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Last year was quite a year for Berkshire Hathaway Specialty Insurance (BHSI) – or half of a year, anyway.

Since opening its doors for business in June 2013 with much fanfare, the new venture has gone from four to nearly 80 employees, started four new business segments – property, casualty, executive and professional lines, and healthcare/medical malpractice – and is in the process of getting its fifth area that will concentrate on program business off the ground now. BHSI also opened offices in five cities across the United States – in Atlanta, Boston, Chicago, Los Angeles and New York.

By all accounts, BHSI is now a significant player in the insurance world, which shouldn’t be surprising considering it is backed by the financial capital of Warren Buffett’s Berkshire Hathaway. But while Dave Bresnahan, executive vice president in charge of casualty, executive and professional lines, and the healthcare/med malpractice business for BHSI, acknowledges the Berkshire brand has helped the young operation earn credibility, he also attributes the overwhelmingly positive response from customers to other factors as well.

“Financial strength ratings alone don’t win you business – it is also the team we have assembled on both the underwriting and claims side. It’s a team that has good relationship capital and has a good track record and reputation based on wherever they had come from previously,” he says. “We are finding that our customers are treating us like an established player. That has been a wonderful thing to see in the first six months.”

BHSI burst into the insurance market seven months ago with $25 million to $50 million in property and casualty capacity (with the ability to do more, if needed). It first launched its excess follow form product followed by an umbrella product, which Bresnahan says is already considered to be one of the top umbrella markets available.

Following these product launches, BHSI unveiled its primary products line – including commercial general liability and primary products liability – in September 2013. Policies are underwritten on the non-admitted paper of National Fire & Marine Insurance Co., one of Berkshire Hathaway’s excess and surplus lines companies, and part of its National Indemnity group of insurance companies. Additionally, the group has access to National Indemnity to underwrite on admitted paper when necessary.

Bresnahan says the operation has already exceeded the business budget it put in place “in a meaningful way,” although he would not disclose the amount of premium volume BHSI has written so far. He says the division made a conscious decision not to publish where it’s at.

Bresnahan says BHSI decided to initially target the E&S space because there is no rate and form filing process, so product can be put into the market quickly and business can be quoted and bound fast. In addition, several members of the Berkshire Hathaway Specialty team came over with extensive experience in the surplus lines market. Another factor BHSI looked at, Bresnahan says, was that the E&S market typically has better results than the admitted market and is rapidly growing.

Despite a slight retreat of the admitted markets from the E&S space after several years of the opposite, Bresnahan says the timing of the Berkshire’s entrance is coincidental. But that’s not to say it hasn’t worked in BHSI’s favor.

“We are actually seeing new business submissions that are currently in the admitted market, but that admitted market is either non-renewing or getting out of the business,” he says. “It’s actually starting to swing in the other direction a bit, which is good for us.”

What’s Up Next

In 2014, Bresnahan says BHSI may look at expanding outside the United States, but it mainly is focused on refining and developing its industry-specific capabilities and coverages at home. To start, it will explore building out its appetite in the segments it is currently writing, such as construction, to provide a multi-line approach for customers.

“I think what customers really want, but the industry does a fairly average job in delivering on, is a holistic view for customers … there isn’t enough appreciation for all the other lines of business that a customer might be doing with a company. There’s a big opportunity for us to evolve in a way that allows us to do that easily and give our underwriters the tools to understand that,” he says.

Part of that process would involve hiring additional people with in-depth knowledge about a particular space so BHSI can enter a segment in a “responsible and credible way.”

“We are being very thoughtful about not biting off more than we can chew and making sure that we always have underwriters in place to understand each of the businesses we want to get in and pursue,” he says.

BHSI also plans to expand its executive and professional lines products into the admitted market, namely directors’ and officers’ (D&O) coverage, because many of its competitors only offer admitted coverage. It has started the process of admitted filings for its program business as well.

Technology will also be a big focus for the unit in 2014. Bresnahan says because BHSI got up and running so quickly, it had to use other Berkshire Hathaway systems that weren’t designed for the large and diversified commercial business BHSI is building. The unit hired Chief Information Officer James Roser in September to lead the systems and information technology effort, and BHSI-specific systems are in development.

Bresnahan says its program business will be dependent on technology. “When we sign up a program administrator, the systems interface is going to be a big part of that relationship,” he says. “Sometimes the systems solution on the program business simply requires us to be able to plug in and translate and work with the system that the MGA or program administrator already has in place.”

Technology also will play a big role in the division’s future success, as agents and brokers want to work with insurers that can exceed expectations when it comes to service. “Every broker and agent would tell you that the great race at their end is a race around efficiency and a race around being able to process business and respond to business in the most efficient way possible,” Bresnahan says.

Risk management is another central focus of the new venture’s strategy. In November, BHSI expanded its health care professional liability capabilities to include customized risk management support. That includes reimbursing qualified health care policyholders for the costs of pre-approved risk management services. Health care professional liability customers of BHSI can use a vendor of their choice and be reimbursed for the cost of many services, such as clinical risk management support and patient safety initiatives.

Risk management and risk control has always been important to institutional health care clients, Bresnahan says. Changes to health care models as a result of the Affordable Care Act and health care consolidation accelerated those concerns.

“We felt like we needed to articulate for those customers how we planned on tackling risk management with and for them in a partnership setting, as opposed to us hiring or investing in a bunch of technicians who would then go to these customers and tell them what they should be doing differently,” he says. “We’re giving them a lot more flexibility than just what we have or what we might invest in-house in terms of risk management.”

Ultimately, it all comes down to the people. Bresnahan says BHSI has spent a lot of time making sure to hire experienced people “that fit a team environment,” but can also make decisions at a local level.

“Service and a high level of customer service can be a nice advantage for us,” he says. “Thankfully, those are things that clearly appeal to people in the insurance space right now. To be on a platform where you are empowered to make decisions, that you are trusted to make decisions, is music to people’s ears.”

When it comes to agents and brokers, Bresnahan says BHSI initially relied more on surplus lines or wholesale brokers than retailers, but it is open to accepting business from them as well.

“We want all of our retailers, whether they’re appointed with us or not, to think of us as a business partner and to think of us as a group that they can bring their client in to see or request us to come see them with their customers,” he says.

Topics Agencies Excess Surplus Professional Liability Risk Management