Niching the niche: a refined focus


Niching the niche: a refined focus

Various factors in current trends in the medical professional liability sector led to the creation of Pro-Praxis, as Bob Allen, its president, told HRMR.

They are starting their own managing general agency,” someone whispered during a recent meeting of the Professional Liability Underwriter Society (PLUS). “It’s a tough market,” another person chimed in.

It does not take long, if you are a player in medical malpractice space, to determine they are talking about Bob Allen’s recent transition from head of healthcare at Torus Insurance to becoming president of Pro-Praxis Insurance, an independent underwriting agency. Capitalized by the Cooper Gay Swett & Crawford group (CGSC), the aim is to build Pro-Praxis into an underwriting platform that employs specialization and operational excellence to assist all parties within an insurance transaction. The strategy for specialization (and current market trends) would ultimately shape why, who and where Bob Allen and Pro-Praxis focus their attention.

AM Best, Conning & Co, Standard & Poor’s, the National Association of Insurance Commissioners (NAIC), the Physician Insurers Association of America (PIAA) and the National Practitioners Data Bank (NPDB) are just a few of the institutions that aggregate and/or analyze data that reflect major trends within the US medical professional liability (MPL) industry. Many of these organizations have concerns with this class of business.

•  Net income has been gradually declining over the past few years. Investment gains do very little to move the dial from ‘loss’ to ‘profit’. Although the 2013 calendar year combined ratio is approximately 86 percent, the accident year combined ratio is suggested to be greater than 110 percent.

•  Prices are also quietly deteriorating. Since 2007, the MPL market has been experiencing a shrinking premium base. However, MPL’s calendar year combined ratio has outperformed the property/casualty industry sector during the same time period.

If MPL loss and price patterns are deteriorating, why would anyone create an MGA for this $9.7 billion line of insurance? In a paper published earlier this year, The ART of MPL Underwriting, Pro-Praxis answers this very question. They examined broad-based industry loss ratios and compared them to the results of six MPL insurers with specific types of business (see Figure 1).

The team found that the insurers who focused on healthcare facilities (hospitals and outpatient care facilities) outperformed the industry average.

Allen notes that in the year 2000, he performed a similar analysis. At that time he compared the industry results to a handful of specialty carriers who insured only one type of physician. For different reasons, this subset also outperformed the industry.

“Niching the niche, or specialization in underwriting, is how to surpass your competitors’ results,” he says.

Before joining the CGSC family, the Pro-Praxis team was approached by several US-based carriers with plans to enter or expand MPL underwriting. At one point, there were seven markets, all with varying risk appetites, who wanted to increase their participation in the MPL market. While very few insurance companies could articulate what they wanted to underwrite, they knew they wanted market share.

In a world of supply and demand, the demand for healthcare underwriters has quickly outpaced the supply. And it is this demand for healthcare liability and the differing risk appetites that led to the formation of Pro-Praxis.

The most important value propositions of a managing general agency (MGA) are the technical expertise and the access it lends to select market segments. The team saw the limited underwriting experience as the problem that they could solve for carriers interested in this space. Pro-Praxis could tailor boutique solutions specific to the desires of multiple markets. Instead of committing the team’s human capital under an employer/employee model, they could offer three or four solutions under a MGA/carrier model.

“With so many insurers interested in MPL and a MGA model to support them, the next question to answer was ‘which carrier(s) should they support’,” says Allen.

Pro-Praxis felt it was critical to have a partner who understands the business. At the same time, the company did not want to work with a market (or markets) that was already operating in the proposed segment. Most importantly, they needed a company that could appreciate their strategy for specific classes of business. The answer to the question was simple: Lloyd’s.

By developing insurance products underwritten by certain underwriters at Lloyd’s, Pro-Praxis could align itself with support that had similar risk strategies. Lloyd’s is the world’s specialist insurance and reinsurance market, bringing together an outstanding concentration of underwriting expertise and talent. The Pro-Praxis facility is supported by Dale, Brit, Amlin, Atrium, Chaucer, Pioneer and Aegis, a blend of seasoned underwriting professionals with comparable underwriting appetite.

“We told underwriters we were not going to have an exhaustive list of eligible insureds. In the case of Life Sciences, we felt we had an opportunity to be very selective but these limitations would also reduce the ultimate size of the book,” says Allen.

“In a broad segment such as Allied Health Facilities, we explained the pros and cons of primary versus excess, small versus big accounts, broad coverage versus restrictive, retail versus wholesale. In a short period of time we found underwriters who understood and appreciated our strategy and value proposition.” A similar approach was taken with domestic and international insurers which led to their Hospital Excess Liability Program.

The MPL segment is complex and the underwriting results vary based on several moving, yet integrated, pieces. At Pro-Praxis, they believe that the analysis of industry and individual risk data must go hand in hand; one cannot be sacrificed for the other. Whether you are a seasoned veteran or new capital entering the market, it is easy to understand why their strategies led Pro-Praxis to the London Market.



Robert Allen is president of Pro-Praxis. He can be contacted at

Pro-Praxis, Bob Allen, HRMR, PLUS, CGSC, NAIC, PIAA, NPDB, MPL, US