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Trading on a great name

Great American prepares for hard market by boosting alternative market offerings

By Michael J. Moody, MBA, ARM

As this article is being written, rumors persist that the hardening of the commercial property and casualty insurance market is at hand. However, this stands in sharp contrast to reported renewal premiums for most lines of coverage. While the financial results of the property/casualty industry would certainly lead one to believe that rate increases are long overdue, the industry still has significant capital.

Gary Powers, divisional president of Alternative Markets at Great American Insurance Group, notes that they are seeing "some pockets of firming" in the workers compensation market. In addition, "CAT-exposed property is also seeing some price strengthening." On a broader scale, Powers says, "I would refer to it as a transitioning market."

Planning ahead

Over the past decade, Great American has developed its agency captive business into one of the premier providers of these types of business models. Based on this success, they also realized that the upcoming market hardening would offer additional opportunities for the growth of traditional group and single-parent captives. According to Jerry Czekalski, divisional senior vice president, despite the continued soft market, "We elected to go beyond the agency captive business and become a multi-faceted alternative markets organization."

It took some time, but Great American's most recent group captive success, a homogeneous captive whose members are involved with agriculture, occurred at the height of the soft market and was done in concert with veteran captive consultant Captive Resources (CRI). "We've been very pleased with the flow of new business opportunities and are off to a great start!" notes Czekalski. Furthermore, he says that they are beginning to work with several retail brokerage operations on captive development as well.

"Once we reached the decision to support group captives, the next logical step was to move into single-parent captives," Czekalski points out. "We started this movement about a year-and-a-half ago." All of this activity, he says, is pointed at "positioning ourselves for a market turn." One other major step that was taken by Great American has been to hire Carol Frey. Frey is a well-respected member of the captive community. She has significant experience with group and single-parent captives and is actively involved in a number of industry trade associations, Czekalski says. He notes that activity within the group and single-parent area has already picked up.

Sarah Berger, divisional vice president, observes that initially it was a little challenging to gain the brokerage community confidence. "We had built such a strong relationship with them on our agency captive business that they were not certain we would be able to provide a similar level of expertise," she says. However, Berger states that with the moves they have made, including the hiring of Carol Frey, brokers can see their commitment to the market.

"We intend to be a formidable competitor in the group and single-parent captive space." And they are beginning to see quite a bit of activity. For the most part, agents and brokers have come to depend on Great American in the agency captive space, says Berger. "They respect our collaborative approach to the alternative risk market as well as the franchise value and underwriting expertise we can bring to the table." She points out that these same qualities will be important in the group and single-parent captive market.

"One of the things that has occurred over the past few years," Frey says, "is that we are seeing a lot of producers moving from one agency to another." And she adds, "Many are looking for a new player in the captive market." As a result, "Opportunities occur because these producers are trying to differentiate themselves by accessing a new market." Production staffs have been quick to notice their entry into this market, says Frey. Berger indicates that the CRI deal turned heads, and she believes that "as the market turns, it will be our collaborative approach to captive relationships that will lead to new business success."

All under one roof

One of the major things that separates Great American Alternative Markets Division from competitors is that they have the needed services self-contained already within the division. For example, Frey points out, "We have our own claims team that exclusively handles the alternative markets book." And the key here, according to Frey, is, "The claims professionals completely understand that risk sharing is involved in all of these accounts." She adds, "This is very different from the traditional bundled markets, where the staff doing the claims are the same as the adjusters that are handling 'dollar one' policies and have no concept of risk sharing." The Alternative Markets Division has its own professionals and has a very limited hierarchy. Management decisions are made from within the division, as are underwriting and marketing decisions. It is a very team-oriented approach among all disciplines from the moment a submission hits the door.

Great American has been able to gain credibility quickly for its group and single-parent captive programs. Much of the expertise that was gained over the past 10 years in the agency captive business has been transferable to the other side of the captive business as well. Where additional resources were required, the insurer has been able to find industry leaders such as Frey to add to their staff. Additionally, Great American's strong financials have also assisted in this effort.

The other advantage that Great American has is the capacity to complete the placement of an entire commercial account for a captive owner. Powers says, "We have a company that can provide cross-selling opportunities that will allow an agent or broker to complete the placement from within the organization. We can bring other specialized insurance products that are outside the captive into the mix," he says. Berger adds, "We can leverage our broad corporate expertise to resolve coverage issues that are beyond the scope of the captive." She goes on to say, "Our clients have a full suite of commercial insurance solutions available to them." And, she notes, these are available on either a first dollar basis or risk sharing basis.

Involvement with the agency captive market has allowed Great American to demonstrate that its unique collaborative approach is workable. In that regard, Czekalski notes, "We are still very interested in developing additional agency captives." But, he says, "We realize that this is a long-term play and we are very selective in choosing our captive relationships."


As with any insurance organization over the past few years, Powers notes, "There is no getting around it—the soft market has impacted our ability to grow in these areas." And he admits that "we are biding our time." But he adds, "That does not mean there are not opportunities out there." Bottom line, however, "We are not going to play in this market, just to play in it; the numbers have to make sense," Powers emphasizes.

Captives are becoming a core competency for Great American, Czekalski says. "We are looking to grow profitability in this space. A hallmark of our organization," he points out, "has been our long-term view of the insurance business, and the same is true with alternative risk business." Those are the types of relationships that Great American is looking for. "We are a winning organization," Czekalski states, "and we are looking for others with the same mentality."


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