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The specialized nature of the excess and surplus lines insurance sector puts a premium on attracting and cultivating top talent.
While high-volume lines of business such as small commercial or business owners policies have shifted to largely automated underwriting, surplus lines remains a comparatively bespoke business that necessitates that highly skilled people underwrite and service customized insurance policies.
“Depth of expertise is a key differentiator for us,” said Jeremy Johnson, Boston-based president and CEO of Lexington Insurance Co. “In our history, we have created multiple new products across a range of industries and disciplines, and you need that expertise to innovate.”
Carol Sheehan-Mathis, Phoenix-based associate vice president of human resources at Scottsdale Insurance Co., agreed that a surplus lines company's success is predicated on experienced talent.
“It all comes down to being able to attract and retain experienced individuals with specialized expertise,” Ms. Sheehan-Mathis said.
Most companies tend to cultivate talent internally and acquire experienced people from competitors.
To fill top positions at upstart Berkshire Hathaway Specialty Insurance Group in 2013, the company turned to several top executives from Lexington and its parent company, American International Group Inc., a group that includes Berkshire Hathaway Specialty Insurance President Peter Eastwood.
“In the specialty and E&S markets, experience goes a long way,” said Kim Briones, Boston-based senior vice president of human resources at Berkshire Hathaway Specialty. “When looking for talent, you are often looking for people that you have come across in the marketplace that are skillful and you want to do business with,” Ms. Briones said.
Mr. Johnson said a mix of internal development and external recruitment is essential.
“Lexington has historically had a strong base of talent and has done very well by promoting from within, but we continue to attract experienced people from across the industry,” he said.
Ms. Sheehan-Mathis agreed a long-term, balanced approach is necessary.
“We are working diligently to build our bench strength internally, but we are also out in the market to identify people that might be interested in our organization in order to get to the next step in their career,” she said.
Despite the industry's premium on experience, getting young people into the organization is a top priority for Scottsdale amid baby boomer retirements, Ms. Sheehan-Mathis said.
“We have very talented employees that are looking to retire,” she said. “This trend has escalated over the last few years.”
So Scottsdale has invested in college recruiting and partners with universities with insurance and risk management programs, Ms. Sheehan-Mathis said.
“The statistics will tell that there is a graying of the insurance industry. That's why you have to stay focused on bringing in young talent into the organization,” Mr. Johnson said. “You need to build a deep bench.”
Aside from college internships and other traditional recruitment tools, Lexington is cultivating internal talent through its annual “innovation bootcamp,” where teams of junior staffers develop new insurance products and compete for prizes. The competition is a great way to expose young talent to company leadership, Mr. Johnson said (see story below).
Ms. Sheehan-Mathis said Scottsdale wants to accelerate the learning curve for younger employees.
“We often developed that deep expertise with time in the job, but we may not have that luxury going forward,” she said. “So we are trying to get them there in less time and demonstrate to our people that we are committed to promoting from within and that the opportunities are there. We just have to get them ready.”
Ms. Briones is encouraged about the depth of the talent pool available for Berkshire Hathaway Specialty.
“Getting the right people is challenging for any company, but there's always extraordinary talent coming through our industry, and no decade or company has a lock on it,” she said.
Flat insurance rates in the excess and surplus lines market are drawing competition from the standard admitted market amid abundant capacity. Despite last month's Napa, California, earthquake, most experts say property catastrophe rates remain soft, while casualty and general liability rates are increasing somewhat.