One of Robert Giles' goals is to raise
MGAs' profile in the marketplace
Robert Giles
The hardening insurance marketplace bodes well for managing general agents, according to Robert Giles, president of the Midwest General Agency in Eau Claire, Wisconsin, and incoming president of the AAMGA. He's seen the results in his own agency, he says, where there has been a "significant" increase in activity.
"The market began to harden slightly about a year and a half ago, particularly in the workers compensation area and commercial auto," says Giles. "That was a natural and welcome consequence of more than a decade of soft market conditions, which just could not go on any longer. Then came the tragic events of September 11. That drove the industry into a hard market similar to the last one in 1984-85, because reinsurance capacity began to shrink and primary companies were paying more for their coverage with more restrictions. Eventually that had to pass on to consumers and we're seeing rate increases, not too large in personal lines, but considerably large in the commercial lines area."
Giles says that any hard market benefits the surplus lines market. "During soft market conditions, certain exposures tend to be drawn away from the surplus lines industry by traditional insurance companies anxious to attract new premium dollars. Then when a hard market comes along, those exposures start to shift back into surplus lines. In a way, I think of them as gray market exposures that swing back and forth between surplus lines and the regular market as cycles change, sort of like they're on a pendulum. Today, the cycle favors the surplus lines industry and probably will for one or two years to come. Our underwriters are overwhelmed by the workload."
Another result of the hard market is that retail agents are beginning to recognize the important role that MGAs play in the marketplace, according to the incoming AAMGA president. "Two years ago, we had to aggressively prospect retail agents to promote our products and services," says Giles. "Now, as the market is tightening, retail agents are coming to us to find markets to replace some of their exposures. And we have to remember to remain loyal to those who have dealt with us on a regular basis."
Asked to look back over the past year and identify the most important developments for the AAMGA, Giles says it was probably deciding on a new association management company. "We're a volunteer organization, so we need to outsource certain functions, such as establishing calendars for meetings and conventions. We had the same management company for about 15 years and the board felt it was a good time to test the waters and see what else was available, to be sure we were getting the management for the price we were paying. So, we began the process of seeking a new association management firm in November of 2000. A great deal of work went into the process. An ad hoc committee reviewed expressions of interest from more than 25 management firms, and proposals from 16. The field was narrowed down through a process that included review of qualifications against specific criteria and committee discussion. Our directors selected Accolade Management, Inc., headquartered in King of Prussia, Pennsylvania, to serve as the association's management firm.
"The vote was unanimous," continues Giles, "and was based largely on the belief that the selection of Accolade was in the best interests of AAMGA. We are their only client and their team knows our needs."
Giles says that Accolade is headed by Thomas B. Rogan, a past president of AAMGA and an independent insurance industry consultant based in Fort Lauderdale, Florida. Rogan is retired from MacNeill Group, Inc., CMGA, a managing general agency based in Fort Lauderdale. "I can tell you that he is highly regarded by insurers, reinsurers, regulators, managing general agents and retail agents--regionally, nationally and internationally. He is one of the most respected men in the business and represents the highest standards of integrity. Tom will be joined at Accolade by Bernd G. Heinze, who will serve as executive director of AAMGA. He is president and CEO of Beacon Management Group, Inc., Wayne, Pennsylvania. Bernie has served as legal counsel to the insurance industry in various capacities since 1983 and is highly regarded as a public speaker on insurance topics."
As to what Giles looks to for the future, he says that promoting the AAMGA and MGAs is of paramount importance. "We want to give MGAs a high profile in the marketplace," he says. "That comes through networking and one of the best venues for that networking is our annual meeting. This one is our 76th, and we believe we have an exciting program. On the Sunday before the convention begins, we will have a special panel, consisting of leading specialty insurers who will discuss what is happening in the marketplace. This is extremely important because this is our first major gathering since September 11. There will be opportunities to meet with service providers, face to face."
During the convention, there will also be sessions on how to run a family-owned business. "More and more, families are combining their financial and human resources to start their own business," says Giles. "This session, which will be run by Dirk Nohre, will look at topics such as legal structure, perpetuation and succession plans, proper internal procedures, ownership roles and other pertinent matters."
Another session, says Giles, will focus on understanding the wholesale market. It will feature a panel discussion on what is "hot" in the market in May 2002. Giles explains that among the topics to be addressed are the Gramm-Leach-Bliley Act and its impact on the market; a review of pricing and product changes, specifically in the area of terrorism protection; reinsurance changes implemented at the beginning of the year; regulatory issues; and an update on the NAIC's MGA Modal Act.
"And of course, we will have the Trader & Vendor Mart, which I think is one of the most exciting events of our annuals. We will again limit one-on-one appointments with Trade Mart participants to three hours each day, allowing extra time for walk-in appointments. I see opportune and challenging times ahead for MGAs and our association," says Giles. *