April 18, 2023: Board Meeting Minutes

Board of Directors Meeting

Threadneedles Hotel, London, United Kingdom

April 18, 2023, 9:00 a.m. – 11:30 a.m. 

Janet Beaver called the meeting to order at 9:11 a.m. and outlined the agenda. Dan Brown reminded all participants in the meeting of their obligations under the SLA’s antitrust resolution.

Rich Gobler certified that the minutes of the October 2022 board meeting were accurate and correct. Terri Moran moved to accept the minutes as presented, Kathy Schroeder seconded, and the motion passed unanimously.

Report of the Chair

Ms. Beaver opened by discussing why the Board of Directors and SLA senior staff came to London, noting that in a post-pandemic world, it was vital to reestablish key relationships with the London insurance community. She said it was important to trade intelligence with key London contacts and get a full view of what was happening in the markets and what the appetite is for covering certain key risks. With regulators and legislators asking the surplus lines sector and the SLA what the industry might be able to do as the admitted market continues to reassess its exposure in California, having meetings with London insurance professionals would help the board and senior staff obtain and provide answers to those questions. In-person meetings help to build relationships more than Zoom meetings or phone calls, and it is those relationships that will help keep the SLA and its board in the loop.

Ms. Beaver noted that it was for the same reasons that the first-ever National Excess and Surplus Summit (NESS) would take place in June in New York City. That meeting, which will include board members and key staff for numerous excess and surplus line associations across the United States, is based on the premise that these associations can, and should, share intelligence and best practices and find collaborative ways to offer value to their members and their audiences.

Additionally, Ms. Beaver thanked Mr. Gobler, Robert Gilbert and Terrence Villar for their help in setting up meetings for the board and senior staff.

State of the SLA

Benjamin McKay reported on several key initiatives of the SLA, including:

• Barbara Trumbly has created an events team, and Phaedra Jackson has been promoted to assistant vice president for operations and events.
• Understanding that the future was data, the SLA endeavored many years ago to clean up its data, which was no small task and took years.
  • The SLA’s data wasn’t sufficient to create analytics or make any predictions that would be useful to outside sources.
  • A previous board chair who is now with a publicly traded organization approached Mr. McKay and said the SLA’s estimates of future earnings are important to his company’s bottom line, and are being used to ensure players in the marketplace are not making false predictions that could hurt policyholders.
• The top coverage codes haven’t changed. Real estate, construction, professional and technical services tend to stay at the top.
• Under the leadership of David Kodama, Jr., and Glenn Leung, the Financial Analysis Department has been reorganized and has made tremendous strides.
  • The department primarily reviews carriers for solvency on behalf of the CDI and makes recommendations about whether a carrier should be placed on the List of Approved Surplus Line Insurers (LASLI).
  • Recently the SLA’s primary CDI contact on LASLI and the Export List sent David and Glenn a series of questions related to LASLI. The result was that the CDI has said “We trust you. You guys do more of this. Put it on your letterhead and if you have a problem, call us.”
  • That marks a seminal shift in the CDI’s oversight of the SLA. It establishes the SLA as a partner.
  • This goes hand-in-glove with changing from dot-org to dot-com to signal to the marketplace the SLA is not a bureaucracy to be feared but a partner they can partner with, part and parcel of former board chair Gilbert’s goal of 100% positive brand recognition among people who know the SLA.
• The SLA brought in Yusuf Mayet from AmWINS, an excellent culture fit who has taken on the responsibility of reforming the SL-2 form
• Mr. Mayet has created a committee that includes AmWINS and R-T Specialty, and three other brokers also have high-level representation.
  • Revamping the SL-2 form would require a legislative change. The current SL-2 process has been in place since 1996, and the CDI needs to buy in before the SLA can go to the legislature.
  • Possible solutions to make the SL-2 form easier for brokers include prepopulating the form, possibly creating a DocuSign type solution to make it simpler, and having the SL-2 trail be automatic. The broker sends it to the retailer, repeating every three days until they sign it and get it done. The brokers signs it, and they get a copy and the SLA gets a copy. Conceptually, this has been well-received by brokers.
  • Gobler said this is going to be a big deal and will boost the SLA’s soft power among members. Mr. McKay said it shows the SLA is a responsive member organization, listening to members and not just being a bureaucracy.
  • Pam Quilici informed the board that CRC Group was telling insurance professionals they no longer had to fill out the SL-2 form, with several board members responding that this was a matter of serious concern.
  • Mr. McKay said the SLA would notify CRC first and then inform the CDI, and Dan Brown said he would draft a cease-and-desist letter to CRC regarding this practice.
• Mr. McKay also informed the board that the SLA’s new Member Value Program would help the SLA identify brokers who have stopped filing, which often happens after acquisitions.
  • Mr. Kodama noted that the CDI has been cooperative and understanding in trying to find a solution to filing issues uncovered after an acquisition, but that it is taking notice of the frequency and asking questions, which could be indicative of coming action.
  • Terri Moran suggested creating a list of frequently asked questions for a bulletin to guide brokerages that are acquiring other brokerages.
• Mr. McKay told the board that Cliston Brown had testified before the Assembly Insurance Committee during its hearing on the FAIR Plan and the homeowners’ insurance crisis, particularly in regard to homeowners’ associations that are losing coverage and being forced to go to the surplus lines marketplace or the FAIR Plan.
  • The SLA continues to fend off the idea that surplus lines is the solution to the crisis and has created a heat map to show decision-makers the movement of policies and increase in homeowners’ premiums throughout the state.
  • The places surplus lines writers write homeowners’ policies are in high-end areas with prices per square foot far in excess than average homeowners.
• Mr. McKay also mentioned Senate Bill 8, requiring $100,000 of liability insurance for gun owners, and noted that Cliston Brown has been having ongoing conversations with the author and her staff.
• The Education Department is expanding from just continuing education courses to Compliance Connections webinars and partnerships, such as the delegated underwriting authority webinar Mr. Kodama worked on with AM Best.

