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Building a successful specialty commercial lines underwriting company takes skill, and that's the task before New York-based Praetorian Financial Group. Praetorian was formed in 2006 from operations run by Clarendon Insurance Co., a unit of Hannover Re Group which late last year agreed to sell Praetorian to QBE Insurance Group Ltd. For 2007, Praetorian expects to continue its focus on specialty market risks for small and middle-market buyers nationwide. Praetorian's chief executive officer is former Benfield Inc. CEO Rod Fox, who recently discussed the insurer's plans.
Q: What's Praetorian's biggest challenge in underwriting the lines it focuses on?
A: The No. 1 thing for us is the quality of the people we do business with, our producers. Beyond that, it's going to be different by every market. It's watching the market change in every specific line. Some will soften, some are hard, some will harden. We just have to be very in tune with market developments in each area. And it's bringing an underwriting culture to this company that really hadn't existed before in any significant fashion.
Q: What are some of the values you try to impress on Praetorian's underwriters?
A: No. 1 is something I talked about a lot when I first got thereit's the fundamental thing of making money. This is a mind shift we've had to do. We want to write at an 87% or 89% combined ratio. We don't think a 98% combined ratio is any cause for celebration. If you're going to take on terrorism risk, nuclear, chemical or biological, and you're only going to make four points on your money, go to Wachovia or JPMorgan Chase and put it in there. You've got to make a significant amount of money to take on all the risks we're talking about. Susan Rivera (who joined Praetorian earlier this year as president and chief underwriting officer) has done a wonderful job with the attention to detail. It's understanding the economics of the transaction, understanding the motivations of the producers, the long-term trends of the business, what the competitors are doing, and never letting up on that.
Q: How has your background as a reinsurance broker helped shape your perspective as an insurer CEO?
A: I've been to 1,000 insurance companies. I've seen the best, I've seen the worst, I've seen the train wrecks. I've spent hours and hours with people like Tony Markel (president and chief operating officer of Markel Corp.) and (retired American International Group Inc. Senior Vice Chairman) Tom Tizzio. I think I understand the economics of a deal and what will hopefully make money and what won't. Then it's leading people. I don't care whether it's a brokerage firm or an insurance company or a car wash, it's the ability to communicate what are you trying to do, why, what are the reward systems, what does the company stand for.
The other thing I think I can bring is the ability to help us see markets as they emerge and as they close. When pricing isn't holding or everybody's coming in, we want to be running the other way.