Wholesale power for retail agents

Rough Notes, Mar 2003 by Boone, Elisabeth

As the "new kid on the block," American Wholesale puts its clout to work for independent agents

Have you ever watched a race car driver zoom from zero to 100 miles per hour in first gear? If so, you have a pretty good idea what it's like to be American Wholesale Insurance Group. Established last year through the merger of several successful specialty wholesalers, AMWINS zoomed to the top of the chart to become the nation's third largest surplus lines wholesaler, with combined premiums in excess of $800 million. Made up of nine operating companies, AMWINS is also the largest independently owned wholesale brokerage organization in the country and is solely dedicated to serving retail independent agents and brokers.

Spearheading the formation of American Wholesale were two highly respected insurance industry veterans: Ernie Telford, chairman, and Steve DeCarlo, president and chief executive officer. Why did they decide to establish AMWINS, and what did they see when they looked at the market?

"It was a real meeting of the minds between me and Steve," Telford says. "I owned MTS Insurance Services (a West Coast wholesale and surplus lines broker) and had recently purchased a majority interest in New Century Global (a managing general agency and wholesale brokerage), and I was looking for a way to put these two companies together. I believed there was an important space in the market to fill: a large, independently owned wholesaler with buying clout to serve the independent agency and brokerage community. I'd known Steve for years; when I told him about my idea, I found out he wanted to do the same thing. He suggested we join forces so we could expand volume and complete our mission a lot faster."

Maintaining its own independence and working exclusively with independent retail producers are at the heart of the AMWINS philosophy. Its commitment to retailers is clearly articulated in the AMWINS motto, Because Independence Matters, and in its mission: To support retail agents by providing product and risk management solutions through highly skilled brokers and underwriters.

"If you look at the top five wholesalers in the country, the others are owned by publicly traded retail brokers or a bank, but the bank also owns a retail brokerage," Telford says. "We wanted to offer independent agents an alternative: an independent wholesaler with buying clout that wouldn't compete with them on the retail side. We know, because they tell us, that independent agents don't want to fill the treasuries of their competitors. We also believed that other wholesalers would want to connect with an organization that embraces that philosophy and would create an environment where wholesalers could continue operating as entrepreneurs and building their own businesses under the umbrella of our wholesale buying power." In this endeavor, Telford asserts, "Steve and I were on the same page from day one."

Steve DeCarlo directs overall operations for American Wholesale. He joined American Wholesale from Royal & SunAlliance USA (RSA), where he was a founding officer of Royal Specialty Underwriting, Inc. (RSUI), serving as executive vice president and chief financial officer, respectively. In 1998, DeCarlo assumed senior vice president responsibilities for business insurance operations for RSA USA.

"Ernie and I are such fans of the wholesale industry," DeCarlo says. "I've watched it evolve, and I really admire people like Ernie who created the wholesale organizations around the United States. These people did it on their blood, sweat, and tears, and they put together a great industry. To be an independent wholesaler with enough scale to truly support the retail community is a great achievement. If we can obtain enough capital to compete with the retailers that own wholesalers, we see that as a big contribution to the marketplace. For me, it's a thrill to work with Ernie because we think alike: How can we help retailers? Retailers have needs; how can we support retailers? It's fun!"

Adds Telford: "We also know from our conversations with insurance company executives that the marketplace is looking for alternative distribution channels. Wholesalers are aggregators, and insurers like the idea of a powerful new wholesale operation coming on board that is not owned by the `800-- pound gorillas.' So far as product development, if we build a national platform, we believe the markets will use us for distribution." The hard market, Telford continues, is proving to be a boon for the new wholesaler. "Now that rates are up, there's a huge amount of new capital coming into the business, and it's looking for distribution channels," he points out. "We believe American Wholesale will be a beneficiary of that trend."

Decentralized model

Bringing together several wholesale operations, each with its own leadership, philosophy, products, and markets, is no easy task. American Wholesale is structured to capitalize on the strengths of its associated companies while allowing each one to operate with maximum flexibility and independence.