NAPSLO Survey Finds Specialty Lines Capacity Unchanged and Submissions Up in 2009

Despite an economic slowdown, the majority of wholesale brokers and E&S carriers are not seeing a decline in capacity or a tightening of terms along specialty lines, but are seeing an increase in submission activity, according to the results of a recent survey of members of NAPSLO.

The survey, which was conducted in mid-May 2009, compared results of the first quarter in 2009 to the same period of 2008.

“NAPSLO members confirmed that pricing, capacity and terms in specialty lines remain relatively flat, but recognized that a major catastrophic event or changes in the economy could have a significant impact on capacity,” said John Wood, NAPSLO president. “During these uncertain times, wholesale brokers and surplus lines carriers remain strong with ample capacity to meet specialty lines needs in any market cycle.”

Nearly half of the respondents to the survey said that they were not seeing a change in the availability of specialty insurance coverage; 38% said they were seeing an increase in coverage availability and only 12% said they were seeing a decline in availability.

Regarding terms, 44% said the limitations on coverage were about the same as in the first quarter of 2008, while 31% said terms were loosening, and 22% said terms were either tightening or tightening slightly.

More than half of the respondents reported submission activity increasing, with 32% reporting a slight increase and 22% reporting consistent increases. Only 23% reported declining submissions and 22% reported submissions were about the same as in the first quarter of 2008. Specialty lines where respondents reported seeing the greatest increase in submission activity in 2009 were Property, General Liability, Casualty, and Cat Exposed Property.

When asked what factors would have the potential to have the greatest impact on availability and pricing on specialty lines in the remainder of 2009, respondents most frequently cited the economy, catastrophic losses and declining capacity among carriers and reinsurers.

Respondents were also asked about pricing and retention level changes along 10 specialty lines of business: Property, Cat Exposed Property, Casualty, Professional Liability, D&O-Private, D&O-Public, Healthcare and Medical Malpractice, Excess & Umbrella, Environmental, and Transportation. Of the 10 areas, Cat Exposed property was the main area where respondents consistently saw increases in pricing while respondents saw decreases in Property, Casualty, Professional Liability, Excess and Umbrella, and Transportation.

While availability, terms, pricing, and submission activity were comparable to 2008, respondents reported decreased retention levels in many of the 10 specialty lines surveyed, led by Casualty, Property, Excess & Umbrella and Transportation. While significant decreases were reported along these lines, the majority of respondents reported retention levels were about the same along all lines.

Results are available on the website.

Webinar on State of Industry Set for June 11

Industry leaders will review the state of the market for specialty insurance in light of a new survey conducted by NAPSLO. The special online live presentation is set for Thursday, June 11, at 11 a.m. EDT. The event is free, visit www.ambest.com/excess09 to register.

Participants in the one-hour discussion include:
--Paul Springman, President and Chief Operating Officer, Markel Corp.
--Marla Donovan, Vice President, Burns & Wilcox
--Kevin Westrope, President and CEO, Westrope
--Richard Kerr, Chairman and CEO, MarketScout Corporation
--A member of the A.M. Best Co.'s specialty lines rating group

The panel will examine today's market, including pricing and availability, for specialty insurance, known in various forms as surplus lines, excess & surplus or non-admitted coverage. They will also survey changes in the financial strength of the specialty insurance sector of the property/casualty industry. Specialty insurance includes coverages typically not available through standard commercial or personal insurance products. Best's Review, A.M. Best Co.'s monthly news magazine, will cover this topic in the September issue and will include content from the Webcast.

Topics to be covered in the panel discussion include:
--The state of insurance capacity and the availability of various lines of coverage
--How terms and limitations may be changing for various lines of specialty coverage
--How pricing, availability and retention experience have been affected for these lines of insurance coverage: property, catastrophe-exposed property, casualty, professional liability, directors and officers (both public and private), healthcare and medical liability, excess and umbrella, and environmental and transportation
--Financial strength of insurers serving the specialty lines industry

Registration for this event is free. Participants are encouraged to send in comments and questions for the discussion portion of the presentation. The Webcast will be available worldwide via a link provided upon registration.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers.

