Farmington Hills, Mich.-based Burns & Wilcox Ltd., the sixth-largest wholesale insurance broker in the latest Business Insurance ranking, has embarked on a growth strategy that includes last year's purchase of Global Excess Partners L.L.C., which underwrites property programs on behalf of Lloyd's of London and other insurers. It also established a separate brokerage unit. Alan Jay Kaufman, who is chairman, president and CEO of H.W. Kaufman Financial Group and Burns & Wilcox, its largest unit, recently spoke with Business Insurance Associate Editor Matthew Lerner about Burns & Wilcox's growth strategy and the outlook for the property/casualty insurance industry in 2014. Edited excerpts follow.
Q: Was there a specific purpose behind the appointment of Evan Bull as head of the national property practice at Burns & Wilcox Brokerage, and are there expansion plans for the national property practice?
A: Yes. His experience and relationships coming from Marsh L.L.C. add credibility and expertise to our national and global broker presence. With the appointments of (Burns & Wilcox Brokerage President) Denis Brady and Evan Bull, we are remaking our brokerage at a higher level. I'd like to see the brokerage expand to produce business in the $500 million area. Our goal is to be in the top five of wholesale brokerages. Burns & Wilcox Brokerage will grow proportionally faster than the Burns & Wilcox managing general agent.
Q: Why did you acquire Global Excess Partners?
A: With Global, we looked for the opportunity to grow our business, and Global has the opportunity to expand significantly. We plan on investing in talent and enhancing Global's underwriting capabilities, both in the U.S and eventually abroad.
Q: What are the advantages of operating as an integrated financial group?
A: Vertical integration. To the client, the major impact is clients have better services. If a retail broker can approve premium financing instantly, it brings value throughout the food chain. US-Reports is another part of the Kaufman Financial Group which conducts inspections. In our industry, it is important to have great inspections to make prudent decisions. It directly impacts the timeliness and expediency of placing business. We think that speed is a vital component of the business process, and its demand is only increasing.
Q: Is there an advantage to critical mass?
A: Scale and expertise are necessary, and you have to have an adequate number of people to develop a solid reputation for having that expertise. You must also be able to afford the ever-increasing cost of doing business; however, a good broker is a good broker, from one or two employees to 100. It's the quality of the talent, not the quantity.
Q: Is the influx of alternative capital into the insurance sector affecting your business?
A: Yes. There is overcapacity. That's why reinsurance rates are down when they should be up. However, I think that will change. If there are downgrades of insurance companies, or if returns are not that great, there will be a receding amount of capital. Right now, we have overcapacity, and I don't think anyone would disagree.
Q: What do you see for the economy in 2014, and how will it affect the insurance industry?
A: 2014 will be ... OK. The economy will be marginally better and we are anticipating flat growth for the industry. There are opportunities, but because of overcapacity, rates will remain flat. The stronger companies will probably have a good year.
Q: Is the insurance business fun?
A: I think it's fun because it's a relationship business ... It's also a competitive business.