North Carolina Coastal Broker Ready to Ride Beach Plan Reform Wave

Hanover Excess Sees State Pool Changes A Boost For Business Still Recovering From Recession, Soft Market

The Web site for Hanover Excess (www.hanoverxs.com) proclaims that the people at this North Carolina excess and surplus brokerage believe in the “pursuit of excellence while keeping a sense of humor.”

David Parker, president of the Wilmington-based wholesaler, says his team of 38 that includes a Charlotte-based professional liability underwriter and three traveling marketing representatives is a close-knit group that manages to have a good time while getting the job done for retail agents and their customers.

“We’re very serious about doing business but we also have a great deal of fun around here,” he says.

Maintaining a sense of humor has been a challenge during the recession but perhaps not as challenging for Parker and his team as it has been for others. Even though unemployment in North Carolina is high at 11 percent, Parker believes his market has been insulated from the worst of the recession in part because the area has many retirees living off their portfolios. His own firm has not had layoffs. In fact, within the past six months, Hanover has added a commercial lines underwriter and a marketing representative.

The state’s real estate picture isn’t as dark as it is elsewhere. With 1 out of every 1,203 homes in foreclosure, North Carolina ranks 36th. That’s not great but it’s a far cry from what’s going on in fourth-ranked Florida (1 out of every 154) and better than 26th-ranked South Carolina (1 out of every 833). As unfortunate as it is, the foreclosure crisis has had a silver lining. “Vacant property writings have skyrocketed,” Parker said. These include large schedules from developers in addition to single homes.

Hanover’s also managed to maintain a sunny disposition throughout the soft market. “Sure, we’ve lost some accounts to cheap numbers,” Parker said, but his business has not been devastated because the market is softest for large accounts and Hanover caters to small to midsized accounts. In professional lines including directors and officers, business has actually increased. He’s not sure why, just that his professional lines underwriter has kept busy.

Location Drives Business

More than any economic or market factor, it’s really its location that affects Hanover’s business the most. Hanover is based in Wilmington, which is also known as the Port City and sits in the southeastern corner of the state between the Cape Fear River and the Atlantic Ocean. It has close to 100,000 residents including retirees – and lots of tourists – who love the mild climate and coastal life, including the beach.

Being at the beach helps Parker and his surplus surfers keep their smiles, and keep busy. Coastal property coverage is always in demand by year-round residents, vacation home owners and seasonal rentals. Hanover Excess offers private options for retail agents and their customers to the coverage available from the Beach Plan, the state-backed insurer of coastal property.

“We are a private market option to the Beach Plan but from a service level we do a much better job than the Beach Plan,” he says.

Excess and Gap

Currently, the firm is gearing up to offer a lot more excess and gap coverage to what the Beach Plan will offer now that state lawmakers have approved legislation to reduce the exposure of the plan. Among other things, the legislation limits the coverage the Beach Plan can offer on residential properties to $750,000 and on commercial properties to $3 million. It had been offering limits twice those amounts. An owner with a high-valued home must now purchase any excess coverage in the private market before the Beach Plan can issue its policy. Also, contents of habitational property can be insured only up to 40 percent of the home or building value under the new law.

The reforms play right into Hanover’s strength. While Parker says there is not a ton of homes in the Beach Plan that need higher limits, there are enough to keep its underwriters busy. Filling the contents coverage “gap” between what the Beach Plan will provide and a standard homeowners policy should also bring a sizable wave of new business.

“It really is an opportunity and just as the lawmakers had hoped the private sector is going to respond and we certainly are,” he said. “We’re getting tons of inquiriestons of call from agents on the Outer Banks. ‘What y’all going to be doing… y’all going to have something for us? I like to hear them say that.”

The Beach Plan reforms also limit its assessments against private insurers. The potential for huge assessments have driven several insurers, including Nationwide, one of the state’s biggest home insurers, to scale back their business. This has left some Nationwide agents without a market – and handed Hanover another wave to ride. Parker says there has been a “huge influx of Nationwide agents” into surplus lines brokerage. “We are actually signing up Nationwide agents on almost a daily basis,” he said.

Signs of Renewal

Parker thinks the state’s economy is showing signs of renewal. The vacant property accounts are still coming in (“I think that will happen for awhile,” he says) but on the commercial side, he said it feels like things are turning around. He cites a rise in new construction start-ups, perhaps by unemployed workers venturing out on their own.

“We’ve seen more new business in the past month than in the entire past year,” he said.

In addition, while applications have been up and then down from week to week for awhile, there’s now more consistency. “I mean, the phone’s not ringing off the hook but it’s ringing and we’re seeing a steady flow,” he said.

Business is not always a day at the beach. One of Parker’s biggest frustrations is keeping retail agents informed about all that Hanover writes. It’s a smaller brokerage but it still has commercial, transportation, professional liability (Provision) and personal lines divisions. In addition to its surplus markets, Hanover even has an admitted market for artisan contractors.

Parker and his marketing reps visit retail agencies regularly. His firm advertises, sends emails, even publishes a newsletter in its ongoing effort to educate retailers about Hanover’s offerings. Yet still he hears that phrase no wholesaler ever wants to hear: “I didn’t know you wrote that.”

“I have heard that for 20 years and it still amazes me I want to pull my hair out,” said Parker, with humor and an acknowledgement that his people just have to work harder to get the word out. And still have fun.

Topics Agencies Legislation Excess Surplus North Carolina Property Professional Liability