Privately owned retail agents, wholesalers, and MGAs can benefit by creating a Strategic Advisory Board of executives, with insurance, legal, financial, and accounting expertise. They must meet regularly to eliminate the Agent Owner from facing surprises. Andrew Barile illustrates how a Strategic Advisory Board can help privately owned agents run their businesses.
The role of the Strategic Advisory Director can take many paths in both hard and soft markets.
Here are 10 examples:
- A retail agent got an unsolicited letter from a regional bank stating that the bank wanted to purchase the agency. This usually occurs because the bank is looking for geographical expansion. Not only was the agent not prepared for a purchase, the Owner needed help in putting together a current valuation. One of the objectives of the Strategic Advisory Board is to have current valuations on its quarterly agenda. Many agencies aren't structured to take advantage of unique opportunities and need guidance throughout the selling process.
- The owner of an MGA got a notice of termination from its largest insurance company market. This came as a complete surprise to the Owner since no one in the agency was responsible for carrier relationships. One of the important strengths of the Strategic Advisory Board of a MGA is to focus on carrier relationships, review Terms and Conditions of MGA Agreements, and stay current on the financial condition of insurance companies. The board had to start an immediate search to find a replacement market for the MGA.
- The Owner of a wholesale agency was approached by its largest retail agent producer to start a Risk Retention Group (RRG) for the retail agent's insureds. The wholesaler had no experience in implementing, structuring, or capitalizing an RRG. The Wholesaler, by calling on its Strategic Advisory Board, was able to provide the consulting services to capitalize and organize the RRG.
- The Owner of an MGA wanted to organize an agent-owned offshore captive insurance company. The owner needed a captive Feasibility Study, which could be performed by the Agent's Strategic Advisory Board. Structuring and capitalizing an agent-owned captive insurance company might require a private placement memorandum, reinsurance negotiations, and access to “fronting” carriers.
- The owner of a retail agency was approached by his largest Workers Compensation client about forming a corporate owned captive. By contacting his Strategic Advisory Board, the owner was able to access the insurance talent needed to put together a sophisticated feasibility study for a Workers Compensation captive.
- The Owner of an MGA who waned to start his own domestic insurance company needed a Business Plan to raise capital and access to the sources of capital. The Strategic Advisory Board had been planning all along for this opportunity, and was able to provide the necessary input, discussing the cost and time frame of starting a domestic carrier in its quarterly meetings. Again, no surprises.
- The Owner of a large wholesaler wanted to look into new technology for policy issuance, billings, and collections. The Strategic Advisory Board had been discussing this issue and done its homework to select three firms that might be able to do the job.
- The owners of an East Coast MGA wanted to expand into the west and purchase an MGA of comparable size with “western” insurance experience. The Strategic Advisory Board had identified four target MGAs to approach.
- A retail Agent who had built his insurance carrier relationships on doing business with wholesalers and MGAs wanted to structure and capitalize his own MGA. He presented the search for a new company market to his Strategic Advisory Board, who performed the company market search.
- An MGA Owner needed a new Business Plan for finding an insurance company market, but wanted it done professionally. His Strategic Advisory Board created a detailed plan, identified various company markets, and became part of the negotiating process.
Strategic Advisory Boards can play an important role in the future of the privately owned company, whether it's a retail agent looking to sell or expand, a wholesaler looking to buy, or an MGA looking to sell, find a new company market, or start their own carrier. Owners need Strategic Advisory Directors who have the experience to implement their future plans.