It's hard to imagine that underwriting in the much-watched entertainment category of major feature films has changed dramatically in the short span of four months since the first of the year.
But it has. The biggest buzz in that sector recently has centered on Woburn, Mass.-based ASU International, the wholly owned subsidiary of HCC Insurance Holdings Inc.
ASU, out of nowhere, has exploded into a full-blown challenger to perennial feature film underwriting kingpin Fireman's Fund Insurance Co., as well as such well established underwriters as the Chubb Group of Insurance Cos., St. Paul Travelers, Entertainment Brokers International and the London market.
After all, it was just weeks ago at the Academy Awards ceremony that Fireman's was the underwriter for a staggering number of Oscar nominees--and winners.
For example, in headlines only, movies that Fireman's underwrote earned 61 of 113 nominations in all categories, including all five finalists for "Best Film," "Best Actor" and "Best Supporting Actor," plus four out of five nominations for "Best Director." On Oscar night itself, movies underwritten by Fireman's brought home 14 statuettes.
But among Hollywood insurance insiders, Oscar-time party circuit gossip often centered on ASU and how was it that this underwriting newcomer, with the powerful feature film broker Aon/Albert G. Ruben, snatched a piece of Fox Entertainment (films and TV).
The upstart managed to wrest the business, an account worth millions of premium dollars, from the potent partnership of Fireman's Fund and the always-heads-up Marsh USA brokerage.
Part of the answer, so the industry gossip went, emanated from the fact that Fox's new risk management director, Tanya Karn, was relatively new to the organization after a long run as the No. 2 person in the risk management department at Disney, and she was eager to demonstrate to her new bosses that she knew how to drive a good, though certainly responsible, bargain. That set the scene, then, for a just-launched feature film underwriting aspirant.
But what made ASU, which had for years been the leading sports insurer in the United States, think that its brand new feature film venture could successfully go up against mighty Fireman's?
The first explanation from Marc Idelson, ASU's senior vice president, North American underwriting, is an easy one. His firm is utilizing paper from its parent company, HCC Insurance Holdings Inc., which has financial ratings of A+ by A.M. Best and AA by Standard & Poor's.
The second answer also is easy: Again thanks to the Texas-based HHC's strong and deep financial reserves, right out of the box ASU has $60 million and counting in capacity and they are prepared to underwrite whole deals.
Okay, say veterans of the feature film industry, but the real question for ASU is how does it expect to provide the kind of seasoned, specialized expertise necessary to effectively and efficiently serve the interests of insured clients in this rarefied realm?
"We've been working on building a team since last fall," says the 38-year-old Idelson. "We looked around the industry for top talent. We currently have a team of 10 people, and we are committed to hiring more to keep pace with our growth." As part of HCC/ASU's expertise-building campaign, Los Angeles-based cineFinance was recently acquired.
By design, ASU is quite willing for its capacity to be utilized in a number of ways. The firm can write 100 percent of a risk, and it can be the lead underwriter for large placements.
That said, however, nobody, including ASU, expects the high-powered members of Fireman's feature film group to be quivering in their boots, so to speak. Fox or no Fox. "Business has been good," says Wendy D. Diaz, Fireman's executive underwriter. "Every year, the number of productions we handle is up, even when the overall economy is suffering."
Diaz--a top underwriter in the film industry, along with Gene Williams of Chubb, Martin Ridgers of EBI, Jon Paulsen at St. Paul Travelers and Cindy Brochart, formerly with Travelers' Gulf Insurance and part of a new group at W.R. Berkley--has, as one might expect, enormous clout.
She and others in Fireman's entertainment units deal with 15 or so brokers at any time, and currently are seriously exploring the possibility of doing business with a managing general agent, which would be a first.
Fireman's, long the most sought-after source of insurance in Hollywood, came to dominate the feature film underwriting business as never before in the past five decades, in part because several major insurers who were new to the market gave up after a hard, price-driven run in the late '80s and '90s.
At the same time well-established, price-disciplined players also reduced their participation, or left the marketplace altogether.
"We reduced our activity to only 15 percent of our participation," say EBI's Ridgers.
Thus, ASU's substantial, splashy and seemingly long-term commitment to the feature film insurance business is being cheered all around by studios, brokers and smaller-scale fellow movie specialty underwriters.
"Nobody likes a monopoly," as one veteran feature film broker succinctly put it. "Nobody I know questions the acumen, the integrity or the business fairness of Fireman's. It's just nice to have another major player in town."
In addition to ASU forging headlong into this market, a resurgence in the film underwriting business has been in motion on several other fronts.
Late last summer, St. Paul Travelers formed a new entertainment unit that combined its existing entertainment program written through Encore Entertainment Services LLC, the Los Angeles-based managing general agency (and the pioneer of insuring reality-TV shows), with Gulf Insurance Group, which had been Traveler's entertainment unit.
At this juncture, says Jon Paulsen, chief underwriting officer for St. Paul Travelers' national programs division, the new group is concentrating on underwriting independent films in the $15 million range.
In the aftermath of St. Paul absorbing Travelers, two principals at the Gulf Insurance group--Cindy Broschart and Michael Harris--left the company and formed Irving, Texas-based Berkley Specialty Underwriting Managers, a broad-based entertainment services group at W.R. Berkley Corp.
Back at old-line insurer Chubb, meanwhile, Williams says the carrier is polishing its focus. "Today we are focused primarily on independent film productions with budgets from $1 million to $75 million, plus commercials, documentaries and television productions," he says. "For the biggest films, we often participate with other insurers to provide the higher limits they need."
Williams says that in addition to serving its traditional geographic base in North America and Europe, Chubb is looking to insure films produced in Latin America where the market, in Argentina, Brazil and Mexico especially, is "growing like a weed."
a former editor and publisher, contributes frequently to Risk & Insurance®.
April 15, 2005
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