Companies to Watch - May 2011
COMPANY: Strategic Underwriting Managers Inc.
President: Jeff Somerville
Founded: March 1, 2011
No. of Employees: 5
Public or Private: Private
Strategic Underwriting Managers (SUM) Inc., opened its doors on March 1 in Toronto, making it Canada’s newest managing general agent. The company was founded by five long-time colleagues: Travis Budd, Jeff Somerville, Rick DeGrace, Serge Melanson and Stan Lam. They all departed from another MGA in January, and have gone on to develop a business model they believe will serve a niche in the market.
“We feel there is a role and a value for an MGA that uses a pool or subscription model,” says company president Jeff Somerville. “Our goal is to have three or four or five insurance companies underwrite a general liability product, organized around product lines linked to our expertise.”
Within two weeks, SUM Inc. set up a second office in Montreal and by mid-April, after spending weeks massaging relations and buying furniture, “through word of mouth, a lot of people started to flow business to us,” says Somerville.
Reasons to Watch
Despite what he describes as “heavy competition and capacity” in the marketplace, Somerville has been surprised by the rapid response from the industry within the first six weeks. Business has flowed to the firm well ahead of schedule. He believes SUM’s team of experts gives the firm an edge.
“The five of us have a long casualty background,” Somerville explains. “Our first products are all casualty and liability products. We’re sticking to our knitting, so to speak.”
SUM’s promise to clients is that, no matter the risk, they’re in it for the long haul.
“Currently there are a lot of companies willing to do just about anything out there, but the market has a cycle to it; we know it, it’s unavoidable, and you can’t predict it,” says Somerville. “The cycle is defined by periods of intense competition, like now, punctuated by difficult markets that are hard or tight, and that’s when a lot of companies start to shy away from high risk products.”
“With the pool model, we believe we have a mechanism that enables us to offer a long-term stable source in the marketplace. Because each insurance company is only putting up part of the risk, we can keep their capacity engaged.”
Aviva is currently backing 100% of SUM’s offerings, which include commercial general liability and umbrella and excess liability products. In order to offer a pool model, SUM is working to engage a collective of underwriting partners.
“In the coming months, we’re actively negotiating with a number of insurers to back our product lines. It will eventually be 40 per cent Aviva, and 60 per cent from a handful of others,” says Somerville.
SUM is looking to add professional indemnity and environmental impairment liability products to its schedule within the next six months. It wants to be seen as an innovator.
“What we can do is work with products that we know and find potential for new products that have some legs. Rick DeGrace is one of the premier environmental underwriters in the country,” says Somerville.
He adds that the emergence of a carbon-cost economy will see continued movement in environmental insurance products for traditional industries, such as oil sands development, while at the same time the amount of insurance bought for renewable energy and brownfield redevelopment continues to show growth.
Life sciences and biotechnology and IT consulting are two other areas where SUM hopes to lead the way.
SUM has already accelerated its business plan, and says brokers have shown serious interest in the firm. There are plans to hire a property underwriter to do first line property and inland marine to support the firm’s casualty business.
Quote from CEO
“People always say that relationships are everything in this business. Starting a new business in a competitive market, we’re testing this assumption. Collectively, we have a lot of relationships that are valuable and we’ve been buoyed by the reality that the insurance business is a community.”
Toronto Office: 18 King St. E., Suite 903, Toronto, ON, M5C 1C4
Montreal Office: 625 President-Kennedy Ave., Suite 903, Montreal, QC, H3A 1K2
Copyright 2011 Rogers Publishing Ltd. This article first appeared in the May 2011 edition of Canadian Insurance Top Broker magazine.