A Guide to Writing E&S Business

E&S Guide

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The American Association of Managing General Agents is pleased to offer the study guide, Understanding the Wholesale Market educational program. It is our hope that this guide will help to allow a better understanding of the additional markets available to the Retail agent through the Wholesale agent, and for the Wholesale agent to better understand the needs of the Retail agent.

The guidelines outlined in this study form the basis of interdependence between the two primary producers of insurance in the market today, thereby allowing agents to realize their ultimate goal, meeting the insurance needs of their clients.

It is not our intent to recommend or provide a specific Wholesale agent, broker, or insurer. The guidelines outlined in this program are intended to assist both Wholesalers and Retailers in the market selection process. The ultimate choice of partners to an agreement is subject to the individual discretion of the actual participants.

As partners in a productive agreement, it is important for the Retailer to realize that the Wholesaler may not be the underwriter and therefore shares a mutual concern with the Retailer for placement of the risk. Retailers are encouraged to know the markets and capacities of the Wholesalers with whom they do business. Wholesalers are counseled to recognize the fact that Excess and Surplus lines are not a regular market for Retailers.

Through shared knowledge of the necessity to operate within the parameters outlined above, the Wholesaler and the Retailer can realize benefits not only to one another but to their respective agency clientele. The agreement between the Wholesaler and Retailer will function at its best when it is considered to be a long-term partnership.

Several commonly used terms referring to the Wholesale Market contribute to a misunderstanding of procedures and practices between the Wholesale and Retail producer; among them, Managing General Agent, Excess and Surplus Market, Surplus Lines Broker and Wholesale Intermediary. To eliminate confusion, hereafter, this program uses simply “Wholesaler” and “Wholesale Market.”

The formation of consistent and profitable relationships between the Retailer and Wholesaler requires an understanding that the method of doing business in the Wholesale Market is substantially different from that of dealing directly with insurance companies. The purpose of this program is to provide guidelines for the Retailer in establishing ongoing relationships with Wholesalers, and to enable Wholesalers to better understand the needs of Retailers. It is suggested that Retailers and Wholesalers approach their working agreements as partners with the parallel objectives of meeting clients’ needs, agency production, and profit without an understanding of the responsibilities, duties and problems each has, it is unlikely that these objectives can be reached.

There are numerous advantages to both Retailer and Wholesaler in the development of continuing agreements. The primary advantage to the Retailer is the discovery of an entirely new marketing source, which can extend into additional sources for standard, nonstandard and specialty lines. This added marketing knowledge places the Retailer in a more competitive position. The Retailer will be able to review any protection limitations that may be imposed upon agency clientele by standard policies and develop the capability to overcome these coverage restrictions. This presents an opportunity to solicit additional coverage’s the Retail agent may not have attempted to market because there was no standard company availability.

Because of the specialty nature of the Wholesale Market, it may be necessary for the Retailer to implement ongoing arrangements with more than one Wholesaler. To capitalize on the full benefits of the Wholesale Market, the Retailer should be aware of the needs of the agency’s clients and, knowing these needs, establish markets with the appropriate Wholesalers. Retailers must realize that Wholesalers are highly specialized and, consequently, the Retailer should transact business with only those Wholesalers who have experience in dealing with the specific risks submitted to them. Attempts to market the same risk with more than one Wholesaler may not be a wise decision.

In summary, the Wholesaler can be a valuable market reference source to the Retailer. For the purposes of this guide, we will use the term “Wholesaler” when referring to the entities that make up the Wholesale Market.

Purpose of the Guide

The purpose of this program is to develop a better understanding between Wholesalers and Retailers of their respective responsibilities, duties and problems. More specifically, the purpose is to accomplish the following:

  1. Outline procedures for the development of a continuing relationship between Wholesalers and Retailers and provide an opportunity to increase agency income through the use of broader products, lines of business and insurers.
  2. Develop a recognition that both Wholesalers and Retailers best serve each other when they consider their affiliation as partners in the areas of customer service and agency profit.
  3. Create an awareness of the methods through which Retailers can identify and use appropriate Wholesalers and evaluate the insurers represented in the Wholesale Market.
  4. Provide guidelines by which Wholesalers can qualify Retailers and improve Wholesalers’ understanding of the Retailer’s needs.
  5. Provide licensing and regulatory guidelines when working within the E&S Industry.