Market Report

Mr. Kodama discussed key market trends and developments:

• Premium registered in 2022 was $11.7 billion for LASLI companies vs. $4.6 billion for non-LASLI companies, of which Lloyd’s accounted for half ($2.3 billion). Premiums were up 25% and 36% respectively from 2021.
• LASLI companies represented 71.4% market share in 2022, as compared to 73% in 2021.
• Lloyd’s syndicates represented 13.9% of market share in 2022, as compared to 15.6% in 2021.
• Progressive’s Blue Hill Specialty, which insures Uber, is the largest non-LASLI, non-Lloyd’s account.
• All LASLI insurers (with AM Best ratings) maintain ratings of A-minus (excellent) or better. From the 2022 AM Best market segment report, 98% of surplus lines insurers are rated A-minus or better as compared to 84% of admitted insurers, and 100% of companies on the LASLI.
• Five LASLI groups had negative outlooks from AM Best as of March 31, 2023.
• LASLI application activity is as active as ever. There are currently eight companies being analyzed and four more submitted to the CDI for review.
• Seven insurers have been added to the LASLI since January 1, 2022, and Third Coast and Harleysville of New York were approved in 2023. With the removal of Catlin Specialty due to a sale, the current company total on the LASLI is 136.
• The SLA continues to monitor attrition activity. The last two years, three companies withdrew for various reasons.

Mr. Leung added that with changes in leadership at the CDI, the SLA has seen an unwillingness to let LASLI applications sit for a long time. Before if there was a deficiency, CDI would just let it sit. CDI is now giving clear deadlines, and this has been noticeable in some of the withdrawals.

Mr. Kodama also reported on the Admitted Market Liaison Committee’s annual Sacramento trip, which took place on February 7, 2023, in which the committee met with Mark Sektnan of the American Property Casualty Insurance Association (APCIA) and Claire Wendt of the Assembly Insurance Committee. The committee followed up with a call with Rex Frazier, president of the Personal Insurance Federation of California (PIFC). Mr. Frazier expressed frustration with the regulatory issues facing admitted carriers on homeowners’ policies. Jerry Sullivan characterized the call as the most discouraging call he has been involved in for many years.

Operations Report

Ms. Trumbly reported that the operations staff has done an amazing job taking on new responsibilities and new challenges.

• In addition to Ms. Jackson being promoted, Eric Walcott has been promoted as well. Iona Vinson spearheaded the closing of the San Francisco office, and she has been transitioning into an administrative coordinator, planning travel, assisting with events, co-leading the health and wellness committee.
• Anika Tran continues to take on more HR responsibilities, heading up recruiting and pursuing her HR certification.

The department’s top priority is to continue to bring in top talent and it has brought in eight new hires so far this quarter. Three are currently being onboarded, as well as six interns. Interns will receive $25 per hour, paid housing, paid travel to and from San Ramon, a $500 cash advance to cover incidentals, and will be monitored throughout the program by SLA staff and member organizations.

Ms. Trumbly added that she heads up the committee on health and wellness and reported that her committee is encouraging employees to challenge themselves, with a steps challenge and an office walk later in April. Cohorts are giving staff members the opportunity to take on leadership roles, and have been featured on the Daily 5 at 10 show.

Coverage Code Rollout Report

Jody Black first gave an overview of Data Analysis, which over the previous 12 months registered 885,000 transactions for $16 billion in premium, and the number of submissions continues to grow. In 2022, the Data Analysis team added 12 new analysts and is slated to bring on 15 more in 2023. The DA staff currently totals 77 employees.

The first project for the team was the new coverage code system, and the second is really new—the broker account team model.

