10. Essex Insurance Co.

Essex Insurance Co. is staging a strong recovery from last year's hurricane losses, according to the Glen Allen, Va.-based insurer's president.

Last year "was the first year since 1985 that we actually had a combined ratio that exceeded 100%," said Brad Dickler, president of Essex, which is a unit of Markel Corp.

"It was dominated by the hurricane losses. If you excluded hurricane losses, we would have been in the low 80s," Mr. Dickler said.

Essex, which is an admitted insured in Delaware and a nonadmitted insurer in all other states, wrote nearly $542 million in nonadmitted premiums in 2005, a slight drop from the $543.4 million it wrote in 2004.

The 2005 nonadmitted premium volume made Essex the 10th-largest surplus lines insurer in Business Insurance's annual ranking.

While premium volume dropped slightly, it was hurricane-related losses that sent its combined ratio into negative territory--reaching 110.1% in 2005 after registering 85.6% in 2004. Net income plummeted to $2.4 million in 2005 from $54.3 million a year earlier.

But the situation has changed for the better, Mr. Dickler said.

"In 2006, we are marginally over budget premium volume-wise," with a combined ratio for the first half of the year of 85%, he said. "We're pretty much back on track even with some additional slight deterioration in our hurricane reserve numbers," he said.

The largest casualty line is primary general liability, which generated about $200 million in premiums, 98% of which is nonadmitted. Essex's contract division's property premium volume stands at about $45 million while that of Essex Special Property, which writes buffer layers on catastrophe-prone business driven either by earthquake or wind exposures, stands at $145 million.

"We spent a lot of time concentrating on our catastrophe situation," said Mr. Dickler. "The reinsurance market is obviously extremely tight, very expensive--capacity is at a premium."

"We have focused on increasing the estimation on probable maximum losses in a given situation," he said. "We've concentrated on reducing our aggregate in storm-prone areas down to the level where we think they're manageable." He added that "like everyone else," Essex was "laboring under the assumptions" of older catastrophe models when last year's hurricanes struck.

"We're downsizing areas where we had too much of an aggregate" exposure even though Essex has not totally rejected cat-exposed businesses, Mr. Dickler said. In addition, the insurer is "trying to capitalize on other business" such as that in the Midwest or West Coast fire-exposed property.

On the casualty side, Essex recently introduced "an energy saving indemnity program, whereby we back up (heating, ventilation and air conditioning) contractors' guarantee of a certain amount of kilowatt hour savings to a certain customer." The ability to put an insurer behind their warranty gives such contractors a competitive selling advantage, and multiyear contracts carry limits of $100,000 to $1 million, he said.

Mr. Dickler said that Essex's "dedication to service" sets it apart from competitors.

"We are not the cheapest company in the marketplace. We are not the broadest in terms of form," Mr. Dickler said. "We do have a good cadre of product lines. We concentrate on having extremely fast turnaround time on servicing the business" and truly partnering with its general agents.