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The Future State of Program Administration

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The program administration arena continues to see amazing growth. Over the last decade, according to Target Markets, the space has increased 131% with more than $42 billion in premium placed, outpacing the P&C marketplace.

Chris Leisz, President, RPS Signature Programs, sat down with us to share his thoughts on what lies ahead.

Program Administration is a Great Place to Be

“Program administration is an evolving part of the marketplace as the world and the U.S. continue to recognize the benefits of specialization,” says Leisz.

“We see increasing support from our standard and specialty carrier partners now joined by a wave of fronting carriers supported by the traditional reinsurance market coming into the space. These markets are each looking to partner with program administrators that have deep industry and product expertise with committed distribution and an unwavering focus to a specific niche. It’s a great place to be.”

There are more than 1,000 program administrators in the market; Target Markets identifies a program administrator as one who has two or more programs.

“The program administration market, of course, is not immune to similar consolidation you see in the retail and wholesale brokerage market,” explains Leisz. “However, I am impressed at the constant formation of new program administrators to address insurance solution gaps in traditional placements or those that focus on new industries or exposures new present in our ever-evolving economic environment.”

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Leisz emphasizes that one of the advantages of the program market is its nimble model in addition to its ability to address specific, unique risks with unparalleled expertise, experience and a distribution system that typically reflects that expertise.

“Experts partner with experts, and carriers are looking to get into the space as a way of accessing that expertise and focused distribution.”

The Firm Market Impact on Program Business

The firm market has necessitated that program administrators cast a wider net for additional solutions for their programs.

“Program administrators are not exempt from the market cycle and its particular impact in the admitted market, and those with predominantly admitted solutions must quickly expand their portfolio to include E&S solutions in order to address the needs of their clients,” says Leisz.

“We have always been about profitable growth, which is the hallmark of program administration and why our carriers support us. Our programs are typically part of larger books of business on the carrier side and our individual results are impacted by the market, but a carrier’s commitment may also be impacted beyond our program.

“Overall, if its cost of business goes up – so does ours. While we ensure that our partners are getting value, we are also committed to the industries we support and need to ensure they have complete insurance solutions and terms that reflects their exposure. Program administrators have to evolve with the market to be relevant to our clients. As you see E&S filings continue to increase and becoming a larger part of the market today, our response must evolve to include this critical component.”

Finding Areas for Growth

“We have a real diversity of programs,” says Leisz, “each of them characterized by deep industry expertise to which we are committed. In many instances, you’ll find someone who has been underwriting a particular class of business and a particular line of business for 25 to 30 years. This [depth of experience] is not easy to replicate.”

RPS employs both a buy and build strategy for growth. “We identify program administrators who demonstrate a deep level of expertise to a specific space with a strong carrier and distribution partnerships for potential acquisitions. We also have a strong organic growth strategy within each of our existing programs, which includes a build strategy that can take on various approaches.

“For example, we may develop programs for industries somewhat adjacent to what we already do. Take our crane, rigging, and scaffolding program, which has been in existence since the ‘80s and is recognized as the best in its space. The program can grow organically by continuing to write more accounts, but it can also grow with the development of ‘industry-adjacent programs,’ such as a demolition or rental equipment dealer, for our distribution partners.”

“Another way to grow is by the type of insurance solutions we deploy,” Leisz continues. “If we have a primary solution, we may decide to create an excess solution to sit above our policy. This gives us the opportunity to write more product lines for the same business.

“Also, in certain instances, we have an admitted program without E&S capability. We can go after risks that don’t fit the admitted ‘box’ but are not risks we should turn away. We have expertise in the space but possibly our admitted space doesn’t work or may not have the flexibility to handle some of these non-standard risks. Creating E&S solutions will also support our organic growth goals.”

“Finally, we continue to improve the geographic reach of our best-in-class program solutions through existing or new agency partnerships in territories yet explored.  We are fortunate to have a broad geographic reach through the RPS offices and rely on our Client Relations team as our pathfinders for developing these new relationships.”

 

About RPS Signature Programs

RPS Signature Programs has more than 36 active programs with nine offices, including an additional 20 programs through its separate binding operation and its parent company, Gallagher. RPS is recognized as the largest MGA in the marketplace, placing close to $3 billion in premium every year into the market.

RPS Signature Programs is a go-to underwriting resource for specialized coverage; a top-rated program administrator working with top-rated carriers across the country to design exclusive coverage for niche risks, including but not limited to solutions focused on the medical and non-medical space; commercial multi-peril, specialty and all lines aggregate solutions for nonprofits; primary and excess coverage for public entities; two self-insured Workers’ Compensation programs; country clubs and amateur sports; and a crane, rigging and scaffolding program, among many others.

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