Local agency credit and collections

Rough Notes, Sep 2000 by Mason, James Woolverton

"Insurance is challenging," Rohde says. "It is a necessary public service. We wouldn't have all this [looking at his 15th floor view] without the concept of sharing and risk spreading."

Next on the Kilkenny management team is John DiFalco, president of the Arrowhead Special Risk Division.

This division, which came into existence in April 1998, started with one product, a difference in conditions policy or DIC, where, in a nutshell, everything is covered that is excluded by an all-risk policy. It applies to commercial risks and is generally purchased for businesses that want to obtain coverage for earthquakes.

Arrowhead wrote $12 million its first year in writing the line of business and is at approximately $25 million currently looking to $35 million by year-end. They have since added two other lines of business.

DiFalco notes that his group is currently working on another project-liability for public entities. Its first policies will likely be written in August 2000, and will be based in an Arrowhead satellite office managed in Richmond, Virginia. It will target small municipalities, mostly on the East Coast, in the Midwest and Southeast.

"For now, the last product we're working on is residential earthquake," DiFalco says. "The goal size for the entire book of business will be about $85 million."

In managing this division, DiFalco is enthusiastic about its diversity, which seems to fit his entrenched attitude toward his career. He started out in 1961 with the New England Fire Insurance Rating Bureau which is now Insurance Services Office or ISO. He spent many years with Wausau Insurance Group in Philadelphia, New York and Portland, Oregon. In 1985 he moved to San Diego to serve as senior vice president responsible for commercial underwriting, ceded reinsurance, assumed reinsurance and program development with Insurance Company of the West (ICW). He joined the Arrowhead Group in 1998.

"I met Pat in 1986 when he first acquired Arrowhead," DiFalco says. "He came to ICW looking for a nonstandard auto carrier. He wanted us to be it, and we wanted to be it. I think we wrote about $1 million to $1.5 million in premium for about a year. We went away and he went away. I kept seeing him at conventions where we'd shake hands, but we never really talked. In 1997, one of our reinsurers came to visit and told us, `You ought to be doing business with Arrowhead.'"

DiFalco adds that a trucking program is something that Arrowhead will likely develop down the road, and it could happen very quickly. The reinsurance piece is complete for it; there is staff in place; and they are working on the last hurdles. It could start within 60 days-or in up to six months to a year if the hurdles are not surmounted.

DiFalco is fascinated with the dynamics of Arrowhead, pointing out that in April 1998 Arrowhead was almost completely nonstandard automobile with virtually all of its product in one basket. Now, just a little more three years later, it is a 5050 entity, meaning it is split 50% nonstandard auto and 50% other personal and commercial lines. Arrowhead is managing a $400 million total book, $200 million of which is commercial lines.