NAPSLO Applauds Introduction of Surplus Lines Bill in House

NAPSLO applauded the introduction of the Non-Admitted and Reinsurance Reform Act of 2009 in the U.S. House of Representatives by Reps. Dennis Moore (D-Kan.) and Scott Garrett (R-NJ), and indicated they hoped the bill would be introduced soon in the Senate.

“NAPSLO is pleased to see Rep. Moore and Garrett introduce the bill in the House and we look forward to working with them to get the bill passed,” said NAPSLO President John Wood. “We are also encouraged regarding prospects for the bill being introduced in the Senate shortly. Passage of this bill would help streamline and reduce barriers in state regulation of surplus lines insurance”

The NRRA is, in part, aimed at making access to the surplus lines market more efficient for consumers and the brokers and agents who assist them. In addition the bill could help standardize state regulations facing the industry.

Reps. Moore and Garrett, members of the House Committee on Financial Services, submitted the bill on Thursday. Senators Evan Bayh (D-IN) and Mel Martinez (R-FL), members of the Senate Committee on Banking, Housing and Urban Affairs, have also announced that they plan on introducing a version of the bill in the Senate.

“We believe that this legislation will bring efficiency and reduce the cost of regulatory compliance in surplus lines placements with multi-state exposures,” said NAPSLO Executive Director Richard Bouhan. “Consumers will benefit because the costs related to the inefficiencies and redundancies, which they bear, will be eliminated.”

The bill would establish national standards for how states regulate the surplus lines market and reinsurance and would create a uniform system of surplus lines premium tax allocation and remittance, one-state compliance on multi-state surplus lines risks, and direct access to the surplus lines market for sophisticated commercial purchasers. These are concepts long endorsed by NAPSLO and promoted with members of Congress during meetings over the past few years.

The House passed similar versions of the bill in the last two sessions of Congress and the Senate took up a similar bill in 2007 but no action was taken in the Senate prior to the end of the 110th Congress, requiring that the bill be reintroduced in the 111th Congress in order to be considered.

“Rep. Moore’s leadership has been important in getting the bill approved in the past two sessions and with the addition of Rep. Garrett as the lead Republican sponsor, we believe the prospects for passage are excellent,” said NAPSLO’s Washington D.C. representative, Maria Berthoud of B&D Consulting. “We are also encouraged by the interest in the bill by the Senate and are hopeful it will be passed in that chamber this year.”

NAPSLO Marketplace Survey Deadline Friday

NAPSLO is currently conducting a survey amongst its members on current market conditions and the deadline to complete the survey is Friday, May 22.

The survey, conducted by the NAPSLO Communications & Technology Committee, gauges current conditions in the marketplace. The survey conclusions will be published on the NAPSLO website, distributed to the insurance trade press, and discussed at an A.M. Best/NAPSLO webinar tentatively scheduled for June 11.

NAPSLO members who have not completed the survey can click on the link below to access the survey.

Surplus Lines Marketplace Survey

ELANY Clarifies License Authority

Resident surplus lines brokers in Missouri, Montana and Florida applying for an excess line broker license in New York will not receive full license authority to write business in New York state because those states do not issue an unlimited license for New York resident licenses, according to a recent bulletin from ELANY.

Under Bulletin 2009-10 released on May 11, ELANY reviewed the state’s position regarding reciprocity and the issuance of “full” or “limited” non-resident excess/surplus lines broker licenses. The bulletin said that brokers from Florida and Montana will receive a limited license, which permits them only to write purchasing group business in New York.

New York will issue an unlimited license for Missouri licenses for individuals, however corporate entities will receive the limited license. In addition, while not limiting what they can write, the state will require a bond for California and Washington resident brokers because those states require a bond for New York resident brokers

NAPSLO E&S School Sold Out

The NAPSLO E&S School, set for June 23-26 a the Eric P. Newman Education Center in St. Louis, has sold out.

The NAPSLO Advanced School, designed for people with more than 5 years experience in the surplus lines industry, is set for Nov. 7-10 in St. Louis and registration forms will be sent in the summer.

Rhode Island Eliminates Surplus Lines Broker Affidavit Filings

The Rhode Island Department of Business Regulation, Insurance Division, is reminding surplus lines brokers that Insurance Bulletin Number 2008-8 states that as of July 1, 2008, Rhode Island laws were amended to eliminate the filing of surplus lines affidavits.

