Tapley Johnson puts education, legislation
and technology high on the list
By Phil Zinkewicz
NAPSLO's 2002 president, Tapley O. Johnson, Jr., CPCU, is president of TAPCO Underwriters, Inc., in Charleston, South Carolina.
Before September 11, the property and casualty insurance industry was only just beginning to make a long-awaited turnaround in terms of market dynamics. After a prolonged soft market, one which some prognosticators believed would never end, property/casualty insurance underwriters were finally poised to take a hard line, but only in certain lines of insurance. However, after the horrific events of the 9/11 terrorist attacks and the losses that the entire insurance industry faced, it became evident that more dramatic changes in the P/C industry were about to take place. Now, just months after the event, those changes are taking place. The market is hardening, in most cases very severely, and it is not yet known how long the new market will persist.
Nevertheless, because of this rapidly hardening property/casualty insurance marketplace, there is little doubt that the surplus lines sector of the property/casualty community is once again in a position to fulfill its traditional role as the "safety valve" of the insurance industry. For just about 16 years, since the last hard market of 1984-85, the surplus lines industry has had to just sit by and "hold its own" as the admitted insurance marketplace recklessly lapped up virtually all shapes and sizes of risks in order to attract premium dollars for investment purposes.
The surplus lines market has always played a valuable role in providing insurance for hard-to-place risks. It acts as a complement to the standard market, insuring those risks that would otherwise not be protected. But in the soft market years of the late '80s and throughout the '90s, there were very few "hard-to-place" risks in the eyes of the standard insurance industry, blinded by stock market performance.
"The surplus lines market is definitely looking at potential for growth as the result of an overall tightening of the property and casualty insurance marketplace," says Tapley O. Johnson, Jr., CPCU, 2002 president of the National Association of Professional Surplus Lines Offices, Ltd. (NAPSLO), the national association representing the surplus lines industry and the wholesale insurance marketing system. "Volume is up between 20% to 40% for brokers and up about 30% for surplus lines companies," he says.
Johnson says also that NAPSLO, along with the rest of the industry, is watching closely what is happening and what will continue to happen as the result of September 11. If the federal government takes a role in providing reinsurance backup for the reinsurance industry in the area of terrorist coverage, that will present one scenario. Reinsurers would have some backup to protect themselves against future devastating losses due to terrorist attacks, he points out. "But even with this prospect there is still some speculation because there are many proposals on the drawing board as to what role the federal government will play. Depending on what happens, primary companies may be hard put to take on many exposures, even those that fall outside the traditional purview of surplus lines," he says. "That's where the surplus lines industry comes into the picture and we have to be ready. NAPSLO has been eagerly watching developments and attending every industry meeting to ascertain what the government will do and what the industry reaction will be," says Johnson.
However, the current hard market and potential government intervention notwithstanding, Johnson says that NAPSLO has its own agenda to fulfill in order to assist the surplus lines industry to grow and to assist its membership in meeting the challenges that lie ahead. There are several items on NAPSLO's agenda for the coming year, which, he says, if fulfilled will justify his term of office.
The first, Johnson says, is to develop broad interest in the academic community in the surplus line arena. "The NAPSLO internship program annually awards six to eight paid summer internships to college students interested in an insurance career," says Johnson. "Interns spend nine weeks with NAPSLO member firms learning all aspects of the surplus lines insurance industry. They receive a competitive salary from their host firms and NAPSLO provides a small stipend, which covers travel, housing and various other expenses. Interns also compete for an additional internship in London."
"Primary companies may be hard put to take on many exposures, even those that fall outside the traditional purview of surplus lines. That's where the surplus lines industry comes into the picture and we [NAPSLO] have to be ready."
--Tapley Johnson, President
National Association of Professional Surplus Lines Offices, Ltd.
