More From Andrew Barile
Economic crisis brings need for strategic advisory boardsHow phone consultations can supplement your insurance knowledge
Regulating P&C companies for systematic risk
Beware: Warren Buffet's reinsuring underwriting profitability philosophy is spreading
Let's find out exactly why AIG needed a bailout and exactly who benefited
New York to create insurance exchange for complicated risks
Reducing worker's comp costs
Why be the director of an insurance company?
Increase your property/casualty sales by creating agency-owned captives
Utilizing an insurance experienced advisor for interim management
Soliciting insurance agents to invest in an insurance industry mutual fund
By Andrew Barile
Providing needed capital to start-up retail insurance agencies, wholesale brokers, excess and surplus lines brokers, managing general agents and, finally, start-up insurance companies can be the focus of a new mutual fund. The investors in the mutual fund would be insurance agents and brokers, and the target investment opportunity would be focused on start-up insurance entities, including third-party claims administrators.
Accessing needed capital for start-up entities is not on the radar screen for hedge funds' strategic investments in the insurance industry. Private equity firms, like Spectrum Equity, purchase managing general agencies, such as California's Arrowhead General Insurance Agency, Inc., but would never make an investment in a start-up managing general agency. Banks would never make loans to a start-up retain insurance agency, but would be interested in establishing a corporate relationship, such as a fiduciary account for an agency.
Access to capital also focuses on the size of the investment. Consequently, unless the retail broker is looking for $50 million of capital, no sources of capital are available to the retail broker. What is needed is a mutual fund focused on making strategic investments in start-up retail brokers and surplus lines brokers -- investments of a size less than $5 million. Transactions less than $10 million are off the radar screen of the typical insurance investment brokers like Goldman Sachs, Friedman Billings, Merrill Lynch, etc.
Access to capital to do a start-up property/casualty insurance company requiring a strategic investment of $15 million would be another focus of the mutual fund. Capitalizing a start-up insurance company, obtaining an Aminus, A.M. Best rating and arranging a 90-percent quota share reinsurance from only A.M. Best "A"-rated reinsurers covering only a specialty niche insurance product, would be another focus of the insurance industry mutual fund. The lure of an investment by a mutual fund in to a $15 million property/casualty insurance company positioned to write $150 million of gross premium with a select distribution system is "doable" on the basis of the significant insurance industry dislocations currently happening in the marketplace. Never before have there been so many available opportunities.
Insurance industry conferences of Target Markets, NAPSLO, AAMGA, Property Liability Underwriting Society, and property/casualty insurers associations' discussions have been held with insurance industry executives outlining these available insurance opportunities. The focus on start-up insurance companies, with very experienced successful insurance executives, guarantees the need for execution by these companies. Utilization of the latest technological developments is a must. The ability to underwrite and rate insurance applications entirely online is all part of the necessary technological execution. Being a low-cost provider of insurance products creates the enormous success of new insurance companies.
Finally, the guarantee of adequate returns on capital invested by the insurance industry mutual fund should be focused on the insurance products that have the proven track record of low loss ratios. What are these insurance products that will make your start-up insurance company successful? Stay tuned.
*For further information, or to contact this author, please leave a comment and your e-mail address in the forum below.
Accessing needed capital for start-up entities is not on the radar screen for hedge funds' strategic investments in the insurance industry. Private equity firms, like Spectrum Equity, purchase managing general agencies, such as California's Arrowhead General Insurance Agency, Inc., but would never make an investment in a start-up managing general agency. Banks would never make loans to a start-up retain insurance agency, but would be interested in establishing a corporate relationship, such as a fiduciary account for an agency.
Access to capital also focuses on the size of the investment. Consequently, unless the retail broker is looking for $50 million of capital, no sources of capital are available to the retail broker. What is needed is a mutual fund focused on making strategic investments in start-up retail brokers and surplus lines brokers -- investments of a size less than $5 million. Transactions less than $10 million are off the radar screen of the typical insurance investment brokers like Goldman Sachs, Friedman Billings, Merrill Lynch, etc.
Access to capital to do a start-up property/casualty insurance company requiring a strategic investment of $15 million would be another focus of the mutual fund. Capitalizing a start-up insurance company, obtaining an Aminus, A.M. Best rating and arranging a 90-percent quota share reinsurance from only A.M. Best "A"-rated reinsurers covering only a specialty niche insurance product, would be another focus of the insurance industry mutual fund. The lure of an investment by a mutual fund in to a $15 million property/casualty insurance company positioned to write $150 million of gross premium with a select distribution system is "doable" on the basis of the significant insurance industry dislocations currently happening in the marketplace. Never before have there been so many available opportunities.
Insurance industry conferences of Target Markets, NAPSLO, AAMGA, Property Liability Underwriting Society, and property/casualty insurers associations' discussions have been held with insurance industry executives outlining these available insurance opportunities. The focus on start-up insurance companies, with very experienced successful insurance executives, guarantees the need for execution by these companies. Utilization of the latest technological developments is a must. The ability to underwrite and rate insurance applications entirely online is all part of the necessary technological execution. Being a low-cost provider of insurance products creates the enormous success of new insurance companies.
Finally, the guarantee of adequate returns on capital invested by the insurance industry mutual fund should be focused on the insurance products that have the proven track record of low loss ratios. What are these insurance products that will make your start-up insurance company successful? Stay tuned.
*For further information, or to contact this author, please leave a comment and your e-mail address in the forum below.
