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Channel Check by Kevin Amrhein Chasing Growth

When the market turns, we need to be ready. That means horading away the nuts now.

By  Kevin Amrhein

Call someone in our industry concerning placement and you’ll get a response about market conditions. The genesis of your inquiry could be coverage, and the answer would be the same. Question: “What’s our tee time Saturday?” Response: “market conditions.” The conversation is unavoidable, as it should be.

My discussions with several wholesalers have produced quite a, dare I say, “colorful” dissertation or two on the marketplace. Most cannot be repeated in print, to both preserve journalist decency and protect the innocent. I was able, however, to gather some morsels from members descriptive of their feelings concerning you-know-what, as well as a few areas that—despite industry-wide downs—appear to be headed up.

“In hard markets, you spend more time with underwriters. In soft markets, you spend more time with retailers. As wholesalers, we have to find the position where we treat both sides equally,” says Denis Brady, president and CEO of American E&S, a general lines wholesaler in San Francisco that serves 1,000 retailers through 10 offices nationally. AES, a subsidiary of Wells Fargo Insurance Services, generates $35 million in revenue.

Brady described the depressed construction market in California, sparing none of the gory details of its effect on insurers. When I asked him what, if any, product or coverage seemed to be growing, the tone of the conversation changed. “One area is intellectual property,” he said. With fewer issues warranting more litigation, adequately insuring for potential IP violation has become big business. Even as markets soften, Brady says, AES continues to experience growth in programs addressing this exposure.

Brady shifts to oil and gas cover and discusses a program that, despite market conditions, has been very successful—a program that serves the growing need of oil and gas companies to deal with well blowout. AES has the facilities to manage and underwrite this program but also goes to the open market for these risks. Discussions of increased drilling and other measures seem to have piqued interest in this area, he says.

When it comes to talking about growing areas, he wasn’t finished. In the race, age always wins, and an aging America needs help.

“With the increased number of assisted living facilities appearing to serve the needs of a huge retiring generation, professional liability needs are growing. We recognized that need and put together a program in London and are marketing it nationally.”

This program, constructed less than a year ago in a stagnant market, remains prosperous—another example of growth in a slow-growth world.

Agriculture is growing (excuse the pun) like mad. Loti Woods, co-CEO of McAuley Woods and Associates, says adverse market conditions aren’t affecting this segment of the portfolio. “Agriculture is a class that can scare standard carriers, particularly with the transportation risk. Property can also be an issue,” she says. “Many of the buildings are older with little fire protection.” Risks commonly include outdoor buildings with conveyor belts and other features that typically don’t fit (even hungry) standard market models.

With its base in Palm Beach, Fla., McAuley Woods deals largely with coastal risks, driving it even further from the admitted marketplace.

Sure, profitable product lines are out there, but how does one learn the best way to survive a soft market? Answer: Ask someone who’s been through one…or six. “My first experience with a soft market was the one that happened after [Hurricane] Betsy; it hit reinsurers really hard,” says Jerry Sullivan, chairman of Los Angeles-based Gerald J. Sullivan & Associates, the center of The Sullivan Group. “This is my sixth soft market, and I can tell you: there is life after the soft market.” He attributes the firm’s perseverance to what he calls the “Squirrel Game.”

“When the market turns, we need to be ready. That means hoarding away the nuts now.” The “nuts,” he says, include people, pricing and acquisition. “The longer this goes on, the tougher it gets on distributors. More good people become available; pricing for agencies and books of business become more realistic.”

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