Gulf insurance opens door to specialty business

Rough Notes, Jun 1999 by Boone, Elisabeth

Travelers-owned carrier builds reputation on flexible service to agents

From successful standard carrier to innovative, focused specialty insurer: That's the path being taken by Gulf Insurance Group, which dates back 60 years and which now is offering both depth and breadth of expertise in some carefully selected specialty markets. How and why did Gulf decide to make this transition? To find the answers, we'll talk with Gulf's president and chief executive officer, Chris Watson, as well as with senior executives who have responsibility for the insurer's major specialty divisions. To learn where the company is going, first we'll discover something about where it's been.

Founded in 1940, Washington Fire & Marine Insurance Company in 1968 changed its name to Gulf Insurance Company. From 1976 to 1986, the insurer was owned by Control Data Corporation through its subsidiary Commercial Credit Company. In 1987, many of Gulf's current staff, including president and CEO Watson, joined the company and began to transform it into a specialty lines group providing directors and officers liability, errors and omissions/professional liability, entertainment and sports coverage, fidelity, surety, and many other specialty risk products and programs. That same year, Primerica Corporation was acquired by Commercial Credit, which then changed its name to Primerica Corporation.

In 1993 Primerica acquired Travelers Corporation and changed the Primerica name to Travelers Group. Two years later, Travelers Property & Casualty Company purchased Aetna Property & Casualty, and in 1997 the specialty lines division of Travelers Property & Casualty was merged into Gulf Insurance Group, creating a $1 billion specialty lines facility. To the Gulf portfolio, this transaction added property, hard-to-place casualty, health care, transportation, additional professional liability coverages and programs, and increases in umbrella and excess liability capabilities. Also in 1997, Gulf established a subsidiary in London: Gulf Insurance Company UK, Limited. Finally, in 1998, Travelers merged with Citicorp to create Citigroup, the largest financial institution in the world.

To a considerable extent, as you can see, the story of Gulf is also the story of the insurance industry's intense drive toward consolidation over the last several years. Despite the dizzying pace of acquisitions and mergers involving its parent, however, Gulf continued to honor its mission by carving out a distinct identity in the challenging specialty lines marketplace. The insurer maintains independent ratings of A (Superior) from A.M. Best and AA from Standard & Poor's, as well as being listed by Ward's Financial as one if its 50 Best Practices companies. Focusing on other than mainstream insurance needs, the Gulf Insurance Group has achieved wide recognition as "The Travelers Specialty Solution."

Fast and flexible

Within the vast Citigroup empire, Gulf operates as an autonomous organization. Through its U.S. and UK subsidiaries, the insurer offers both admitted and nonadmitted capabilities, allowing it to launch new products and programs quickly and to provide tailor-made coverage when required. Gulf recognizes that strong agency/brokerage relationships are essential in the absence of a complex and expensive branch network; to that end, producers work directly with the insurer's decision makers.

Gulf offers a broad and diversified portfolio of products and programs in its carefully defined specialty markets. Most of its products are distributed on a direct basis through retail independent producers. In other cases, program administrators provide underwriting, service, and policy issuance for producers on Gulf's behalf. For a few specialized programs, the insurer looks to a designated wholesale distribution system.

"We pride ourselves on being an open brokerage company," says president and CEO Watson, who joined Gulf in 1987 when it was beginning its specialty lines initiative. "Any agent can gain access to our facilities; no contract is required." A retail independent agent, he explains, can work either directly with the insurer or through its designated program administrators. About 60% of Gulfs business is written on a direct basis, with the remaining 40% being program business.

Diverse portfolio

Among the specialty products Gulf offers, Watson says, about 40% is financial services coverages like D&O and professional liability; the insurer also offers bankers blanket bonds for financial institutions and mutual funds. "Sports and entertainment is another very strong class for us," he observes, noting that Gulf insures such high-profile clients as the Dallas Cowboys and Carnegie Hall. "We're also a major player in trucking and transportation, and another marketleading product line is umbrella business." (See the sidebar on the facing page for a complete listing of Gulf's "Menu of Specialties.")

A key to success in these and other specialty lines, Watson emphasizes, is underwriting expertise. "Our underwriters work directly with our agents to produce business that meets our standards," he explains. "Our philosophy is to hire the best underwriters and give them the tools they need to do their job." So far as both agents and insureds are concerned, he continues, "Service is our benchmark. We're a firm believer in delivering a superior package of product, underwriting, claims, and service. We want to be sure our insureds and our agents have everything they need; we don't just take their premium check and say, `See you next year.' " Is this approach successful for Gulf? "Very much so," Watson responds. "We get high praise for our service and our turnaround time."