• The main objectives of revamping the codes were to organize codes in a coherent fashion and to create a flexible numbering system that allows new coverages to be added without compromising the existing structure. The second goal was to improve reporting capabilities for the SLA and its stakeholders.
• There are now nine major coverages.
  • Under the previous coverage code systems, there were 25 coverages filed under “miscellaneous.”
  • In the new system, that’s down to eight miscellaneous coverages.
  • Data Analysis added 17 new coverages to describe coverages more accurately and to improve data tracking.
• The rollout to the entire broker community took place on February 21. Data Analysis received 10 inquiries, none related to submission process or inability to submit, which meant the rollout was a huge success.
  • Not only did Data Analysis meet its regular production goals, but exceeded it by 10% on the rollout day, which is very unusual.
  • Mr. Black credited the Technology and Marketing and Communications departments for their collaboration on the project.
• On April 3, Data Analysis piloted the account team initiative model. The purpose is to create a new structure giving the SLA’s most prolific brokers a consistent, high-quality experience.
  • Each top-tier broker will be assigned to a dedicated team in which members can become experts in that broker’s book of business and create a personalized experience for each of the identified brokers.
  • There will be 10 Data Analysis teams, each led by a manager and with 1-2 assistant data analysts, at least two DA-1s, 1-2 DA-2s, and one analyst.
  • There will be 49 brokers participating in the model, representing 84% of all premiums and 65% of all transactions.
  • The remaining brokers will be assigned to whatever analyst has the most capacity at that time, with trend monitoring to determine if any more brokers need to be added to the top group or relegated.
  • The full launch is scheduled for May 3.

Member Value Program and Membership Services Report

James Greene provided an update on the SLA’s Member Value Program and its membership services.

• When Mr. Greene first began working with the SLA, the SLA was using a million sheets of paper a year and faced a 250-day filing backlog.
  • The board told the SLA to get in the cloud, deploy technology, take care of its employees and significantly reduce the use of paper.
  • Today, the SLA has done all of these things and is operating at peak efficiency.
• Gilbert, during his tenure as board chair, set a goal of SLA members knowing the association and having a favorable impression of it.
  • • Marketing expert Bill Kastigar was hired as a contractor to develop a plan of attack.
    • This led directly to the creation of the SLA’s three superordinate goals: the Member Value Program, 100% compliance, and employee health and wellness.
    • The SLA implemented Salesforce to help with the Member Value Program and strengthened its ties with the CDI, getting membership data in real time.
    • The SLA is formalizing and creating a membership services department.
      • Diana Olveira will have direct oversight and Sherri Thibeaux will be part of the department.
      • The department is being created because of the need to build relationships with members, gather and glean insights about what makes sense in marketing to, and communicating with, members.
    • Start to segment and build communications and marketing. What is the return on investment?
    • The goals are as follows:
      • Turn new members into life members—start the relationship-building process.
      • Identify influencers and super-users, get them involved on committees.
      • Deliver white-glove services to members.
      • Meet the SLA’s aspirational goals and ultimately foster a healthy, fair and competitive marketplace.

Mr. Greene also gave a quick look at membership numbers:

• Currently, there are 2,941 individual resident members, 810 entity resident members; 3,154 individual non-resident members, 877 entity non-resident members.
• New licenses are way up as compared to the first quarter of 2022, when there were 62 new resident individual members and 106 new non-resident individual members; for the same time period in 2023, there were 96 new resident individual members and 301 new non-resident individual members.
• New members in 2023 are averaging 146 a month, as compared to 71 a month in the entire 2022 calendar year.

Ms. Beaver noted that the board, by electronic vote, approved the Stamping Committee for 2023 on March 6, 2023. That committee includes Rich Gobler as chair, as well as Josh Koppel, John Mundelius, Kelly Tate and Andrea Ward as members. She then asked for a motion to approve all other committees, as follows:

ADMITTED MARKET LIAISON COMMITTEE: Susan Atkins (chair), Lynda Colucci, Lisa Foley, Jerry Sullivan, Tamar Tavitian, Jeffery Thomas.

AUDIT COMMITTEE: Terri Moran (chair), Janet Beaver, Rich Gobler.

DIVERSITY, EQUITY AND INCLUSION (DEI) COMMITTEE: John Washington (chair), Susan Atkins, Jon Larson, Dymphna Menendez.

EDUCATION AND COMPLIANCE COMMITTEE: Tim Chaix (chair), Carolina Calvo-Betdashtoo, Kris Bauer, Clancy Marie Johannsen, Shanna Sweeney, Tanisha Woodard.

LEGISLATIVE COMMITTEE: Hank Haldeman (chair), Tim Burnett, Rupert Hall, Paul Laufer, Tony Manzitto, John Mundelius, Allen Shiu, Jerry Sullivan.

SPECIAL ADVISORY COMMITTEE: Jon Larson (chair), Taylor Ambridge, Jeffrey Case, Darren Chilimidos, Josh Koppel, John Poucher, Johnathon Ramirez, Mark Schroeder, Kelly Tate.

Ms. Moran moved to approve the rosters as presented, Mr. Gilbert seconded, and the motion passed unanimously.

Ms. Quilici said she was still working on the Next Generation Committee roster and will present it to the board at a later date.

New Business

Ms. Moran asked for an update on the premium forecast and budget. Mike Caturegli said that the SLA had anticipated processing about $18 billion in premiums in 2023, an 11% increase over 2022, and that the SLA was trending toward that projection. While there has been a large spike in the number of transactions, the average premium is down.

Adjournment

All business being concluded, Ms. Beaver adjourned the meeting at 11:21 a.m.