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Longtime excess and surplus lines insurance executive Mike Miller announced in April that he was forming a startup E&S insurer, Ategrity Specialty Insurance Co. Backed by an as-yet-unnamed investment management professional in New York, the Scottsdale, Arizona-based insurer is in the process of securing a license in Delaware and obtaining a rating from A.M. Best Co. Inc. Over the past few months, Mr. Miller, who spent 20 years at Scottsdale Insurance Co., has been recruiting staff. Key hires include former Scottsdale — now known as Nationwide Excess and Surplus — executives John Goodloe, who will be chief underwriting officer of brokerage business, and Sandy Vertuno, who will be chief underwriting officer of contract underwriting, which is business Ategrity will derive from agents with underwriting authority for the insurer. Mr. Miller recently spoke with Business Insurance Editor Gavin Souter about his plans for Ategrity. Edited excerpts follow.
Q: Why launch a new excess and surplus lines insurer now?
A: It’s always interesting when you do something new, and some reaction would be “Gee, it’s a soft market, there’s plenty of capacity out there, so why would you start another company?” My whole reason for starting it is I love the E&S and specialty marketplace, I think I understand it very well, and I have a lot of relationships developed in that market. You never know when the hard market is coming, or a different market, but you start, you maintain the disciplined underwriting approach, you keep to your business principles, you don’t buy or burn your way into the market. And if you do that, then as the market ebbs and flows you’re in a position to respond to the market based on the needs that the market shows.
We have not put a plan together that says we’re going to take over the world in 60 days. We think we have a very reasoned plan that we are confident that we can execute against.
Q: What areas are you looking at?
A: We’ll be 100% nonadmitted and 100% committed to the wholesale marketplace. Over time, we plan to write in all 50 states, and we’ll be writing commercial coverages — general liability, property and excess. Someday in the future, we may think about acquiring an admitted carrier where we can do some specialty admitted business, but that’s not in our current thinking.
On the brokerage side, we’re going back to relationships that John Goodloe has and looking at the kinds of needs that are in that marketplace and taking advantage of the experience of the team that John has put together. On the contract side, we’ll be into the market a little later because contract takes more technology to enter the market. So we’re going to be in the brokerage market first followed by contract binding at a later point.
Q: Any particular areas you are looking at? There seems to be a lot of activity in the trucking insurance market at the moment, for example?
A: The one area that we’re not going to be going into is commercial auto, trucking. I have a lot of experience with that market, and it needs to be corrected. We think there’s plenty of other opportunities, given the relationships and the backing that we have, that we can spend our time on.
Q: Technology’s been a major theme in your rollout. What are you doing on that front?
A: We do not have a legacy technology platform that we have to build around, and we think that’s a huge advantage. We’re starting from the ground up and building our platform. It’ll be cloud-based, digital, and we think we can build it in a way that we can take some friction out of the process so that business can flow easier and quicker. We’ll be able to build some front-end technology pieces that will help quoting, binding and issuing. We want to make it mobile and digital so that people can do business with us in a way that they want to, not in a way that we demand.
Q: What’s your goal for this first year of business? What are you looking to write in terms of premium?
A: In the first 12 months, we think we can be in the $10 million-$15 million range. We’re going to begin in 11 states and then roll out from there. The 11 states are not contiguous, and it would include the kind of states that are the larger E&S states, including California, Texas, Florida and New York.
Q: How do you see the state of the E&S market?
A: Obviously, it’s not a hard market, it’s a bit of a soft market. Everybody thought that property rates would go up after last year’s catastrophic losses, and there was a small attempt to see if that would happen, but it fizzled really quickly. So rates have been fairly anemic for a period of time, and it doesn’t appear that that’s going to change over the next 12 months.
But there’s a couple things to consider. The economy is very strong, and when you have a strong economy, people tend to start new businesses, expand current businesses — and that’s where E&S really does come into play. We will insure startups, early-stage companies, and there’s a lot of that going on. So I think there’s opportunity out there because of the strong economy. And so I think that comes into our thinking, but I’m not sure you’ll ever see what we used to term a hard market.
When things get stressed, companies are really adept at analyzing their books quickly, understanding where they have the issues and then react to just that issue. In the past, when things got a bit challenging, companies would just, across the board, raise rates or reduce coverage or get out of lines of business.
Companies are much more nimble today. I think people who are able to understand their book, have good analytics, can figure out where they’re winning the game and where they’re losing the game have an advantage because they can make those decisions much quicker than companies that haven’t been able to get to that point. With our technology platform — using current technology where we can capture data, utilize public data and all kinds of different things that we can do — we can understand our book very quickly, know what we need to continue to do or what we need to change and when to do that.
Michael R. Pesch is president of U.S. retail property/casualty brokerage operations at Arthur J. Gallagher & Co. He first joined the brokerage as an intern in 1991 and then full-time after graduating college. In his current role, he manages the day-to-day operations of Gallagher’s retail brokerage business in the United States. He recently spoke with Business Insurance Editor Gavin Souter about Gallagher’s growth over the past year, its strategy for the future and conditions in the property/casualty market. Edited excerpts follow.