KONA, Hawaii-Some managing general agents are finding creative ways to weather the prolonged soft market.

When Harold Anderson lost a market for a particular line of coverage, he decided to develop the program himself to shop around to insurers.

He assembled a team of underwriters to put the program together in-house and then showed it to a couple of insurers, even some that hadn't written program business before.

"We found it much to our advantage to go to a company president and show him our work product," said Mr. Anderson, president of Kenneth I. Tobey Inc. in Seattle. He did not elaborate on what kind of coverage his team put together.

In some cases, insurers were impressed with the MGA's work, especially when they discovered they wouldn't have to invest weeks or months of company time preparing the product in house before it could be sold, he recounted.

Now, instead of having just one market for the coverage, the MGA has several from which to choose.

And today, Mr. Anderson's firm has an entire department-called Product Development-devoted to developing new insurance products-something that in the past had been the exclusive domain of insurers.

"We're doing actually what the company would do with regard to putting a product together," he said. "This has been the key to our survival."

"Our organization has become the CostCo of the insurance industry," he said, referring to a popular chain of wholesale stores in the West that cuts prices by eliminating middleman mark-ups.

Mr. Anderson wasn't the only surplus lines industry expert advising MGAs to be more innovative.

One of the AAMGA's educational courses held during this year's annual meeting focused on ways to develop such program business.

And an industry panel discussion focused on challenges associated with the changing marketplace and ways to succeed in the 21st century.

"We can no longer depend on commissions alone. We're going to have to become more risk-takers," said Orville D. Jones, chairman and chief executive officer of Crump Insurance Services, a unit of Price Forbes North America in Dallas.

In some cases, MGAs may have to consider taking fees in lieu of commissions in response to pressure from buyers to cut costs, said Kevin P. Brooks, chairman and president of General Star Management Co. in Stamford, Conn.

"Risk managers are already asking what the wholesaler's 'cut' is," he said. Unfortunately, he added, "fees are not as profitable as commissions."

But other AAMGA members were more optimistic, pointing out that the pressure on cost containment will provide the impetus for MGAs to become more creative.

In the end, that could lead to greater revenues for wholesalers, pointed out Seth D. Freudberg, president and CEO of United National Insurance Co., a surplus lines insurer in Bala Cynwyd, Pa.

"We need to routinize innovation," Mr. Freudberg said, because "no single innovation works forever."

MGAs also need to constantly seek new markets, "or you will die," Mr. Freudberg warned. While the overall insurance market remains soft, "there have been market turns in specific lines," he pointed out. "For those MGAs who focus on lines that become hard, survival could depend on the ability to keep and find new markets."

"MGAs also need to be very easy to do business with," he said, urging wholesalers to streamline their operations.

MGAs have a distinct advantage because they usually are small, entrepreneurial organizations, observed Peter Lane, president of Lloyd's North America in New York.

"It's doubtful that large organizations can be as flexible as MGAs," he said. "In fact, large organizations keep trying to break down their operating units."

"As long as buyers' needs change, there will be a need for MGAs," Mr. Lane assured.