Program Business

Programs Flourishing

A growing sector gathers for its annual meeting in Scottsdale.
By: | October 3, 2017 • 5 min read

The advent of more and more technology and concerns about capacity and rate are issues that will perplex and challenge every aspect of the commercial insurance business for years to come. One thing, though, is certain, the programs business is flourishing.  How the sector should respond to emerging players with new technologies, as well as other hot topics will be on the agenda at the Target Markets Program Administrators Association’s 17th Annual TMPAA Summit, Oct. 15 through Oct. 18 in Scottsdale, Ariz.

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Christopher L. Pesce, president of Maritime Program Group in Westbrook, Conn., and the TMPAA president-elect, said the level of disruption within the program market has yet to play out.

“I think what the program administrators are looking at is how to become part of the solution — how to partner with Insurtech to come up with a better mousetrap and keep themselves relevant,” Pesce said.

“It’s a tall order.”

While it’s tough to compete with “very sophisticated technology operators,” program administrators are confident in their own ability to innovate and in how quickly they can adapt to changes in the market.

John Colis, president and chief executive of Euclid Insurance Services Inc. in Itasca, Ill., said that the sector is seeing “a flood of money” backing new Insurtech start-ups aiming to digitize and, to some extent, automate the underwriting process.

Colis said it “remains to be seen” the extent to which these ventures will compete with program administrators — or become program administrators themselves. However, the issue is definitely on program administrators’ radar.

Ethan Allen, executive vice president, AIG

“What this looks like and how it is implemented remains to be seen and will be interesting to watch,” he said.

A session at TMPAA’s Summit will explore specifically how Insurtech will impact distribution networks utilized by program administrators, said Ray Scotto, executive director of the Wilmington, Del.-based trade group. Most administrators use the independent agent network, but some go to the market directly, he said.

“We need to explore the impact on this entire industry segment.”

The group’s leaders will also discuss the results of a study that shows there is continued growth of the program business segment of the market, and the segment is outperforming the general commercial segment “by a pretty good margin.”

The managing general agent and program market growth in 2016 exceeded that of the total P&C market by 32 percent, according to a July study by Conning, an investment management company for the global insurance industry.

In 2016, comparable firms in Conning’s MGA database grew by 4.9 percent compared to 3.7 percent for the P&C market overall.

“I think the program business is somewhat in vogue right now, with more carriers and surplus capacity within the industry signing on,” Pesce said.

“Deploying that capacity with program administrators is cost effective and speedy. Whether it’s a start-up carrier or a carrier simply looking for expansion, the fact that so much surplus is in the industry right now is to the benefit of program administrators.”

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Another topic of importance is heightened interest in the space from large acquirers, Colis said.

The healthy segment, he said, is “prompting an increasing number of underwriters to consider getting into the space. When demand increases, supply follows.”

Paul A. Mihulka, vice president and head of new programs at Zurich North America in Omaha, Neb., said that the carrier is seeing new program administrators being formed, with wholesalers moving into this model and other companies investing in program administration to get into the marketplace.

“We view this as an exciting time to be in the program marketplace, given all of the new entrants and new capital that’s coming in, resulting in new investment, potential new partners and transformative innovation,” Mihulka said.

“… the companies that will be most successful will be the ones that can differentiate their offerings through product, service or analysis such as predictive analytics.” — Jerry Prendergast, insurance programs underwriting manager for specialty markets, Munich Reinsurance America

Zurich, too, is particularly focused on Insurtech, he said.

“As we think about how to leverage a particular Insurtech capability — whether that’s AI, robotics or other technological advancements, we’ve embraced it as an opportunity to gain efficiencies and increase the effectiveness of our products and services to our program administrators and their retailers and customers,” Mihulka said.

Jerry Prendergast, insurance programs underwriting manager for specialty markets, Munich Reinsurance America

“Some would choose to view Insurtech as somewhat of a threat, but at this point, we would view it as a tremendous opportunity.”

Ethan Allen, executive vice president at AIG in Boston, said the carrier has “some exciting initiatives underway” involving data and technology to keep AIG “a best-in-class partner” for program administrators.

New predictive models will help PAs “to be able to go into their portfolio in a way where they’ll be enabled and empowered from a data standpoint to make better risk selection and pricing decisions in addition to more focused business development activities.”

AIG has also implemented a new underwriting and policy issuance system that allows program administrators to be more efficient in the way they transact business, he said.

“These efficiencies lead to improved profitability for our partners due to reduced frictional costs as well as allowing for faster servicing for the retail agencies and insureds they serve,” Allen said.

“In addition, this new system will give us improved access to data that will in turn enhance the value of future iterations of our predictive modeling.”

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Jerry Prendergast, insurance programs underwriting manager for specialty markets at Munich Reinsurance America Inc., said that in the MGA program space one of the challenges many companies face is the commercial auto line of business.

