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Max Benefit

Newly formed Max Specialty relies on wholesalers to consistently and quickly grow its business.

By  Kevin Amrhein

“Wholesalers are not a dying breed.”

If I, your most humble correspondent, charged with tailing the wholesale distribution universe over the past two years said that, would you believe me? What if the proclamation were made by one of your wholesale partners—would you believe it then?

What if I told you that the speaker of said statement and the individual at the helm of one of the most successful growth stories among carriers in our industry over the last three years were one and the same?

“We wrote little business in 2007,” says Steve Vaccaro, CEO of Max Specialty, member of the Max Capital Group. “Our focus was more on treaties, filings, state regulations and building quality staff. This helped keep our balance sheet clean and the company free from [crippling] legacy issues.”

Vaccaro started Max Specialty with Bermuda-based Max Capital Ltd. in December 2006. “They [Max Capital] were looking to get into the U.S. but were having trouble finding the right insurance company”—one, he says, that was free of legacy issues and lingering problems. After purchasing a shell from Allianz, Max Specialty became the U.S. footprint for Max Capital Ltd. By the end of 2007, the new venture had been approved in 42 states.

And the rest, as they say, is history. In 2009, Vaccaro predicts that each of the company’s three divisions will exceed $100 million in gross premium. The first of the three divisions is property and casualty brokerage, which supports the wholesale marketplace. A second division, made up of inland and ocean marine underwriters, distributes through both wholesale and retail partners. A third extends binding authority to a select group of privately owned general agents.

“We like these three focus areas because, in our experience, when market cycles change it rarely affects all three of these areas at the same time,” Vaccaro says.

Vaccaro places great faith in the health of the wholesale marketplace, using the distribution channel almost exclusively to support brokerage, the company’s largest division to date. “Brokerage did $80 million in 2008. We expect between $90 million and $100 million in 2009.”

He says the company’s marine division, which did $50 million in 2008—its first year—is expected to write $60 million to $70 million by the end of this year. Marine products are distributed through both wholesale and retail markets, but so far the company has been successful in serving both without conflict, he says.

Wholesalers fuel the substantial growth in Max Specialty’s brokerage division by approaching the carrier with accounts that support its strategy—one that may surprise those familiar with the company’s Bermuda parent.

“Our brokerage division is made up of small to medium-sized commercial accounts,” he says. “We’re not looking to compete on large Fortune 500 accounts. Bermuda does that. Our average account premium is $50,000—smaller accounts with some catastrophe exposure and some middle market business with less catastrophe exposure.”

Vaccaro touts the experience of Max Specialty’s wholesale partners as a primary reason for the company’s success in maintaining its focus on disciplined underwriting.

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