A number of property/casualty insurers call themselves Super Regionals as a way to differentiate themselves in the marketplace. They pride themselves on being not too big and not too small. Big enough for economies of scale yet small enough to be close to their agents and customers. Big enough to offer a variety of product lines in several states yet small enough to be flexible and accommodating.
Until now, there has been no industry-wide, objective definition of Super Regional.
To open an industry discussion on the subject and give definition to this important group of insurers, Insurance Journal called upon its official research partner, Demotech Inc., an actuarial firm based in Columbus, Ohio.
“In their efforts to distinguish themselves, many regional insurers have begun referring to themselves as ‘super.’ But everyone seems to have a different understanding of what that means,” said Joseph Petrelli, president, Demotech. “Insurance Journal came to us with the idea of establishing objective financial standards for stratifying property/casualty carriers. In general, larger regional insurers writing several lines of business in several states were characterized as Super Regional.”
“We saw this as an opportunity to bring definition to the term and to recognize these insurers for their achievements,” explains Mark Wells, president, Wells Publishing Inc., publisher of Insurance Journal.
Demotech Classification System
The experts at Demotech responded with their own classification system for property/casualty insurance companies. The Demotech Company Classification System categorizes all property/casualty insurers into one of 11 categories based on Demotech’s analysis of the data, reported by the companies to the National Association of Insurance Commissioners.
The 11 categories are Nationals, Near Nationals, Super Regionals, Regionals, State Specialists, Coverage Specialists, Strategic Subsidiaries, Risk Retention Groups, Surplus Lines Carriers, Reinsurers and companies with less than $1 million in direct written premium.
No company is assigned to more than one category. Thus, a company not on the Super Regionals list is in another classification, perhaps as a Near National, Regional or State Specialist.
This issue of Insurance Journal, focusing on the Super Regional Property/Casualty Insurers™, presents the first report on Demotech’s classifications. Future issues will identify State Specialists, Regionals, Coverage Specialists and others.
Super Regional criteria
To select the companies for the Super Regional Property/Casualty Insurer™ list, Demotech used these specific, objective qualifying criteria and thresholds:
- Active, individual companies not in regulatory supervision at Dec. 31, 2005;
- Companies reporting data to the National Association of Insurance Commissioners using the property/casualty annual and quarterly statement format;
- Companies with more than $1 million of direct written premium in each of two to 34 states at Dec. 31, 2005;
- Companies with less than 90 percent of their direct written premium in any one state at Dec. 31, 2005;
- Companies with less than 90 percent of their direct written premium in any one line of business at Dec. 31, 2005;
- Companies with $100 million of surplus or more at Dec. 31, 2005 and also at Sept. 30, 2006;
- Companies with net written premium of at least $50 million at Dec. 31, 2005; and
- Companies with direct written premium of at least $25 million at Dec. 31, 2005 and greater than $0 at Sept. 30, 2006.
The first list
In general, a Super Regional Property/Casualty Insurer™ is an individual company writing multiple lines of insurance in multiple states. Risk retention groups, surplus lines insurers and reinsurers are not included.
Utilizing the above quantitative criteria, Demotech identified 139 Super Regional Property/Casualty Insurers™. They are presented in this Special Report both alphabetically (below) and by size as ranked by direct premiums written as of Sept. 30, 2006.
Insurance Journal and Demotech hope this report sparks a discussion on Super Regionals, including the criteria used in this listing, so that future reports can more accurately articulate an industry definition.
“Companies may question the selection criteria and thresholds that resulted in the current list of Super Regionals. Our selection criteria were quantitative and transparent and we welcome the opportunity to discuss the process with carriers that have suggestions or further insight,” notes Barry J Koestler II, CFA, senior financial analyst and chief ratings officer, Demotech.
The authors stress that this report is an objective stratification of the universe of companies, not ratings of the individual insurers. Inclusion in no way suggests that companies on this list are superior to companies that did not make the list.
“Super Regionals must effectively compete against State Specialists, Nationals and Near Nationals as well as provide responsive coverages required by insureds,” adds Sharon M. Romano, CPCU, AIAF, CCP, ARC, vice president at Demotech. “While Demotech’s criteria were intended to identify the companies capable of meeting these dual objectives, we acknowledge that the initial criteria may have eliminated some fine companies from this list.”
Begin the discussion
As noted, future issues of Insurance Journal will report on other categories. For now, with the publication of the first list of Super Regionals and specified criteria, let the discussion begin!
Demotech Inc. provides independent Financial Stability Ratings® of property and casualty and title insurers. Its services also include statements of actuarial opinion and pricing assistance. Visit www.demotech.com.
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