10 LARGEST U.S.-BASED SURPLUS LINES INSURERS: COLUMBIA CASUALTY CO.

Columbia Casualty Co.

CNA Plaza, Chicago, Ill. 60685;

312-822-1906; fax: 312-817-3317

1996 1995

Gross premiums $544,954,351 $502,611,356

Non-admitted $181,294,645 $147,601,114

Commercial risks 100% 99.2%

Net premiums $360,441,102 $350,362,262

Paid-in capital $5,200,000 $8,700,000

Capital & surplus $280,811,095 $242,937,606

Employees 0 0

Combined ratio 109.7% 107.8%

Rating agency 109.4% 107.8%

Net income $34,272,113 $29,020,069

Best's rating* A/A- A/AS&P rating* A+/A- A+/A**Ratings are for CNA and Continental Insurance Co., respectively.

Columbia Casualty Co., the non-admitted CNA Insurance Cos. insurer, saw its direct, non-admitted premiums soar 22.8% last year.

Columbia Casualty reported direct, non-admitted premiums of $181.3 million for 1996, compared with 1995's non-admitted premiums of $147.6 million. That performance earned the insurer the 10th spot in Business Insurance's ranking of the 10 largest U.S.-based surplus lines insurers.

Columbia Casualty debuted at the ninth spot in the BI rankings last year, based on combined retrospective financial results for Columbia Casualty and Pacific Insurance Co. Pacific was previously Continental Insurance Co.'s non-admitted insurer and is a different company from Pacific Insurance Co. Ltd., which is profiled on page 30. CNA Financial Corp. acquired Continental Corp. in May 1995.

CNA E&S, the CNA division to which Columbia Casualty belongs, plans to continue phasing down Pacific's writings, eventually using the insurer only to write non-admitted business in Illinois, where Columbia Casualty is admitted, according to Richard W. Quehl, president of CNA E&S.

Of Columbia Casualty's total direct, non-admitted premiums, Columbia Casualty wrote $162.5 million-89.6%-and Pacific wrote $18.8 million-10.4%. In 1995, Columbia Casualty wrote 54.1% of total non-admitted premiums while Pacific wrote 45.9%.

Columbia Casualty owes the majority of its 1996 non-admitted premium growth to increased writings in existing lines of business, Mr. Quehl said. Columbia Casualty also launched some new programs, the largest of which is municipal liability business, including police professional liability and public officials professional liability.

Columbia Casualty's 1996 gross premium volume was $545 million, up 8.4% from combined volume of $502.6 million for the two companies in 1995. The rise in gross premium volume reflects Columbia Casualty's increase in non-admitted premiums and its portion of the business that other CNA companies write, according to Mr. Quehl.

Net written premium volume last year for the combined operations of Columbia and Pacific totaled $360.4 million, up 2.9% from the previous year.

Columbia Casualty's combined ratio rose to 109.7% from 107.8% last year.

There is "probably no single good answer" to why that happened, Mr. Quehl acknowledged, but the downward pressure on rates in a competitive market was a key factor.

Net income rose 18.3% to $34.3 million last year from $29 million the previous year. "Thank God for the investment department," he quipped.

Columbia Casualty has a policyholder surplus of $280.8 million, up 15.6% from $242.9 million the previous year.

Columbia Casualty has an A rating from A.M. Best Co. and an A+ rating from Standard & Poor's Corp. Pacific has an A- rating from Best and S&P.

Mr. Quehl said he expects CNA E&S's gross premiums to increase about 6% this year, and Columbia Casualty's growth will be parallel.

Columbia Casualty writes liability coverage on a non-admitted basis only. The largest limit Columbia Casualty writes is $25 million.

Medical malpractice coverage accounts for the largest portion-about 35%-of premiums written on a direct, non-admitted basis, up from 25% of the insurer's direct non-admitted premiums in 1995. In addition to the coverage written for providers ranging from nurses to hospitals, Columbia's medical malpractice business has increased by writing more coverage for biotechnology companies that manufacture and test new medical products, Mr. Quehl said.

Medical malpractice liability coverage is written on a net basis with limits of up to $5 million, Mr. Quehl said.

