lean mean surety machine, The

Rough Notes, May 2001 by Boone, Elisabeth

Experience and stability drive Atlantic Mutual's highly competitive surety operation

If you've ever driven a sweet, low-slung sports car, no one has to explain the phrase "zero to 60 in 6 seconds." And if you have that much power in your hands, you'd better have a really good idea of what you're doing behind the wheel.

With premium volume of almost $1 billion and almost 160 years in business, The Atlantic Mutual Companies unquestionably pack a lot of power under their hood. They're also smart enough to know that power and speed can be dangerous unless they're under the steady hand of an experienced driver. That's why, when Atlantic Mutual decided it wanted to enter the surety business, it turned to a pro who knows the course and can steer confidently through hairpin turns and over rocky roads.

Man with a mission

Meet Senior Vice President Tom Gorke, who joined Atlantic Mutual in October of 1999 and was charged with using his almost 30 years of experience to start a surety operation from ground zero. Having signed on with Seaboard Surety (later St. Paul Surety) right out of college in 1970 and moved up the ranks to executive vice president, Gorke unquestionably knew the territory-and, equally important, the players. At Atlantic Mutual, Gorke's mandate was to implement a business plan he had presented to the executive committee that outlined his objectives for the new surety department and detailed how he planned to achieve them. His first task was to put together a staff. "Building a staff was the critical piece," Gorke says. "I needed to bring together a group of talented, experienced surety underwriters from around the country to make Atlantic Mutual a national surety presence, and I needed to be very selective."

Gorke launched this initiative by bringing on board veteran surety underwriters Mike Keegan and Tony DiMartino. "These are highly experienced underwriters who have excellent reputations and had established long-term relationships with clients," Gorke comments. Today the surety division's staff numbers 22; in addition to Gorke, there are 17 underwriters, a claims attorney, and three clerical employees.

If nuts and bolts are what hold an engine together, then the underpinnings of a surety operation are rates, forms, and filings. Atlantic Mutual had already obtained approval from the U.S. Department of the Treasury to write federal bonds, a process that is reviewed each year. The maximum limit on a single bond is 10% of an insurer's surplus, and Atlantic Mutual's current limit is $53 million -- some significant capacity to bring to the surety market. Next Gorke worked with Keegan and DiMartino to develop rate manuals and make filings in each of the 50 states. With regulatory tasks completed, Gorke and his staff addressed their next challenge: completing the creation of a home office infrastructure, and laying the groundwork to establish a presence in each of Atlantic Mutual's six regions: New England, Mid-Atlantic, South, Central, Southwest, and West. In each of these regions, Gorke says, "We'll have experienced underwriters who know the territory, know the surety business, and know the construction business." In some cases surety underwriters will work from the insurer's existing regional offices; where needed, the surety division will set up branch offices within regions. "Well go where the good business is," Gorke declares.

As if heading up the new surety operation weren't enough of a challenge, Gorke late last year was given the additional responsibility of running Atlantic Mutual's Marine Insurance Division. The surety and marine units operate separately, but Gorke says the new "boats and bonds" division definitely offers some opportunities for synergy, particularly within the producer ranks. "Both units have experienced underwriters, and they introduce producers to each other," he says. "Their synergy is proving very profitable."

Mid-market focus

Although Atlantic Mutual is new to the surety business, it's definitely not in the position of having to play catch-up. "With the strength of our balance sheet and our Treasury limit, we can handle just about anything," Gorke asserts. "Just because we're a new player doesn't mean we have to start out just writing small bonds. We'll look at smaller risks, but our target is the 'meat and potatoes' of the surety industry. We have the balance sheet, reinsurance support, and experienced underwriters who have seen just about everything." Atlantic Mutual writes both contract and commercial bonds. On the contract side, "We write the typical classes: general contractors, road contractors, heavy engineering firms, and electrical and mechanical subcontractors," Gorke explains. "In the commercial area, we write all compliance-type obligations: license and permit, court and fiduciary, financial guaranty, and miscellaneous bonds."

With its new surety division, Gorke believes his company is even more attractive to independent agents. "Atlantic Mutual has great relationships with its agents," he observes. "I've never seen such strong ties between an insurer and its producers. These relationships are a perfect fit with the surety business, which is based on long-term relationships among agent, contractor, and surety." From the start, he notes, "Agents' response to us has been tremendous. As a new operation in the Atlantic Mutual family, we're very interested in working with existing Atlantic agents to meet their bonding needs. We have the talent to assist an agent who doesn't have a significant book of surety business or experience. We're also focused on doing business with the very best professional surety producers in the business. We're not going to do business with everyone."