Over the past few years, the auto business has experienced an increase in claim frequency and severity. Many experts believe the shift is directly correlated with an increase in vehicle usage and distracted driving, Prendergast said.

Insurance companies have responded in a number of ways including exiting the line, re-underwriting a portion of their book of business and/or increasing rates.

“There are opportunities in the auto program space and the companies that will be most successful will be the ones that can differentiate their offerings through product, service or analysis such as predictive analytics,” he said.

The conference also features a Lloyd’s Open House, which will give program administrators the opportunity to meet with syndicate underwriters, said Richard Hodge, a director for Lloyd’s broker Tysers’ North America & International Specialty Division. &

Katie Kuehner-Hebert is a freelance writer based in California. She has more than two decades of journalism experience and expertise in financial writing. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession

As risk manager for a cloud computing and software company, Laurie LeLack knows that the interconnected economy and cyber security remain top risks.
By: | December 14, 2017 • 4 min read

R&I: What was your first job?

One of my first jobs was actually at a local insurance agency when I was a high school student, before I had any idea I was going to get into insurance. After college, I was a claims analyst at Sunbeam.

R&I: How did you come to work in risk management?

I fell into it after college, where I studied international business. I had a stack of resumes, and Sunbeam came to Florida from Rhode Island, so I applied. I interviewed with the director of risk management and just stuck with it and worked my way up.

R&I: What is the risk management community doing right?

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Getting a holistic view of risk. Risk managers are understanding how to get all stakeholders together, so we understand how each risk is aligned. In my view, that’s the only way to properly protect and serve our organizations.

R&I: What could the risk management community do better?

We’ve come a long way, but we still have to continue breaking down silos at organizations. You also have to make sure you really understand your business model and your story so you can communicate that effectively to your broker or carrier. Without full understanding of your business, you can’t assess your exposures.

R&I: What was the best location and year for the RIMS conference and why?

Being on the East Coast, I like Philadelphia.

Laurie LeLack, Senior Director, Corporate Risk and Americas Real Estate, Citrix Systems Inc.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

Organizations understanding their cyber risk exposures and how this line of insurance can best protect them. Five to ten years ago, people shrugged it off as something just for technologies companies. But you can really see the trend ticking up as a must-have. It was always something that was needed, but people came to their own defining moments as we got more involved in electronic content and social media globally. Cyber risk is inherent in the way we do business today.

R&I: What emerging commercial risk most concerns you?

The advent of security and contractual obligations. These are concerns as we all play a part in this big web of a global economy. There’s that downstream effect — who’s going to be best insulated at the end of the day should something transpire, and did we set the right expectations?

R&I: Is the contingent commission controversy overblown?

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I think so. At the end of the day, it’s all about the transparency you’re getting from the people you work with. I think some best practices in transparency came out of the situation, but we were working on a fee basis, so it wasn’t as much of an issue for us as it may have been for other companies.

R&I: Are you optimistic about the U.S. economy or pessimistic and why?

I’m cautiously optimistic. We seem to be stable in terms of growth, and I’m hoping that the efficiencies and the economies of scale we achieve through technology will benefit us. But I’m also worried about the impact that could have on the number of jobs globally.

R&I: Who is your mentor and why?

Robert O’Connor, my former director when I was first on-boarded at Sunbeam, gave me so many valuable tidbits. I’ll call him to this day if I have an idea I want to bounce off him. He’s a good source of comfort and guidance.

R&I: Of what accomplishment are you most proud?

I have two very empathetic, healthy and happy boys. Eleven and soon-to-be 14.

On the professional side, there were a lot of moments during my career at Citrix where we were running a very lean organization, so I had the opportunity to get involved in many different projects that I probably wouldn’t have had in other larger organizations.

R&I: What is your favorite book or movie?

My favorite movie is Raiders of the Lost Ark.

R&I: What’s the best restaurant you’ve ever eaten at?

A place in Santa Barbara called Bouchon.

R&I: What is the most unusual/interesting place you have ever visited?

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Caverns in Gatlinburg, Tennessee. They were interesting. It was cool to see these stalagmites and stalactites that have been growing for millions of years, and then just above ground there are homes from the 1950s.

R&I: What is the riskiest activity in which you’ve ever engaged?

Riding on the back of my husband’s Harley.

R&I: What about this work do you find the most fulfilling or rewarding?

I like educating people and helping them find their ‘aha’ moment when you highlight areas of risk they may not have thought about. It allows people to broaden their horizons a little bit when we talk about risk and try to explore it from a different angle. I try not to be the person who always says “No” because it’s too risky, but find solutions that everyone is comfortable with given a risk profile.

R&I: What do your friends and family think you do?

I tell my kids I protect people and property and sometimes the things you can’t feel or touch.




Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]