The Niche Less Traveled
In uncertain times, wholesaler niches
answer the call.
By the time you read this, billions in bailouts may or may
not be “stabilizing” our industry. Reinsurers may
or may not have tightened underwriting standards. Regardless,
volatility is likely to continue well into 2009.
“There’s certainly uncertainty,” quipped one
Council member during a recent phone conversation before
shifting to the non-existent inflection symptomatic of the
morose, an unfortunately common demeanor nowadays~
By design, one may assume that members of the wholesale
community—a segment especially susceptible to industry
fragility—and others offering services to complement the
traditional “direct” transaction would be shoved
out of the general marketplace, forced to survive in places no
one has gone before. In fact, oblivion may be a welcomed
respite for those whose successful niche products are a reason
to celebrate the unconventional.
Just ask Paul Fuller, president of Glatfelter Insurance
Group’s Wholesale/Specialty Program Operations. He
believes that obscure is OK, as evidenced by the success of a
program he helped create for, of all things, water reclamation.
The Rural Special Districts Insurance Services (RSDIS) program
was formed after realizing the profitability within the
underserved niche of reclamation districts.
“The reclamation district niche was identified by
accident,” he says. “Our agency was located near
the delta region of California’s Central Valley. This
area is renowned for the use of levees to reclaim land
otherwise unsuitable for farming.”
Fuller describes how these unique operations were usually
stuck with restrictive mono-line placements. “Over time,
it became apparent that this niche was underserved and
represented a viable market opportunity.”
The time invested paid off for stakeholders, he says, and
the RSDIS program expanded its niche to include water, sewer,
irrigation, conservation, and cemetery districts. “RSDIS
now operates in 48 states and is represented by nearly 500
brokers. We are the largest program in the United States for
our niche,” Fuller says.
Recently, Mac Wesson, president and COO of U.S. Risk
Insurance Group, spoke of several niche products that he
believes provide the wholesaler an identity off the beaten
path. Consider the “Take 1” program—my
personal favorite, which extends coverage to companies that
lease or rent equipment for rock concerts and other live shows.
(The fact that he used Bruce Springsteen as an example when
describing Take 1 alone merits mention.)
“Most people would assume that concert equipment is
owned by the show or the venue, but this is not usually the
case,” Wesson says. “Almost everything is leased or
rented; the stage, the speakers, just about everything except
the people.” He says an advantage the wholesaler has over
the few others writing this type of business is access to the
entertainment division of Fireman’s Fund, of which U.S.
Risk is currently the only MGA.
Offering a neglected niche relief is a concept familiar to
Tim Byrne. Byrne was instrumental in forming Coastal Agents
Alliance, an MGA and program administrator of which he serves
as president. The program supplies retail brokers serving the
difficult New York and New Jersey coastal homeowners insurance
market with a viable alternative.
“Being a retailer for years helped me. I know how they
want to do business,” he says. Byrne found a partner that
made his operating model possible: Glencoe Group, a division of
Renaissance Re that provides the paper for Byrne’s
organization. “Glencoe Group says ‘we do nothing
but take risk—you do the rest,’” he
Byrne says he offers services not common in the non-admitted
marketplace, such as full automation (they do
“everything” online, he says), underwriting,
claims, and direct billing on renewal. “Traditional
wholesalers are used to a hit-and-run market,” he says.
“They’re opportunistic. It’s hard to invest a
fortune in time and automation; whereas, our arrangement allows
us to act as an admitted market using non-admitted
Perhaps efforts such as these are the reason why even in
turbulent times some major carriers are bullish on wholesalers.
“We’re looking to grow substantially in the
wholesaler market,” says Brian Specht, vice president and
National Casualty Product executive for Fireman’s Fund.
“In addition to technical skill, wholesalers are an
excellent resource for product development. They see the stuff
that doesn’t fit in the retail world. They suggest unique
coverage and product enhancements.”
The carrier is investing in underwriting talent around the
country to enhance its presence within this distribution
channel. Over the last four years, Fireman’s Fund has
integrated its formerly separate E&S team into all of its
major regional offices. “This integration has allowed us
to get a lot closer to our wholesalers,” Specht says.
The only thing we know is that we don’t know the
direction economic conditions will take this industry.
Fortunately, the wholesaler segment is occupied by
organizations like these that understand that off the beaten
path may be the safest place to be.
Amrhein is wholesale editor.