By CYRIL TUOHY, managing editor of Risk & Insurance®
Nobody ever doubted that Patrick G. Ryan, former chairman and CEO of Aon Corp., could build a wholesale brokerage from scratch. His previous attempt ended in the creation of the world's largest retail insurance distributor.
The real question was: Could the 74-year-old Ryan cobble together an underwriting team worthy of his ability to build a distribution giant?
Two years after launching the wholesale brokerage Ryan Specialty Group, Ryan appears to be on his way once more. Though this new wholesale venture isn't likely to be anywhere as large as what his retail efforts eventually became, it may well turn out to be just as profitable, if not more so.
Ryan Specialty Group's wholesale brokerage arm, R-T Specialty LLC, represents the company's distribution side, and it was the first piece of Ryan's four-legged strategic vision: distribution, managing the underwriting, pushing for geographic reach through a Lloyd's syndicate and finding a way to underwrite small accounts profitably.
Of late, RSG has been most active in building up its underwriting side, grouping the specialty managing general agencies and underwriters under the umbrella of RSG Underwriting Managers LLC.
This spring, RSG Underwriting Managers added the Long Island, N.Y.-headquartered excess and surplus lines managing general agency WKF&C Agency Inc., to the underwriting stable. The agency, Ryan said, was particularly valuable for the expertise of its underwriters and for the technology platform it has built.
"WKFC has developed a technology platform, and an underwriting and processing model to allow them to bevery cost efficient on behalf of underwriters," said Ryan, in an email to Risk & Insurance®. "It's a paperless operation and very responsive."
With accounts ranging from $5,000 to $50,000, and issuing 20,000 policies per year, according to WKF&C CEO Michael Sillat, WKF&C has mastered the art of underwriting small and midsize companies, a segment of the marketplace notoriously difficult to underwrite profitably.
WKF&C's "robust" and "adaptable" underwriting and administrative platforms, in the words of Sillat, have helped the managing general agency underwrite and bind risks from 10 different lines with as many as 13 insurance companies.
"RSG bought us for a reason," Sillat said, pointing to WKF&C's expertise in binding insurance contracts. He said the deal with RSG was anchored in a "synergistic relationship."
Sillat, who will stay on as CEO, said he is looking forward to examining the technology platforms of the other managing general agencies operating under the RSG Underwriting Managers umbrella.
Specialist underwriting managers under the RSG Underwriting Managers group include Global Special Risks, Jubilee, Power Energy Risk, Life Science Risk, Sapphire Blue, Concord Specialty Risk, CivicRisk, Technical Risk Underwriters, Think Risk and Ryan Specialty Consumer Products, according to Ryan Specialty Group's website.
Ryan said that WKF&C's expertise in underwriting smaller accounts helped cement the last of four initiatives that make up RSG's initial strategic vision. Other initiatives included attracting third-party capital, and buying the Lloyd's syndicate Jubilee to give RSG "flexibility on a geographic basis," Ryan said.
So far, cobbling together a team of specialist underwriters appears to have gone more smoothly than building RSG's distribution model.
Within months of its launch, RSG's R-T Specialty was involved in two separate disputes. One, filed by wholesale brokerage competitor CRC Insurance Services, alleged that 120 of its employees had left to go work at RSG in violation of a noncompete agreement.
A separate dispute involved a former employee of Crump Property & Casualty who left to work for R-T Specialty at the end of 2010.
Both disputes were settled early last month after RSG, CRC Insurance Services and Crump Group said in a statement May 4 that they had resolved their disputes through a "global, confidential settlement agreement."
CRC's operations are being combined with those of Crump Property & Casualty, after Crump in was bought by CRC's parent, BB&T Insurance Services, based in Winston-Salem, N.C., earlier this year.
June 4, 2012
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