Interview Transcript

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

A bit of context for you might be helpful. I've been studying wholesale brokers. I'm curious to learn a bit more about, from your experience, specifically how the business models differ, how you see the industry evolving. And really, what are the big risks for these companies. The stocks are all pretty fantastic, and they grow year on year for decades. So we're curious about how this may change or what could change this over the next five to 10 years.  I'd love to first learn a bit more about your background, how you ended up at RT Specialty.

My background is that I started my career in insurance in 1991 as an underwriter trainee. I was an underwriter for approximately three years. Then, I took some time off to travel and study for a year, came back, and continued underwriting for another five to six years. After that, I was offered a position in wholesale brokerage, which was a new field for me since I had only worked as a standard market underwriter until then. I was young at the time, so I decided to give it a try, moving from a set salary as an underwriter to a commission-based structure as a broker. It worked out well, and I have been in brokerage for 25 years, working with several different companies.

I started off at a company which has since been bought out by RT Specialty. However, I didn't start at RT. I started at a broker that was acquired by CRC, for 15 years. Then I was recruited by a headhunter for RT Specialty. I was quite comfortable at CRC, but RT Specialty made me an offer I couldn't refuse in terms of compensation, so I decided to give it a try.

In the past, it was very simple to move your book over. I would tell my clients that I was moving to a different wholesaler, and they would readily follow me. However, three years ago, during the Covid period, I noticed a shift. We were in a convenience-driven society, and nobody wanted to do the extra work required to move an account from one wholesaler to another, which involved signing a broker of record letter. Many retailers initially resisted because they didn't want to bother with sending the letters.

What do they actually have to sign? What exactly is it?

It's just a letter that authorizes RT Specialty to manage the account. It's not very difficult, but it requires them to take the template letter, fill in the name of the insured, the policy number, and sign it. However, it was an extra step that many weren't interested in taking initially, making the transition very challenging. I didn't anticipate how much things had changed, with people not being used to doing extra work in this instant and convenient world. That was the one surprise I had.

Roughly what percentage of your accounts or premium went with you within a year?

In the beginning, probably only under 50% of clients stayed. I was actually very fortunate that the person who took over my book at CRC did not do a very good job. Most of my clients weren't pleased with the service. They came back to me, saying they tried staying with CRC, but it just wasn't working out. The service wasn't there, and the person wasn't getting back to them. That's what happened with me. One of the main differences I find in culture between CRC and our team was the management, which basically came down to leadership. At CRC, when I left three years ago, the CEO or the top guy, anyway, his name was Dave Obenauer.

Dave was not much of a leader, I think his background was in accounting. When he purchased another company, I think it might have been Krause or Crump. I think it was Crump. He was the CFO of Crump but became the CEO of CRC and he's never been a broker. Not having that front-line experience, I think, really hurt his leadership style because he pretty much let his lieutenants take over since he really doesn't know the ins and outs of what we do.

How does that compare to RT?

So, our head leader is Pat Ryan. He was involved with Aon for many years. He's a very well-recognized person in the industry, someone to look up to. He knows what's going on. He's an elderly gentleman, but he's so full of energy and is just on top of things, which is really good to see. But right below him is Tim Turner. Tim was a large broker at CRC and he's the one who started with Ryan.

They got together and started RT Specialty, hence the 'R' and the 'T'. I didn't know Tim personally, but I did talk to him when I was exploring the possibility of joining RT. I think I understand now why so many CRC brokers followed him to RT. It's a big risk, starting a brand new company, a wholesaler, and leaving your book at a well-established wholesaler to start afresh with a new one. I think it was a huge risk. But he brought over at least 100 people, and I think I know why. He has leadership skills. It's like, you want to work for this guy. He's someone who's been in the trenches, knows how to fight, and is someone you want to follow. For me, that was a significant difference. We were going from a company with leadership that hadn't done what we do as brokers, to a leadership structure where you have people who have been in the business for a long time, been very successful, and are very likable, so people want to follow them.

