Specialty Market Hot Spots
McDONALD: We sort of alluded to this in some of our remarks before. Let’s talk about this specifically. Given what’s happened in the market and all the different things, what are the hot spot lines right now? What are the things that surprise you the most in terms of specific specialty lines in terms either as being difficult or unusually available? E.G., any thoughts on that?

LASSITER: Well I touched on general liability earlier. We’re seeing some pricing there, umbrellas. I don’t think we’re seeing a lot if, it’s sort of a continuation of the same trends in terms of the percentage reductions that we might have to compete with in order to get a renewal order in most of our product lines. You touched on it earlier, I think D&O is in general flat to slightly up, especially in some financial institution areas. It’s up pretty big in that area. But the only real place where we see extreme competition frankly is in general liability.
McDONALD: Chris, at the producer level you get a pretty wide spectrum of coverages. What’s your biggest challenge right now?

TREANOR: Well I think as we said before, what we anticipate and what we’re starting to see is financial institution business is going to fundamentally change. The estimates of what that loss is going to be, based on the meltdowns and the bankruptcies and everything else, it’s tough to say. I heard a number this morning of $8 billion. The premium in that for D&O and E&O and financial institutions is what, a billion and a half? So there’s certainly going to be some movement in that area. In the general D&O market you’re certainly going to see more bankruptcies as the economy worsens, as credit becomes more difficult. There’s going to be a spike in D&O claims.
We are anticipating that that’s the line that’s going to be under the most pressure. We don’t think that’s a short-term phenomenon. Beyond that I absolutely agree with E.G. that the GL stuff, whether it’s the admitted markets doing stuff that they have no expertise in doing but do it anyway, the standard markets, or whether it’s just crazy pricing I think that’s absolutely the one that continues to be under the most pressure.
We do see tough large products holding up better and people walking away from that and we anticipate the cat property market rebounding. But short of that we’re still seeing a lot of softening.

LASSITER: There certainly are some lines we don’t know. I don’t know if you do, Tony, like auto or workers comp. maybe you can speak to those but we don’t.

MARKEL: We don’t do any comp and very little auto. But you know, Lee, either you or Chris brought up and he’s reiterated the dramatic increases that are coming out in D&O and I think you in your earlier remarks or maybe Dan alluded to credit related coverages. But I don’t think the industry deserves a lot of credit for that knee-jerk. It’s like we’ve been smacked across the face with the two by four and these rates are responding to obvious rating inadequacies. It’s a knee-jerk really.
So if you get pounded long enough you finally start coming to your senses. I think those two areas are going up but they’re going up basically because losses are so obvious.

McDONALD: Dan, anything on that in that regard there?

RYAN: No, not really. Where folks are looking to perhaps more so now is probably the program market. That’s been drawing a lot of attention. Insurers are trying to find good program managers, MGAs, MGUs, whatever acronym you want to use and just trying to get to the ease of use and automation. Whatever lines of business it is, whatever program it is, try to make the life of the program at the program manager’s level a lot easier. But in terms of line, I would agree with what we talked about here. The GL is certainly obviously the line that comes under pressure first, always the first line to collapse and then everything follows after that. D&O is certainly an issue we’re looking at. I heard somewhere in between $8 to $10 billion in terms of potential losses from class action. I don’t know if that came from Stanford. That’s a range that we’re looking at. We’re watching that very closely in terms of development there and certainly that is pushing some of the up pricing in that marketplace and we’ll continue to probably see that given the level of premium that’s out there are the moment and the need there. But other than that relatively benign. I think bright spots, it’s almost business as usual over the next quarter or two.
What Producers Should Know
McDONALD: We’re going to be wrapping it up with a final round of questions here. As I mentioned in the beginning we have a full house on the line and a lot of producers. So at this point what do producers need to know about this market and what are you hearing from them? What do you want them to know? Tony?

MARKEL: Clearly the surplus lines market and its wholesale partners, as E.G. jokingly referred to is everybody is sitting prepared to take advantage when the market turns. But we are a safety valve type of industry. We come to the fore, wholesaler and company, when the market discontinues making cheap pricing and competitive rate levels and coverages, capacity and everything so available. We have not at this stage collectively, our wholesale partners and ourselves and I think E.G. would agree with this, we have not really gone and come to the fore yet. Because the market is still so sort. That’s not the market that we shine in and win.
I started to say if and when, I don’t think it’s a question of if, I think it’s a question of when. When the market does tighten as the result of the confluence of events that we discussed, clearly I think the dry powder that we have as companies and the expertise that the wholesalers bring to the equation will fill the need the way we always have in the past.
Very few of the surplus lines carriers and I would assume from that, very few of the wholesalers, have really had organic growth in the last two or three years. Because the opportunities are not there and in general I think we’ve been disciplined enough not to Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13