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American Agent & Broker
George Williams, CPCU
October 2004
THE THEME of the 2004 annual meeting of the National Association of Professional Surplus Lines Offices, "Thirty Years of Progress," was intended to focus on the organization's growth and development since its founding in 1974. Signs of that growth were present at the meeting, held last month in Orlando, Fla. A record number of nearly 2,900 attendees registered for the event in advance, a total that increased with considerable on-site registration. Association Vice President Richard L. Polizzi, ASLI, pointed out in the meeting's opening session that since the group first began offering its E&S and advanced schools (the E&S school 15 years ago, the advanced school 10), nearly 1,450 students have gone through the two programs. President H. James Griffith told attendees that 800 insurance professionals have earned the Associate in Surplus Lines Insurance (ASLI) designation since NAPSLO created it in 1996. The growth in the market segment served by the association's members has been noticed by "outside" parties as well. In a special report, "Excess and Surplus 2004," A.M. Best stated that "direct premium volume for the surplus lines industry increased by approximately 28%" in 2003, "which followed an estimated 62% increase in 2002."
Appropriate as the theme was, speakers and attendees focused equally on the current status of their organization and the surplus-lines market, as well as the outlook for the future. Saying that the state of the association was going from "good to great," Mr. Griffith told attendees that NAPSLO members appeared poised in 2004 to surpass the record amount of premium they wrote in 2003. The industry segment's growth and ability to help clients affected by the hard market, he said, "have contributed to a greater presence and appreciation for us in the insurance industry."
This optimism may not have been tempered by current market conditions, but the spectre of a softening market was evident at the meeting nonetheless. The same A.M. Best report that described market growth noted that although "tremendous migration...from the standard market to the surplus lines market" was a factor in premium growth, rate increases were also a factor, and that pricing pressure was already beginning to affect such lines as property, umbrella and excess coverage. Several attendees acknowledged this trend, indicating that while business was good, they were becoming increasingly busy, as softening rates required them to work harder than in recent years to write the same amount of business.
The softening market may also have an effect on the pace of agency consolidations and mergers, according to Robert J. Lieblein, CPA, and Steven S. Wevodau, of WFG Capital Advisors. Mr. Lieblein and Mr. Wevodau presented "Mergers and Acquisition Trends and Developments," one of two educational seminars at the meetings. "Six months ago, we might have predicted the market would soften, but not as quickly as it has," Mr. Lieblein commented, adding that the resulting slowdown in "organic growth" was forcing national brokers, banks and other entities to continue seeking acquisitions to meet their growth goals. Still, Mr. Lieblein said, he expected to see the pace of acquisitions slow within 24 to 36 months.
While NAPSLO's members are adjusting to a market change, Mr. Griffith said the organization is also readying for "what could be the defining moment in our industry." He was referring to the prospect of new federal regulation of the industry-in particular, the currently proposed "SMART" act, which could lead to a single, streamlined set of regulations for all states. NAPSLO's legislative committee, Mr. Griffith said, has made the organization's position clear: "We believe that...one set of federal standards, which all states would have to adhere to...is certainly preferable to a federal regulator, with limited knowledge of the individual and unique state markets in which we are functioning." He added that in communicating what it sees as important principles to legislators, NAPSLO has been working alongside other industry organizations, such as the Independent Insurance Agents & Brokers of America, the American Association of Managing General Agents, the Council of Insurance Agents & Brokers and the Property Casualty Insurance Association of America.
Mr. Polizzi (who was voted in as NAPSLO president at the end of the four-day meeting) reinforced the importance of the association's work in Washington. "(We) have been working diligently to make sure that each discussion (of legislation) includes our four points," he said, "which are freedom of rate and form, automatic export, uniform licensing, and a uniform approach to premium and taxes."
Responding to changing market conditions and proposed legislation is but a small part of NAPSLO's efforts to help its members, Mr. Griffith explained. The first day of the annual meeting featured a focus-group meeting, which NAPSLO co-sponsored with ACORD, that studied ways to facilitate the consistent, electronic transfer of data-just one of several efforts the group has undertaken to help its members make the best use of developing technology. NAPSLO has also recently created a seminar program, debuting in Chicago and New Jersey, and focusing on negotiation skills. Mr. Griffith indicated that the association would unveil a new version of the program at this month's Big "I" convention, adapted to help retail producers prepare submissions for surplus-lines brokers. In the future, he added, the program will be expanded in terms of both topics addressed and locations served.
Mr. Griffith said the NAPSLO board has recently reviewed its strategic plan, and may begin implementing some new ideas soon, based on that review. As he prepared to turn the reins of the organization over to Mr. Polizzi for the coming year, he confidently stated, "I know we'll be in good hands."
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