Tim Turner is at the top, but then all his people below him, the upper-level management, have all been brokers and they know what they're doing. It just trickles down to a very good leadership structure. We get emails multiple times a week just letting us know what's going on with the market, changes that are happening, always constantly updating us on the trends, like this week, we've got some updates about the storms coming up on the East Coast. So we have to watch out, storms are coming, things of that nature, just to always be on top of it. RT really wants brokers to specialize in one line versus multiple lines. That's one thing that I think is somewhat different. CRC also wants that, but they allow for more multi-lines.

How niche do you go in property? 

One niche is habitational, which consists of apartments and condominiums in California. I would say probably under 50 clients. And of those 50 clients, probably my top six or seven generate 80% of my revenue.

They all eventually came over from CRC. How long did it take you to convince them?

It was quite a process. At first, they were reluctant to move over, so I had to visit them and explain that if they wanted the same quality service I had been providing for many years, they would need to transfer their accounts to me. It took some convincing.

Did you have to pay for that transition from CRC? How does that work? Does RT Specialty cover those costs, or do you handle them?

No, not in California. I had signed a non-compete agreement at CRC and was compensated for it. There were a few years left on that contract, and CRC sent me an email reminding me of the non-compete terms and the remaining duration. If I wanted to exit the agreement early, I needed to repay some of my compensation, which was prorated. I did so, and it wasn't a problem. I was able to take over my book of business without any issues.

Did RT Specialty pay that for you, or did they cover all the costs?

No, I paid it myself.

Oh, wow, okay.

Yes, I paid it all myself. I can't speak for others and their experiences. I have heard of cases where RT Specialty has covered the costs brokers had to repay to their former employers. However, I anticipated this expense upfront and estimated how much I would need to repay CRC. I asked for this amount to be included in my offer from RT Specialty. That's how it worked out for me. I do have a colleague who transferred to RT Specialty around the same time as I did. He was in Colorado, where non-compete laws are stricter and more enforceable, so he faced some challenges. But once I repaid my prorated compensation for my non-compete, I had no further issues.

How do you think potential changes in non-compete clauses could affect the brokerage industry and the movement of producers, as well as the risks to brokers?

I believe that a reputable company like RT Specialty will compensate the broker for the lost revenue they will incur. They will assume that the non-compete clause will be enforceable and that they won't generate revenue from that book for the two years, or whatever the term of the non-compete is. In most states, it's two years. They will compensate their broker, saying, "We know you're not going to produce a certain amount of business because you can't bring over that book, but we're going to pay you as if you were able to bring it over." Brokers will be compensated, so there's no risk there. However, the major risk is that during those two years when they can't interact with that account, the retail broker might become very comfortable with whoever took over that book. At the end of two years, when they return and say, "My non-compete is over, I would like to have my book back," the retail broker might say, "Actually, we're happy with the service we've been getting from the current provider, so we're going to stay with them." I believe that's the biggest risk.

But if I have, let's say, $1 million of premium and I am an expert wholesale broker, and you, a different broker, want to buy my book of business. If you come to my company and say, I want to leave. You want to buy my book. Can you not just pay two years upfront, like two times the premium? That's two years' revenue, which would cover my non-compete. I could potentially take that book instantly, as I've heard happens elsewhere but I imagine it’s different by state?

Not in my experience in California. Non-competes are not that enforceable there, from what I understand. I think a company like RT wouldn't have to make that offer to CRC. In some states, yes, I believe it is possible and it has happened before, as you mentioned. It's a good proposition for the company losing their broker because most clients will want to stick with the broker they've been working with for many years, with whom they have a relationship. They're going to lose anyway, so they might as well get paid for it. It's a very good proposition. However, sometimes there's a lot of ego involved, and they might refuse the deal, saying, "No, we don't want that."

Let's say you have a million dollars of premium in California with a broker. You have a contract as a broker with your company, which includes a non-compete clause. If I want to buy your business, how does that work, given that you don't want to upset your company?  

I haven't personally experienced that situation. No one from CRC has ever asked to buy my book, nor has RT Specialty asked to buy my book. So, I don't have experience in that area.

