We dig deeper.
You will never see us get a retailer
submission and just hit the forward button.
Specialist wholesalers spent decades trying to convince
retailers there’s more to selecting a wholesale partner
than volume. As market conditions continued to deteriorate,
retailers took steps to reduce the number of wholesale
partners—cutting ties to many in the wholesale space that
couldn’t (or chose not to) bring “big” to the
Those who insisted on a singular focus—continuing to
do what they do better than others—may be rewarded for
their perseverance. As rates continue the slow climb back to
reality, and rationality finds its way back to the underwriting
process, the result very well may be what David Pagoumian, CEO
of Napco, recently told me: “I see large retail brokers
trending back toward specialists.”
Like several others in the wholesale space, Napco is not
constructed on a model of high-volume transactional brokerage.
The Iselin, N.J.-based firm specializes in insurance programs
for high-risk property accounts. Specialty wholesalers like
Napco represent a segment of the business that has struggled to
maintain a presence since market conditions went south.
But things are changing. Pagoumian says that, in the
property insurance market, specifically for catastrophe-exposed
property, there are signs rates are climbing and underwriting
standards are tightening. He attributes this to a number of
factors, including changes in catastrophe models, including a
new version of a widely used U.S. hurricane model from Risk
Management Solutions and the severe property losses suffered
worldwide since the beginning of 2011. Pagoumian and many
others in the industry also anticipate January renewal prices
for treaty reinsurance will rise 10% to 15%. Rising reinsurance
prices would further affect property insurance rates.
The belief that specialist wholesalers like Napco will gain
market share in the very near future is not wishful thinking.
Hardening conditions usher in tighter underwriting standards
enforced by more demanding underwriters. While it’s true
that some large retailers have access to complex account data
and resources in-house, many agents and brokers rely on
specialists to help deliver comprehensive submissions to the
carrier. Further, many large wholesalers allocate the
lion’s share of resources to improving efficiency in
transactional brokerage, choosing not to focus on account
specialization or underwriting. Pagoumian believes more
retailers faced with increasing prices and stringent
underwriting demands will turn to specialists for
“What I believe we do better is dive deeper,” he
says. “We tend to get deeper in our analytics. We play
underwriter to a greater extreme than what many retailers
expect when they utilize the wholesale space. You will never
see us get a submission from a retailer and just hit the
While changes in the marketplace may offer conditions
suitable for growth for smaller, specialist wholesalers,
actually getting in front of potential retail partners and
forming new relationships is easier said than done. This is
especially true for larger retailers that have invested
significant effort in consolidating wholesaler relationships
over the past few years. Pagoumian acknowledges that the lack
of what he calls “critical mass” is detrimental for
firms like his.
“We’re in the same waterways as the big houses.
But not having the critical mass [of a large wholesaler] does
present some challenges,” Pagoumian says. “When I
go in to see a large retailer, the challenge is getting past
the mentality that ‘big needs big.’” Most of
Napco’s retail clients are ranked in the top 100 in
His approach is to focus the conversation on new business
rather than asking for a piece of an existing book or account.
“When I go in, I’m sensitive to the fact that
there’s a relationship with other wholesalers. I’m
not going to ask the retailer to simply give me a piece of that
other wholesaler’s work. Instead, I’m going to ask
for a chance on new business. It doesn’t cost them
anything to include me in the new account process, and
it’s my chance to deliver a better experience and
hopefully form that new relationship,” he says.
Napco’s expertise and resources are not limited to the
catastrophe property marketplace. “Historically,
we’ve always focused on catastrophic property risks. A
relatively new development for us is strengthening our presence
for risks that may not be classified as catastrophic but that
standard markets don’t want to write.” He says the
effort to place more non-catastrophe business has been driven
by retail clients. “What taught us that the marketplace
had demand for us to write non-CAT business was reviewing
submissions from our retailers. We think we can gain more
traction in the non-CAT space because of our process. We use
the same analytic skills we use for more complex, high-risk
Amrhein is wholesale editor.