Consultative Broker Briefing - V. IV, No. 7 - Be on the Lookout: Marketplace Warnings

The Consultative Broker™ Briefing
Volume IV, Number 7
A Free Publication of C.R. Ekern & Company
888.670.1177
www.crekern.com
Copyright, C. R. Ekern & Company, 2002

"Be on the Lookout: Marketplace Warnings"

I was recently speaking with the managing partner of a Southwestern based regional brokerage firm. He shared with me his concerns regarding the deteriorating insurance carrier results, and we discussed the combined ratio increases and surplus decreases according to Business Insurance’s article on March 25, 2002. Here are his thoughts:

“Because of the combination of premium increases and reserve reductions, several carriers may see their ratios of surplus to written premium approach unacceptable leverage levels. Therefore, in the short run, the increased premiums can have a negative impact on a carrier’s ability to offer capacity because the ratio will worsen with more premium. The results can include a carte blanche withdrawal from certain business classes, new business moratoriums, and cancellation of perceived marginal accounts.”

Some of us with a little “gray hair” have seen this one before. Of course we are not predicting this, but it bears monitoring closely. In the event a carrier’s results do not match the premium increases, WATCH OUT!

As a Consultative Broker you know the importance of thinking and acting strategically on behalf of your clients and prospects. A key component of strategic account development is anticipating marketplace changes and providing safe harbor throughout the storm. Here are some thoughts on what a Consultative Broker should be doing:

Remain on the lookout. Have someone on your team constantly monitoring the results of your major carriers. Review the results each quarter and discuss them with the carrier management. Pay particular attention to the first and second quarter results. Ask tough questions and do not allow Mandarin Chinese to be spoken!
Keep your clients and prospects informed. Tell them about the potential impact these results may have on their industry. In the event they are not hearing it from you, they may hear it from someone else (another Consultative Broker?)
Remember 9/11. There are a number of carriers that have not as yet felt the full impact of 9/11. This is true of any carrier that is currently operating with July reinsurance terms.
Know the alternatives. We have said this before, and we will continue to remind you. The traditional insurance marketplace is just one source of capacity. Others include captives, RRG’s, and your clients’ balance sheets.
Keep in contact with wholesalers. In the event the market continues to deteriorate, your wholesaler relationships may be your silver bullets in difficult situations.

And some words to the wise: Watch the next three months very closely. In the event the other shoe is going to drop, it will begin to slip during this second quarter. As Consultative Brokers we won’t allow it to fall on our clients’ heads!

Best regards to all Consultative Brokers,

Rob Ekern
President
C.R. Ekern & Company

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Thank you.
C.R. Ekern & Company