994, WKF&C is based on New York’s Long Island, in Melville. The agency opened its doors with seven employees. By 2004 it employed a staff of 50, and today that number stands at 85. The majority of WKF&C’s written premium is comprised of property risks; the agency’s second largest business segment is general liability. Other lines offered by WKF&C are windstorm and earthquake deductible buybacks, equipment breakdown, inland marine, miscellaneous professional liability, insurance agents and brokers professional liability, and weather and special events programs.
Eligible property classes include habitational, hotels and motels, manufacturing, processing, mercantile, office, real estate, restaurants, and vacant buildings. Wind can be included or excluded, subject to certain guidelines. Among the casualty classes entertained are commercial real estate, habitational, mercantile, retail, office, special events liability including host liquor liability, and vacant buildings and land. Average account size is about $10,000 in premium.
About 90% of WKF&C’s business is written on a wholesale basis through a network of 150 exclusive producers, whom retail agents can access to arrange needed coverages. The agency’s weather and special events programs are available directly to retailers through WKF&C’s home office.
Since 2004, WKF&C has achieved significant growth in volume—from $160 million to $200 million—and has launched an ambitious geographic expansion into the Midwest and West Coast. To find out more about the agency’s recent initiatives and accomplishments, Rough Notes spoke with Michael Sillat, chief operating officer and chief financial officer, and Tom Wilson, president and co-CEO (the other co-CEO is Tom Kennedy; he and Wilson are two of the agency’s four founders).
Looking to the West
In 2004, WKF&C had four branch offices, located predominantly in states east of the Mississippi. Since then, the agency has expanded its reach to the Southwest and West Coast. “In June of 2006 we opened a branch in Los Angeles, and in July of 2007 we opened an office in San Francisco,” Sillat says. “Earlier this year, we opened an office in Dallas. The main reason we established these three branches is that some of our carriers expanded our authority to include California and Texas,” he explains.
“In terms of what we do, California is by far the largest market for excess property and casualty. We realized that selling and servicing that business from New York wasn’t efficient. We hadn’t done much business in California, so when we opened our doors, we were welcomed with a flood of submissions. The West Coast,” Sillat asserts, “has been our biggest growth area since 2004.”
What’s more, Sillat points out, “California is a major venue for entertainment and sporting events, so we’ve also found a host of opportunities for our weather and special events programs that we distribute through retailers.” Underwriting these coverages (as well their traditional property and casualty products) is very difficult in Texas, Sillat observes, because the state experiences so many weather extremes, including tornadoes, hurricanes, windstorms, hailstorms, and floods. The same is true of neighboring states like Oklahoma, Louisiana, and Mississippi.
“All of those states have a lot of business that fits our underwriting guidelines,” Sillat says. As in California, establishing a branch office in Texas makes sense from the standpoint of both business and local culture, he comments. “People in Dallas don’t want to talk about the New York Jets (unless they beat us!); they want to talk about the Dallas Cowboys. We need to be there. That’s why we decided that a local presence with local underwriting knowledge was pivotal for us to continue to be a factor in this region.”
Wedding bells
These days, even non-millionaires plan lavish and costly weddings with long guest lists and sometimes exotic forms of entertainment. That risk is right up WKF&C’s alley, according to Tom Wilson, and the agency’s wedding program is available directly to retailers. “Basically the policy covers the cost to cancel the wedding as a result of anything that’s beyond the control of the bride and groom,” Wilson says.
“For example, perhaps a parent passes away, the venue burns down, or an act of God occurs.” The wars in Iraq and Afghanistan also can disrupt wedding plans as service members are deployed to those fronts, Wilson comments. “Our policy covers all the deposits the couple had put down for the hall, the flowers, the caterer, the band, and so on.”
To help retail agents place wedding coverage, WKF&C is creating a new Web site that is expected to launch in the second quarter of 2008. “We offer coverage for conventional weddings in certain limit bands: $10,000, $20,000, all the way up to $100,000,” Sillat explains. “If it’s a unique wedding where specialty coverages might be required, our underwriters will work with retailers to arrange protection.”
Less glamorous, but no less important, is equipment breakdown coverage. In 2005, WKF&C began to offer it to wholesalers who access the agency for property risks. “We have a very competitive program with a major nationwide admitted carrier to bind that coverage,” Sillat says.
“We’ve also entered the market for insurance agents and brokers E&O. Obviously we can’t bind coverage for our wholesaler clients because it would be a conflict of interest, but it’s available to any retail agent or broker throughout the United States, with few restrictions.” WKF&C’s target market for the coverage, Wilson says, is small to mid-sized agents based on premium volume.
Pointing to another new market for WKF&C, Sillat says, “We’ve received the authority to write wind coverage on property risks. Up till now, we’ve just written ex-CAT business with no wind coverage. Although there’s a lot of capacity in the market for this business, we believe this new capability will be of interest to agents considering that we’ve had two relatively quiet hurricane seasons,” Sillat notes. “According to well-respected forecasters, we’re in a ‘wind decade,’ and we’re very competitive in this market.”
Going paperless
As if opening new branch offices and entering new markets weren’t enough of a challenge, WKF&C can also claim credit for being the architect of its own automation system. Shortly after opening their doors in 1994, the agency’s management team found themselves frustrated by perceived shortcomings in the automated systems then available to MGAs. Rather than compromise by purchasing a system that didn’t meet all of their needs, the team invested in a specialty software firm, MGA Systems, to develop a customized system from the ground up.
Called Insurance Management System (IMS), it is a client-server-based enterprise application that can support multiple users on a single database, and provides for secure database connectivity over the Internet. System features include custom rating, dynamic risk clearance, an electronic file system, fully integrated accounting/general ledger, invoice creation, policy issuance, and quotations and binders. Policies are distributed via e-mail directly to their wholesale brokers. WKF&C is using the system to establish turnkey underwriting operations as it expands geographically.
In 2004 MGA Systems announced its intention to market the system to other MGAs, and that effort is well under way. “They have more than 20 clients already,” Sillat says. “The system has been adopted by several of our own wholesale brokers, and we’re getting an overwhelmingly positive response.”
From windstorms to weddings, amusement parks to tennis tournaments, WKF&C’s team is experienced, focused and committed—not to mention extraordinarily tech savvy. *
For more information:
WKF&C Agency, Inc.
Web site: www.wkfc.com