The insurance industry’s programs business continues to deliver value through product innovation. Today, insurance programs is a $40-$50 billion premium market, driven by pecuniary motivation. Insurance carriers are partnering with program administrators (PAs) and managing general agents (MGAs) to provide capacity for capturing new business in non-commodity classes of business. The outlook for sustainable growth through 2017 is positive, as carriers seek profitability in specialty line sectors of the marketplace.
This year’s Target Market Annual Summit attracted the largest attendance since its inception more than fifteen years ago. Estimates project that approximately one out of every ten U.S. premium dollars is distributed through the programs market, according to the Target Markets Program Administration Association (TMPAA). Today’s market volume has set record levels as program premium revenue nearly doubled in the 5-year period of 2010 to 2015, exceeding the $17 billion in written premium reported in 2010.
At the heart of the programs market is innovation. The majority of program administrators are entrepreneurial, working closely with agents and insureds to uncover new risk exposures and offer coverage solutions. Program administrators typically serve as wholesalers to distribute, quote, underwrite, bind and issue customized specialty policies on behalf of the carrier up to agreed upon written authority. Policy enhancements regarding coverage offering, term language and pricing are designed to differentiate the program within the administrator’s specialty niche. The administrator builds relationships with insurance carriers to access required capacity to meet nuanced coverage demand. PAs and MGAs possess the underwriting, marketing and distribution expertise for non-commodity classes of business. Insurance companies reap the financial advantage of generating revenue dollars in specialty sectors where they typically do not have the market presence or in-depth sector expertise.
Profitability in program lines is generally stronger than the broader commercial market. As such, insurance carriers are increasingly flexible in terms of developing policies for smaller programs, fronting operations and startup sector entry. Regionally-focused programs, such as state specific coverages, are becoming more prominent. Sector specialists address vast risk exposures within specific markets, as diverse as can be imagined by the ingenuity of the program administrator. High value art, Antique cars, Cyber, Drones, Miscellaneous D&O, Agriculture and Healthcare are just a few areas of risk in trending sectors with multiple, complex coverage needs. Today, Ironshore offers forty-five specialty programs in partnership with program managers to provide coverage solutions developed to meet their clients’ needs.
MGAs underwriting risk within the Shooting Sports sector, as an example, provides coverage for every detailed aspect of the class, including shooting ranges, optic parts, body gear, ammunition and lesser-known but proliferating manufacturers. In the healthcare sector, a program is offered to provide post-surgical complications expense cover to protect surgeons performing medical procedures in certified medical specialties. While the program was initially created to advance the outcomes of bariatric surgeons, the program has expanded to encompass various specialty classes, such as orthopaedic, plastic and maxillofacial and spinal surgery.
Program business lines can heighten carrier profitability while sharing the underwriting risk with the administrator. The possibilities for sector coverage are virtually limitless as emerging risks present opportunities to deepen specialist market penetration. Insurance carriers’ oversight of administrator activities, diligence in underwriting analysis and commitment to long term partnerships drive program business lines profitability.
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