Why not? Is it not typical? Why wouldn't they want to buy your book?

I don't think they need to. In California, they don't expect the non-compete to be enforceable, or perhaps they're confident they can retain the business. CRC, for instance, has offered to pay much higher commissions than RT Specialty to retain a book. I've seen offers where CRC has said they will pay 100% of the commission, which might be between 15% to 17%, much higher than the typical 10% to 11% they usually pay. It's a strong incentive for someone to keep their book with CRC or the losing wholesaler. However, it doesn't always work because if you have a loyal client and you've been working there for many years, a retail broker might decline the offer, preferring to stay with their current arrangement.

How have you seen this change over the last 20 years?  

I've seen a lot of it really come down to acquisitions. Currently, the three large wholesalers are Amwins, RT Specialty, CRC. These companies are aggressively buying others, causing many brokers to move simply because they were acquired by another company. Those being recruited by other companies, like Amwins, often stay put if the compensation package isn't compelling enough. RT Specialty, for example, offered a very attractive compensation package.

From what I understand, it's a long-term investment. When a company hires a new broker, they have to pay them more than their current salary and a sign-on bonus. Consequently, they will lose money for the first few years, but it's a long-term investment. They anticipate that the broker will be with the company for 10 years, and after about three years, they expect them to start generating a profit. I guess after about five years, they figure the investment in that broker has now broken even, and then they start making money. So, that's generally how it works. But essentially, the trend, or the reason a broker might move from one company to another, is really about the opportunity. What does the other company have to offer? Sometimes, it might be that someone is retiring and they offer the new broker that person's significant book of business. So, it depends on what the company has to offer as the reason to move. Like I mentioned earlier, I was very comfortable at CRC, but I was offered a very good opportunity.

How did that work at CRC? For example, if you had a million in premium hypothetically at CRC, how would you typically get paid?

The compensation is a percentage of the revenue. And yes, you're talking about premium revenue.

So, you get a 10% commission on average? What's the average commission?

Typically, in the industry, you strive to obtain 10% and settle for 7.5%. The minimum you want to achieve is 5%. So, between 5% and 10% is what a wholesale broker typically tries to achieve. At our brokerage, we get a percentage of that commission. If we bring in a million dollars in revenue, we'll typically get between 27.5% to 32.5%. It's a sliding scale, so if you bring in $2 million in revenue, you'll get paid somewhere between 30% to 35%, depending on the company. But it varies with each company.

It increases as you earn more, because obviously you get more operating leverage and the company earns more on that.

Exactly. So, whether it be a million dollars in revenue, 1.5 million, or 2.5 million, it goes up. And so, your top producers, who are generating more than, let's say, $5 million in revenue, could be making up to 40% of the commission they brought in.

More than the underwriters.

Typically, there's a significant disparity between the compensation of underwriters and brokers. On average, brokers make about 10 times more than an underwriter.

Sorry, you mentioned roughly 27% to 32% of the revenue is the commission. Is that typically what you use for total revenue? Does it change between new business or renewal business?

Yes, it's total. Just to clarify, if we make 7% on one account, we're making, on average, 30% of that 7%. I just wanted to clarify that.

But that doesn't matter if it's a renewal or if it's new business?

Correct, they just take the total. In wholesale brokerage, we just take the total. I know on the retail side, they give different commissions for new and renewal business. I'm not sure why, as I've never worked on the retail side. However, retaining renewals is just as important as new business. We aim to retain at least 80% of our renewals and add 20%. Our goal is to increase by at least 10% every year.

It's interesting because I spoke to a few retail brokers, and they mentioned they get 30% to 35% commission on new business and only 25% on renewal business. Why do retailers do it differently than wholesalers? It seems like you guys have a better deal.

I'm not sure. I need to correct my earlier statement about brokers making 10 times more than underwriters; it's more like five times more. Sorry for the confusion.

In terms of how much more they earn?

Yes, let's say a typical underwriter earns between $150,000 to $200,000. If we take five times $150,000, a good broker makes about five times what an underwriter makes.

