Tapping into overseas capacity
Lloyd's broker's partnership with ASPN gives U.S. brokers home for hard-to-place programs
By Phil Zinkewicz
George Bernard Shaw once said that England and the United States were two countries separated by a common language. To a certain extent, that may be true even today; but, in the insurance industry at least, that does not necessarily mean that there are not commonalities of interest.
U.K. insurers, of course, have been operating on this side of the Atlantic for years and Lloyd’s of London has been a constant, albeit not physical presence in the United States for decades. But there is a relatively recent trend on the part of individual Lloyd’s insurance interests—underwriters and brokers as well—to make their presence known even more emphatically, either by opening up offices in the United States or, in one case involving a London broker, by establishing an exclusive relationship with a well-known U.S. marketing facility.
On the underwriting side, for example, in the past two years, three major Lloyd’s of London underwriting syndicates have established offices on U.S. soil.
In 2004, Wellington Underwriting plc, a major Lloyd’s underwriter, said it was expanding into U.S. specialty business through the acquisition of AXA Corporate Solutions Excess and Surplus Lines Insurance Co. A year later, Beazley Furlonge Syndicate at Lloyd’s opened offices in the United States. Beazley had written some $628 million in premiums in the United States, mostly large-scale business written through Lloyd’s brokers, prior to opening its U.S. offices in March of 2005. Earlier this year, the London-based Hiscox Group opened an office in the United States. Hiscox is a specialty lines insurer that writes a range of personal and commercial risks.
These, of course, are all Lloyd’s of London underwriters, seeking to expand their markets in the United States by getting closer to the buyer. But one Lloyd’s of London broker, Lloyd & Partners, set up in January 2005, is determined to penetrate the U.S. market through an exclusive relationship with a subsidiary of Aon Corporation—ASPN (Agency Specialty Product Network).
Recently, U.K.’s Lloyd & Partners established COSAIN, meaning “to protect” in Gaelic, as a trading name and formed an exclusive distribution relationship for all of its products with ASPN. For independent agents, brokers and managing general agents (MGAs), this relationship will facilitate access to the London, European and Bermudian markets for difficult-to-place insurance program business, according to ASPN President and CEO Jerry Tegan. In addition, COSAIN can assist in finalizing existing programs by providing additional lines of capacity previously not offered to make programs more complete and competitive, according to Stuart Bryant, partner in COSAIN and Lloyd & Partners, Ltd.
“We specialize in difficult-to-place program business, the kind that sometimes doesn’t fit the standard and excess/surplus lines market in the U.S.,” says Bryant. “Our mission is to provide ASPN with exclusive access to London, European and Bermudian markets where unusual or difficult coverages are more standard and much easier to place.”
For some exposures, the relationship between COSAIN and ASPN is coming at an opportune time. The insurance industry, to be sure, is not entering a hard market. Overall, the U.S. standard insurance industry is looking to expand operations, but in selective areas. It has been reported that the “heartland” areas of America are high on insurers’ lists for expansion, while coastal areas—beleaguered by massive hurricanes in recent years—are less palatable to insurers’ appetites. Not just in personal lines homeowners insurance, but in commercial exposures and program business as well, insurers are looking at coastal areas of the country with a jaundiced eye.
Not so for COSAIN. Says Bryant: “Program business is a unique marketplace. It can take months to properly design a program and to market it to the most suitable carriers. At COSAIN, we know the international marketplace, understand the business and the appetite of the markets. We focus on difficult-to-insure programs. Some examples of ongoing COSAIN discussions include programs for the mobile home park industry, older apartments and condominiums, global cargo programs, bank and real estate-owned property and coastal restaurant programs to name just a few. In addition, COSAIN, being linked to an independent Lloyd’s broker, has significant expertise in a number of industry segments, including health care, property, professional liability, mining, marine cargo and energy.”
On the other side of the exclusive relationship is ASPN, which is a unit of Aon Corporation and operates as a marketing arm for more than 30 provider companies, including insurance carriers, wholesalers, managing general underwriters and insurance services companies. According to Tegan, ASPN’s goal is to help independent agents and brokers “grow, prosper and meet their clients’ needs more effectively.” Tegan says that ASPN offers a wide array of more than 450 insurance products, programs and services.
“This alliance between ASPN and COSAIN is another example of how ASPN assists the independent agency network in finding solutions to difficult problems as well as building profitable, new revenue streams. In these early stages all potential opportunities should be vetted through an ASPN regional vice president or ASPN internally and COSAIN. As each new opportunity develops for COSAIN, details such as a brief summary of the exposure, explanations of those exposures and proposed solutions, if available, help move the underwriting process forward in a timely fashion. Program opportunities are not limited to size, however. We want a program that is scale driven, i.e., has the potential to grow with the appropriate resources. This is a unique facility that is designed to support the needs of agents and brokers where the standard or traditional markets may not want to write a particular risk for a variety of reasons,” Tegan says.
Tegan continues: “While COSAIN is able to assist agents, brokers and MGAs with program solutions, we are equally excited about the ‘reverse flow’ aspect that COSAIN brings to ASPN. As part of this new strategic partnership, our markets in London, Bermuda and Europe will have the opportunity to access ASPN distribution here in the U.S. with products and programs they want to distribute via U.S. agents, brokers and MGAs. Rather than the typical model of agents looking for markets to write certain types of risk, we will be able to bring programs that the markets want to write to agents, brokers and MGAs. We see this as a significant advantage for all parties involved.”
Adds Bryant: “The independent agent and broker network in the U.S. rarely has direct access to London brokers. ASPN is looking to establish an international network for independent agents, brokers and producers. We will not compete with local insurers for local program business. We’re looking at business that independent agents and brokers cannot place in their local markets. We are emphasizing program business because we believe that’s where we can differentiate ourselves from our competitors. There are certain types of programs, in certain areas of the U.S., where capacity is shrinking. But we believe that there are underwriters in the global market who still believe they can make money by setting the rates properly.”
Writing program business is not easy, says Bryant. “But there are certain markets in Europe and Bermuda that are considering getting into it.”
The COSAIN executive says that the relationship with ASPN came about as the result of Tegan’s desire to bring ASPN into the London market. “He wanted to broaden ASPN’s markets and provide unique market access for agents and brokers through London, Bermuda and Europe—access that has not been available thus far to most,” Bryant says.
Bryant adds that, as of now, COSAIN is not dealing with liability exposures because it has seen business only on the property side. “But we’re prepared to consider more or less anything, as long as we access the business through ASPN.” *
For more information:
COSAIN or ASPN
Web site: www.askaspn.com
Phone: (877) ASK.ASPN
“We’re looking at business that independent agents and brokers cannot place in their local markets.”
COSAIN and Lloyd & Partners, Ltd.