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311 S. Wacker Drive, Suite 3700, Chicago, Ill. 60606; 312-554-3200; fax: 312-554-3223;

1997 1996

Gross premiums $356,811,524 $296,765,781

Non-Admitted $305,604,293 $259,948,439

Commercial risks 85.6% 87.6%

Net premiums $19,651,979 $17,195,237

Paid-in capital $4,100,000 $4,100,000

Capital & surplus $42,955,502 $36,248,196

Employees 0 0

Combined ratio 102.3% 110.0%

Rating agency 102.5% 110.2%

Net income $3,259,375 $1,777,675

Best's rating A-p A-p

S&P rating A A

Almost everything in moderation: That's the attitude Reliance Insurance Co. of Illinois takes when selecting risks and setting coverage terms.

Offering adequate coverage for reasonable risks has been part of Reliance's formula for success in the continuing soft market excess and surplus lines insurers have dealt with since the late 1980s, said Elaine Trischetta, executive vp of Reliance National Insurance Co. She oversees the excess and surplus division, of which Reliance of Illinois is the main non-admitted insurer. Reliance's surplus lines underwriting is concentrated on employment practices liability and professional liability coverage for several professions, such as architects and engineers, lawyers and insurance agents.

"We see that some competitors are offering a lot of broadened coverages on risks that don't seem to warrant it," said Ms. Trischetta, who works in the New York office. "We are trying to offer broadened coverage in a prudent fashion."

Its ability to keep a rein on coverage terms despite pressures from competitors to expand coverage also has contributed to the surplus lines insurer's growth strategy.

With a slew of surplus lines insurers vying for business in a market that finds its coverages routinely gobbled up by the admitted market, it would seem the insurers couldn't afford to walk away from a bad risk. But that's not the case with Reliance.

"We always have a walk-away price in our minds. Everything has a walk-away price," said Ms. Trischetta, noting that some lines, such as miscellaneous professional liability, always will be the domain of the surplus lines market, due to the degree of policy manuscripting involved when tailoring coverage to various professions.

But, she concedes, "What used to be strictly a surplus lines coverage may find its way to the admitted market, because they have broadened their appetite for risk."

Reliance of Illinois' gross premium volume went up 20.2% to $356.8 million in 1997.

Direct premiums written on a non-admitted basis jumped 17.6% to $305.6 million, enabling Reliance to maintain its place as the sixth-largest surplus lines insurer in Business Insurance's rankings.

Net income escalated 83% to $3.3 million in 1997.

The increased profits can be attributed to good underwriting results, said Ms. Trischetta, and a 1996 pretax charge for additions to asbestos and pollution claim reserves that lowered earnings for that year.

Reliance is an admitted insurer only in Illinois, and in 1997, Reliance wrote about $10.2 million in admitted premiums, which accounts for 2.9% of gross premium volume. It writes as a non-admitted insurer elsewhere.

Reliance doesn't offer set rate cuts, Ms. Trischetta said; each risk is evaluated individually. In general, though, rates have gone down 10% to 15% annually, and property rates still are soft.

Some lines, such as liability coverage for nursing homes and managed care organizations, are actually showing signs of tightening, she said. She also noted competitors for lawyers' professional liability business are discussing raising rates.

Limits have grown in every line of business. Professional liability limits are up $5 million from last year, to $25 million. Reliance's umbrella policy has limits of $50 million, a 50% increase over last year. Employment practices liability limits increased by $5 million to $25 million, and property limits also doubled to $50 million from $25 million in 1996.

Reliance also has a new professional liability product: errors and omissions liability coverage for agents and brokers. Reliance, which is the endorsed insurer for the National Assn. of Professional Insurance Agents, is working on adding enhancements to the agents E&O program, Ms. Trisch-etta said. Deductibles vary, and limits up to $15 million are available.

Reliance also plans to introduce an Internet liability product sometime in the third quarter of this year. Developed in conjunction with Network Risk Management Services, a risk management service provider based in Atlanta, the new product attempts to take away some of the fear and uncertainty of liability and security issues stemming from e-commerce. The policy will have a limit of $10 million, with variable deductibles.

In the past year, Reliance has not stopped writing any line of business. Major producers for large casualty and directors and officers liability coverages are the large brokerages, Ms. Trischetta said, such as Aon, Willis Corroon, Sedgwick and J&H Marsh & McLennan. Specialty brokers are used for certain lines.

Reliance's combined ratio improved to 102.3% in 1997 from 110.0% the year before.

Reliance's results have been helped by growth in three areas: employment practices liability, E&O coverage for miscellaneous professional and architects and engineers coverages, and umbrella liability.

Looking ahead, Ms. Trischetta said maintaining steady growth is among Reliance's goals. Reliance of Illinois was founded in 1972, and reaps several benefits from its 26 years of experience.

The surplus lines insurer has routinely attained a Best's rating of A-p, which indicates that figures are reported on a pooling basis. Standard & Poor's has rated Reliance's claims-paying ability an A for 1997 and 1996.

Reliance Insurance Co. of Illinois does not employ a staff; it is wholly operated by the New York-based staff of Reliance National. Principal officers are basically the same as last year, with the addition of Linda Kaiser, senior vp, general counsel and secretary.

Robert Olsman remains chairman and president, and the other officers are: Jerome Carr, senior vp, treasurer and CFO; Kenneth Krohlich, senior vp and chief actuary; and Robert Krisowaty, senior vp and controller.