TOUGH RISKS, SMART SOLUTIONS

Rough Notes, May 2005 by Boone, Elisabeth

Newcomer James River Insurance brings energy and expertise to the wholesale market

Talk about timing: When James River Insurance Company opened for business in July 2003, the hard market already was beginning to soften-not the best news for a new entrant into the wholesale market. These days, though, many brokers are considerably less willing to trust their clients' specialty risks to the whims of the standard market, even when prices are tantalizingly low. And James River, like other recent entrants into the excess-surplus market, is positioning itself to be a stable, savvy market for some very difficult classes.

James River Insurance is a subsidiary of James River Group, Inc., which purchased the insurer's predecessor, Fidelity Excess and Surplus Insurance Company, from American Financial Group. James River Insurance has policyholder surplus of $57.5 million and is rated A-/VII by Best's. Domiciled in Ohio, the insurer operates from its headquarters in Richmond, Virginia, and is authorized to write business on a nonadmitted basis in 48 states and the District of Columbia.

James River's senior management team is a diverse group. Serving as president and chief executive officer of James River is Michael Kehoe, who most recently was vice president of brokerage underwriting for Colony Insurance Group, the surplus lines subsidiaries of Agronaut Group, Inc. Other former Colony executives who moved to James River are Edward Desch, senior vice president and chief financial officer; William J. Kenney Jr., chief information officer and senior vice president-administration; and Brian Haney, vice president and chief actuary. Serving as senior vice president-claims is Ann Marie Marson, who most recently held the same position at ACE USA. John Clarke is director of marketing; his background includes serving as senior vice president and chief product development officer for Wyndham Partners Consulting, a division of Renaissance U.S. Holdings, and as a vice president of Markel Corporation.

A market in flux

"In mid-2003, most casualty and many professional liability lines were in the second half of the all-too-short hard market cycle," Clarke says. "The commercial property market was already suffering a renewed round of rate cutting accompanying a flood of new capacity in the marketplace." Prior experience in the E&S market and strong prospects for growth, he says, led James River into the market in 2003.

The mission and operating philosophy of James River Insurance reflect its commitment to its three classes of stakeholders: investors, brokers, and insureds. "Like most companies, our overall mission is to deliver consistently high returns on equity to our investor shareholders by building the most profitable E&S company in the business," Kehoe says. "Operationally, we want to provide fast, efficient, creative solutions to small to medium account business that requires a true underwriter's touch, often in tough and higher hazard classes of business."

With a keen focus on underwriting profit, James River Insurance writes brokerage, individual risk business through 10 underwriting divisions, each organized around a specific industry group or coverage. (see box on page 133.) Brokers are appointed specifically to each division based on their areas of expertise. James River works almost exclusively with wholesale brokers; in some instances the insurer places specialty risks on behalf of selected retailers.

"We believe we can give a higher level of service, provide more expert solutions, and be better underwriters by having our staff organized by industry segment or coverage type," Clarke says. "Most of the brokers we work with are similarly organized, at least into teams that focus on casualty, property, professional liability, energy, or another market segment."

To support its underwriting, James River Insurance has arranged a variety of reinsurance treaty structures. Its roster of reinsurers includes BF Re (Berkley Insurance Company); XL Re (XL Reinsurance America, Inc., and XL Insurance [Bermuda], Ltd.); Employers Re; QBE Re; Everest Reinsurance Bermuda, Ltd.; Aspen Re (Aspen Insurance [UK] Ltd.); Partner Re of the U.S.; and various Lloyd's syndicates.

Choosing niches

The market segments that James River Insurance targets are general casualty, manufacturers and contractors, excess casualty, primary and excess property, professional liability (primarily lawyers and architects and engineers), and allied health care. Kehoe says, "We chose these segments because we knew them well, had enjoyed success with them in the past at different companies, realized there was a need in the marketplace, and, most important, were able to attract great people to lead our various teams.

"We will continue to expand our product portfolio as we can attract the talent to build it," Kehoe says. "In 2004 we added an energy division that focused initially on the oil and gas industry. This year we're expanding into mining. Also in 2004 we started an environmental liability division with an initial focus on contractors pollution coverage, and a health care division that targets nonstandard physicians malpractice."