The affidavits are still required to be executed by the insured and surplus lines broker – the change is only with regard to the filing of those affidavits with the Department. As a result the Department no longer accepts broker affidavits.

In lieu of the filing of affidavits, all surplus lines licensees must file a yearly report with the Department showing the business procured under the surplus lines license for the preceding calendar year.

Surplus Lines Brokers should use the form under Insurance Regulation 11, Exhibit C as a guide and add information such as the company name and contact information where appropriate. The first Surplus Lines Broker Annual Report filing is due April 1, 2010. There is no annual filing for 2009.

Surplus Lines Brokers who do not write any Rhode Island business in a calendar year are required to either complete the form included in Insurance Regulation 11, Exhibit C indicating that they are reporting zero premium or file a letter to that effect on letterhead.

E&S School Nearly Sold Out

The NAPSLO E&S School, set for June 23-26 in St. Louis, is nearly sold out and only a few spaces remain.

The school is designed for insurance professionals with less than five years experience in the surplus lines industry. Persons with more than five years surplus lines experience are encouraged to attend the NAPSLO Advanced School, offered each Fall

The E&S school's curriculum will focus this year on five segments: Risk Takers-and various markets; Distribution System - purpose & variations; MGA's and Brokers-managing the business; Market Dynamics-changing environments; and Cops - regulatory agencies.

Registration materials are available to download from the NAPSLO website.

Rhode Island Requiring Companies to Provide Emergency Contact Information

As part of developing an emergency adjuster access and coordination plan, the Rhode Island Department of Business Regulation, Insurance Division, has issued a bulletin requiring all Property & Casualty insurers (including surplus lines insurers) licensed or approved to do business in Rhode Island to immediately provide the Department with emergency contact information.

The department is requiring companies to designate a Primary Contact Person (“PCP”), and an Alternate Contact Person (“ACP”) in the event the PCP is not available, and provide contact information for the individuals. The contact person will serve as the primary conduit between the insurer, and the Department before, during and after a catastrophic event.

The Department said that the PCP and ACP should have the authority to provide assistance and information to the Department at all times during such event. Also included within the Plan is a Vehicle Identification Placard system that will allow vehicle access into disaster areas for vehicles carrying insurance company personnel and firms can order placards as part of registering.

The Department said it would make every effort to issue Bulletins before, during and/or after a disaster is declared in Rhode Island to offer guidance and assistance to the industry during such event. In the event of extended power outages, efforts to reach the PCP will be made via cellular phone.

The Department's liaison for catastrophic events in RI is Paula Pallozzi, Chief Property & Casualty Rate Analyst who may be reached at paula_pallozzi@dbr.state.ri.us or 401-462-9616.

Companies should visit the state's website to furnish emergency company contact information. Alien Surplus Line Insurers that do not have NAIC/FEIN numbers should contact Ms. Pallozzi directly. For more information about the information required, please download a copy of the bulletin.

Florida House, Senate Pass Bill to Remedy Zota Ruling

The Florida House and Senate approved legislation this week clarifying the surplus lines industry's status regarding forms and policy regulation that was challenged by the Florida Supreme Court’s ruling in 2008 in Essex v. Zota.

The Florida House of Representatives passed legislation on Tuesday by a vote of 116-0 and the Senate passed it 38-0 on Friday. The bill now goes to the Governor for signature.

The bill restores the industry's exemption from regulation of surplus lines forms and policies that was put into question by the court ruling which said that surplus lines was only exempt from the rating section of Chapter 627 of Florida’s statute (Insurance Rates and Contracts) but was subject to the chapter’s other provisions.

The new legislation affirms the industry's regulatory exemption retroactive to Oct. 1, 1988, the date the court’s decision ruled previous legislation initiated the exemption of rate, but not form regulation.

"We are pleased to see that the Florida legislature has passed this bill and are hopeful that the Governor will sign the bill," said Executive Director Richard Bouhan. "Led by the work of the Florida Surplus Lines Association, the Florida Insurance Council, PCIAA, AIA, Lloyd's, NAPSLO and the Florida Surplus Lines Service Office this legislation affirms the industry’s freedom from regulation of rate and forms."