Liquor liability coverage, primarily for mom-and-pop restaurants, taverns and private social clubs, accounts for about 25% of non-admitted premiums. Columbia Casualty writes liquor liability coverage in 27 states.

The insurer writes liquor liability with a $1 million limit, all net, up from a $500,000 limit in 1995.

Another 25% of non-admitted premiums are generated by a combination of smaller lines of liability business: railroad liability coverage, product liability coverage for industries such as sporting equipment and heavy machinery, and premises liability coverage.

Railroad liability coverage is written with a limit of up to $15 million. Columbia Casualty's maximum retention is $5 million.

Columbia writes primary product liability coverage with a limit of $1 million on a net basis. The insurer writes excess product liability coverage with a maximum $25 million limit on a quota-share basis, retaining a maximum of $10 million.

Columbia Casualty writes premises liability with similar limits. Primary premises liability coverage with a limit of $1 million is written on a net basis; excess coverage is written with a limit of up to $25 million on a quota-share basis, with the company retaining up to $10 million.

Miscellaneous errors and omissions coverage and municipal liability coverage generate the remaining 15% of non-admitted premiums.

Miscellaneous E&O liability coverage is written on a net basis with limits of up to $5 million, Mr. Quehl said.

Police professional liability is written with a $1 million limit on a quota-share basis, with the company retaining $300,000.

Columbia Casualty plans to launch a new program this year to cover weather-related extra expenses municipalities incur, Mr. Quehl said.

For example, if a heavy snowfall causes a municipality to spend more money for snow removal than it has budgeted, Columbia Casualty's insurance would cover that expense. The program would not cover catastrophic events such as hurricanes and earthquakes or extra expenses related to those events, however, Mr. Quehl said. The coverage will be written on a net basis with limits of up to $5 million.

The insurer also is "working hard to find a way to get into the gaming industry," Mr. Quehl commented. Columbia Casualty is considering writing liability coverage for riverboats and Indian reservations that offer gambling and California card parlors, where patrons bet on games like poker, he said.

Two programs Columbia Casualty introduced last year have not panned out as planned, although the insurer still is writing both coverages, Mr. Quehl said.

An automobile liability program for automobile messengers in California with a $1 million limit "hasn't been anywhere near as successful" as the company had anticipated, Mr. Quehl said. Although Columbia Casualty still is writing the coverage, the insurer will not expand the program to other states because of keen competition for the risk, Mr. Quehl explained.

Columbia Casualty also is not expanding a construction defects program it launched last year for contractors. The coverage, which has limits of $1 million per occurrence and $2 million aggregate, is written on a claims-made basis. However, most other construction defects policies in the market are written on an occurrence or modified-occurrence basis, making them more desirable than Columbia's coverage, Mr. Quehl noted.

Columbia does not intend to change its policy form, though, Mr. Quehl said. "We think the market's wrong, and we're willing not to write the business" rather than writing the coverage on an occurrence basis, he said.

Columbia Casualty discontinued one program last year, accidental and malicious product tampering liability coverage, because demand was insufficient to support the program, Mr. Quehl said.

Columbia Casualty can write business on a non-admitted basis in all states except Illinois. In Illinois, Pacific writes business on a non-admitted basis.

CNA E&S's major lines of admitted business include: excess workers compensation and ancillary products such as coverage for medical carve-outs, which are medical expenses that fall within a policyholder's self-insured retention, and buffer layers, which lie between the limit of the primary policy and the beginning of the excess coverage; elevator maintenance contractors liability; California non-standard private passenger automobile liability; ski resort liability; product liability for non-volatile risks; and primary and excess casualty.

A new line of admitted business CNA E&S is writing is state-specific auto liability, such as liability for dump trucks in Kentucky, Mr. Quehl noted.

Major producers of business for Columbia Casualty include the alphabet brokers, other wholesalers and independent managing general underwriters, Mr. Quehl said.

Columbia Casualty's major reinsurers include American Re-Insurance Co., NAC Reinsurance Corp., Munich Reinsurance Co., Kemper Reinsurance Co. and General Re Corp., Mr. Quehl said.

Columbia Casualty has no employees of its own. Its staff of 122 is employed by CNA Insurance Cos., the surplus lines insurer's parent.

William P. Casey, senior vp, is a principal officer of the company, in addition to Mr. Quehl.