ANY WHICH WAY WE CAN

Rough Notes, Apr 2008 by Boone, Elisabeth

AmTrust grows organically, geographically, and via strategic acquisitions

What happens when a successful carrier in an underserved market decides to expand?

Plenty!

AmTrust Financial Services has developed a reputation as a market to turn to for small business workers compensation risks-the Main Street businesses that typically are not pursued by larger carriers. (see "Comp for Small Businesses" in the September 2005 issue of Rough Notes.)

Given its record of success in this challenging niche market, one might think AmTrust would focus simply on building its workers comp volume among small businesses. The fact is, though, that while AmTrust continues to enlarge its presence in that market, the company also has embarked on a number of initiatives to expand its reach in terms of both product offerings and underwriting territory.

Based in New York City, AmTrust Financial Services is a multinational insurance holding company engaged in three major lines of business: small business workers compensation; specialty risk and extended warranty administration; and specialty mid-market P-C programs.

To learn the details of AmTrust's ambitious expansion initiative, Rough Notes spoke with Mike Saxon, chief operating officer of AmTrust Financial Services, the parent company of AmTrust North America that is the small business workers compensation unit also led by Saxon.

"Since 2005, we've achieved considerable growth," Saxon says, "and at the same time, our focus and core capability still is workers compensation for small businesses. Due to demand in the market, as well as our pursuit of organic growth, we've expanded our core business to offer workers compensation for mid-sized businesses and to offer other commercial lines as well," he explains.

Specialty mid-market P-C programs

"In 2005 we entered into a renewal rights agreement with Alea North America, which allowed us to write program business for the specialty middle market, under risk sharing with certain GAs [general agencies] with which Alea-which we have now branded AmTrust Underwriters-had established relationships," Saxon says. Then in mid-2006, we acquired Wesco Insurance Company. Wesco gave us the ability to expand our domestic insurance operations and also provided additional underwriting capabilities for the program business, for workers compensation, and for specialty risk lines of business that we currently write. Wesco now complements Technology and Rochdale Insurance Companies as domestic, wholly owned AmTrust carriers rated A- by A.M. Best."

AmTrust Underwriters, Saxon explains, targets programs that are willing to assume a share of the risk to gain better control of their exposures. The company places coverage for workers compensation, general liability, commercial auto liability, and property. Its capabilities include captives and rent-a-captives; risk retention groups; risk purchasing groups; trusts; and sliding scale commissions.

Among the preferred risks entertained by AmTrust Underwriters are retail operations, wholesale operations, light to medium contracting, light to medium manufacturing, habitational exposures, smaller public entities, schools and universities, not-for-profit organizations, and a broad spectrum of commercial automobile risks. AmTrust Underwriters works specifically with a select group of GAs who are dedicated to the program market and have secured the people, infrastructure and expertise to develop long-term business. Today we have 32 programs on the books, and the majority of these relationships have been in place for a very long time," Saxon adds.

Small business workers comp

AmTrust also has expanded its reach by acquiring Muirfield Underwriters of Chicago. "In May of 2006 we entered into an agreement with Aon to acquire Muirfield, which allowed us to gain a foothold in the Midwest and establish a presence in some of the Plains states closer to the Mississippi," Saxon notes. "We've been able not only to expand our small comp writings but also to expand our workers comp operation into the middle market." As a result of this initiative, Saxon comments, "We no longer consider ourselves strictly a small comp writer, although that is our bread and butter. We're now able to offer policies to larger businesses."

In any line of business, the definition of "middle market" depends to a great extent on the individual carrier's view of that market. How does AmTrust define the middle market with respect to workers compensation risks?

"We don't target risks in a particular premium range," Saxon responds. "We write workers compensation policies on a standalone basis up to about $900,000 in premium. For us, the small to midmarket would be premiums from $100,000 on down. If a risk is good and falls within our underwriting parameters, we'll look at it even if it carries a higher premium. We also have some select wholesale relationships, but in large part we distribute our comp products through our retail base," Saxon explains.

In 2004, AmTrust entered into a renewal rights relationship with Associated Industries Insurance Services of Florida to write their small business workers compensation business in the state of Florida. In the fourth quarter of 2007, AmTrust finalized a deal to acquire the rest of the workers compensation business along with purchasing Associated Industries Insurance Company. Associated writes about half of its business with the acquired carrier and the remaining portion with AmTrust's Technology Insurance Company. AmTrust retained the current management team and employees to continue operating the business, which is licensed in Florida and contiguous states. Associated maintains relationships with about 300 agents in the state of Florida.