After experiencing sizable growth throughout the last hard market, Scottsdale Insurance Co. is now relying on its producer relationships to continue its momentum.

Based on 2005 nonadmitted premiums totaling $1.19 billion, the Scottsdale, Ariz.-based insurer ranks No. 4 in Business Insurance's annual rankings of surplus lines insurers. Though the volume is up less than 1% from 2004 nonadmitted premiums, it follows three consecutive years of solid growth.

"I attribute a lot of it to the hard market," said Michael D. Miller, president of Scottsdale, which is a subsidiary of Nationwide Mutual Insurance Group. "From 2001 through 2004, the market's been very, very strong, so Scottsdale was able to take advantage of that."

"We also think we're doing the right things in continuing to develop the relationships we have with our producers," Mr. Miller continued. "For example, this year, through six months, we're up about 10% in a market that we think is pretty difficult. That certainly has nothing to do with the hard market, and we believe it has a lot to do with the things we're doing to strengthen our relationships."

The primary reason Scottsdale's premium volume was up only slightly in 2005 vs. 2004 was that many standard insurers came back into the market, taking away business that typically goes back and forth between the standard and excess and surplus lines companies, according to Mr. Miller.

For example, "they've withdrawn a lot of their capacity from coastal areas and, to make up for that, we believe, they've moved into the middle part of the country, so those markets are much more competitive than the coastal markets. It's an interesting market right now," Mr. Miller said.

For its part, Scottsdale is still writing coastal property risks, albeit very carefully.

"We have capacity constraints based on our capital position and the reinsurance that we could buy," Mr. Miller said, alluding to the tightening in the property reinsurance market that followed last year's devastating hurricane season. "We were not able to buy all the reinsurance we wanted to buy and we paid a lot for what we did buy."

Still, "we're trying to do as much business in those markets as we can within our capacity restraints," Mr. Miller added. "We're paying a lot of attention to how we manage those coastal areas because we don't want to drive up an aggregation or concentration of risks that would cause us to have an unusually high probable maximum loss out of a storm or hurricane."

With rate increases up to 100% for commercial property on the water, by far the biggest challenge for commercial policyholders is finding adequate coastal property insurance coverage, Mr. Miller said.

"I think they're accepting what they can get," he said. "We believe that some are basically walking away saying, 'I'll just take a shot at this,' self-insuring to some extent. Others are taking a higher deductible."