Insurance may be local, but it doesn’t have to be handled exclusively in the state, or even the country, where it’s needed. For the surplus lines market that means Lloyd’s, which explains the annual visit to London of the top leaders of the American Association of Managing General Agents. They have a lot to talk about, and have just concluded a three-day “fact finding” trip to London.
Current AAMGA President Scott M. Anderson, of the Concorde General Agency in Fargo, N.D., Past-President Francis Johnson of Johnson & Jonhson, Inc. in Charleston, S.C. President-elect Thomas K. Albrecht of Barclay/SIU in Montgomery, Ala., along with AAMGA Executive Director Bernd (Bernie) G. Heinze held a grueling 37 meetings spread over three days.
Following conferences with Lloyd’s Chairman Lord Peter Levene, outgoing International Markets Director Julian James and other Lloyd’s leaders, the AAMGA gave a presentation on Tuesday, Jan. 23, to a large audience in Lloyd’s old-library, where Heinze set out some of the common goals and concerns the two organizations share.
Of the $21.88 billion in direct written premium AAMGA members wrote in 2005, more than 10 percent, $2.249 billion, was placed at Lloyd’s. That fact alone is enough to create interest, but Heinze wasn’t there to just talk about numbers. Giving people in the London market, who do business with the AAMGA, information on what’s going on in the U.S. and learning what’s going on at Lloyd’s was the delegation’s primary mission.
Heinze first priority is regulatory reform, which in turn is linked to simplifying back office processing that will ultimately benefit not only the wholesale brokers, but also the retail agents and their clients with whom they do business.
At a meeting with the IJ the following day Heinze described the goal as making sure “that the E&S market continues to be fast, nimble, and can react quickly to changing market risks. In order to continue to do this, we need to be able to deal without unnecessary and taxing regulations.”
Last year the U.S. House of Representatives passed HR 5637 – a version of the State Modernization and Regulatory Transparency Act, unanimously. The AAMGA was instrumental in that success. Heinze, an attorney, even helped craft some of the bill’s provisions. It would streamline the current procedures under which the surplus lines industry operates, notably by introducing greater electronic processing, eliminating filing redundancies, and taxing insurance transactions in one state – where the insured is located.
As an illustration of what the current regulations frequently mandate, Heinze mentioned one hearing he attended where a colleague produced a stack of paper one and a half feet thick, all of it necessary to place one multi-state risk. He emphasized that the AAMGA’s backing of the bill, which it hopes will be reintroduced in the current session of Congress in two or three months, is not a call for federal regulation. The AAMGA has not taken an official stand on that question. It is simply a long-needed step towards modernizing the way surplus lines are regulated, making it easier and cheaper for the ultimate consumer – the retail agent’s clients – to obtain the coverage they need, accoroding to AAMGA. “It’s a bill for consumers,” Heinze said.
Those changes can’t come too soon, accordig to these leaders. All four men agreed that the industry in general and the surplus lines market in particular are facing the prospect of increasingly costly risks. Both Johnson and Albrecht are located in states with coastal exposures, so they’re directly concerned by more frequent and violent weather events. “They don’t call them ‘barrier islands’ for nothing,” Johnson said, “but people keep building on them [usually in wood].”
They are all well aware of and concerned by the threat the planet and the industry face from climate change. It’s not a hoax or a liberal anti-business conspiracy; it’s a real and growing problem that will have to be dealt with, they agree.
No one, however, is in favor of government intervention in the insurance business, which is seen as fundamentally distorting market rates in ways that will ultimately cost taxpayers a lot of money. “The industry [E&S] can handle it,” Johnson said, “if you let it alone. It will remain strong if it’s allowed to make reasonable profits by charging the right rates, which should be set with the agents, the client and the carriers. Government [insurance] should be the ‘last resort’, not the first.”
Thomas Albrecht, who takes over as AAMGA president in May, has headed the organization’s political affairs committee for the past three years. He’s in a good position to try and complete the modernization work that began with the last Congress. “Over the last few years we’ve become much more ‘proactive’ rather than ‘reactive’,” he noted. “We’re now focusing on the future, and the need to improve the regulatory environment. I don’t think the industry really needs to change that much, but it certainly needs more flexibility.”
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