NAPSLO established the internship program in 1981, to interest students in the excess and surplus lines industry. Students work five weeks for a NAPSLO member insurance company and four weeks with a NAPSLO member wholesale broker firm. Most candidates for internship are college juniors or seniors, but graduate students have been considered as well. However, to attract young, talented people to join the internship program, NAPSLO is no longer depending upon mailings to the academic community.
"We are encouraging each member of our internship committee to personally contact academic institutions to broaden our reach with young people and encourage them to look upon the surplus lines industry as a career opportunity," says Johnson. "In addition, for those in our internship program, we are now working on 'follow-up.' We are now sending their resumes to surplus lines companies and brokers to assist the interns in getting jobs so that they will stay in the industry."
Another item on the NAPSLO agenda for this year is developing a proactive legislative position on issues affecting the surplus lines industry, according to Johnson. "This is going to be a difficult task for us because NAPSLO membership includes large and small surplus lines companies and large and small surplus lines brokers. Our membership often has conflicting interests in terms of legislative and regulatory developments. However, there are issues that are consistent with our total membership and we can address those in a proactive way," says the NAPSLO president.
NAPSLO also intends to enhance the current program of its basic and advanced education schools, according to Johnson. NAPSLO offers several industry and educational meetings during the year to members. There are two industry/educational meetings--the annual convention and the mid-year educational workshop. Later this month (Feb. 24-27), the Mid-Year Marketplace and Business Round-Up will be held San Antonio, Texas. In addition, there are two strictly educational programs, the NAPSLO excess and surplus lines school and the advanced school. It is this latter educational effort which NAPSLO plans to build upon.
The NAPSLO Excess & Surplus Lines School is a three-day residential school program offered each summer for men and women with two to five years of overall insurance experience, but who are new to the surplus lines segment of the industry. The Advanced School was designed for insurance professionals with five or more years of experience and provides an extended course of study for experienced surplus lines professionals. "We intend to review our basic and advanced school programs to give students a broader overview on what's going on in the insurance business overall," says the NAPSLO president. "For example, at our most recent leadership conference, the president of a major bank spoke on bank involvement in insurance. Basically, he said that banks are not doing well in the insurance business and that the 'golden age' of banks in insurance is not so golden. We want to convey this type of information to our students."
Technology is high on the agenda for NAPSLO, according to Johnson. In March 2001, the position of director of communications was expanded and changed to director of communications & technology. Mike Ardis, who was director of communicatons, continues to serve in the new position. Johnson says that Ardis will be a resource for the NAPSLO members to utilize regarding technology issues confronting the excess and surplus lines insurance industry. He will provide NAPSLO members, particularly broker members, with relevant information on technology being employed in the insurance industry in order to assist the members in making more informed and better decisions about employment and purchase of technology, notes Johnson.
"He will also serve in an advocacy role on behalf of NAPSLO and the wholesale insurance business directed toward vendors and other associations in order to positively influence these groups to address the requirements and needs of the wholesale surplus lines industry as these vendors and associations develop their technology and formulate their solutions," says Johnson.
In his newly designed post, Ardis also will oversee NAPSLO's Web site and continue to handle major communications efforts on behalf of the association, says Johnson. "His new position is part of an effort to fulfill the board's goal to enhance the technological resources available to the association's membership."
Another goal for NAPSLO in 2002 will be to keep members informed about critical legislative and regulatory issues facing the surplus lines industry. "This is where NAPSLO has been most effective, and we will continue to increase our efforts in this area," says Johnson.
Finally, Rough Notes asked Johnson where NAPSLO stands on federal vs. state regulation of the insurance business overall. "NAPSLO has not taken a position on federal regulation vs. state regulation," says Johnson. "Our membership is diverse. Some of our members would prefer federal regulation, and others state regulation. Most of our members probably lean towards state regulation because it is a question of the known vs. the unknown. My own view is that, realistically speaking, there will probably be some role for the federal government but that state regulation will remain strong and survive." *
For more information:
Web site: www.napslo.org