It's pretty incredible though. Why do you think that is?

As a former underwriter, I understand that you can work very hard and bring in a lot of premium, yet still get paid the same salary as another underwriter who brings in less premium. This is because they are on a salary, whereas brokers are compensated based on the revenue they bring in. We have a motivation to work very hard. That's just the way it is.

What about the base salary for wholesale brokers? Is it around $50,000 or $100,000, and do you get monthly commissions?

Typically, we have zero base salary.

Zero base salary.

We operate on a 100% commission basis. We take a draw on our expected commission for the year and are paid out every two weeks or bi-monthly. At the end of the year, they reconcile the accounts, determining how much was advanced versus how much is owed. Typically, that's how it works. However, brokers do not have a base salary; we are always 100% commission-based.

So, it's really based on performance.

Exactly. Underwriters, on the other hand, receive a salary and a bonus. From what I've heard from my underwriters, the bonus is for the entire office. If all the underwriters perform well, they receive a bonus that they share. However, it's not based on their individual production or the premium volume they generate.

How many accounts can one broker typically handle? Is there a maximum number of relationships you can manage?

There is no maximum. But realistically, there are only 24 hours in a day, and you need to sleep. Therefore, you must hire additional people to manage the book. My team consists of myself and three others. I've seen teams as large as a dozen or even 50 people. Such teams handle hundreds of clients, dividing them either by client or by premium size or line of business, depending on their strategy. To grow as a wholesale broker, hiring additional staff is essential because you can't manage everything alone as you expand.

What renewal rate do you aim for in your book?

We aim for an 80% renewal rate to retain our revenue.

And then you aim to grow by acquiring new clients?

Yes. If we achieve 30% growth and lose 20%, we net a 10% growth overall.

What's the hardest part about organically growing your book?

The hardest part about growing right now is that we are in the property market here in California, which is currently a hard market. Many standard carriers, like State Farm, are leaving California. I read an article today stating that California is the most catastrophe-prone state in the US. This exodus of carriers is funneling a lot of business into our segment, the E&S market, making us very busy. Currently, our challenge isn't growth but rather how to handle this growth. We're all stressed because we have so much to manage.

Typically, in a soft market, which I've experienced in previous years, the biggest challenge is finding new business. Renewals usually stay with you, which is convenient for your client, the retail broker. The challenge is to go out and find new business and convince your clients to send new business your way instead of to your competition. To do this, you need to meet them, entertain them, feed them, and take them to events like athletic games.

It's been a while since we've been in a soft market, so it's been a while since I was out golfing and entertaining. Right now, the important thing is just to be in the office to handle the work and the submissions that are coming in because it's really overwhelming. Our underwriters are saying the same thing; they are overwhelmed and working late into the evenings and weekends just to keep up. At least the good ones are. The ones close to retirement don't care as much; they're done at 5:00PM.

My biggest advantage is that we can provide good service. As I mentioned earlier, we live in a world of convenience. There's a new generation of workers entering the workforce who don't have the same work ethics as someone like myself. They grew up texting, and I'm seeing a lot of people, including underwriters, who simply will not reply quickly or at all. Wholesaler brokers, especially the younger ones, if they get a phone call or an email, are not responding quickly or not responding at all. That's why a lot of my clients come to me after trying to work with other wholesalers like ABC Wholesalers who just aren't getting back to them.

That's where we excel because I've taught my staff to always reply. Even if it's just a simple acknowledgment like, "Hey, we received your email. Thank you." If it's a question we can't answer right away, we say, "We don't know, but we'll get back to you." We all use the same markets and tools in wholesale; it's like going to a restaurant chain where the food is the same at every location, but you choose one over another because of the service. It's the service that makes all the difference.

When you think about service, what differentiates your service?

The absolute best service is to respond to your client quickly, whether it's good news, like saying, "I have good news for you, I'm going to get you a quote in a few days," or bad news, such as, "Sorry, I can't help you. Please try someone else." It's crucial not to come to someone at the last minute and say, "I don't have anything for you," leaving them with nothing and at risk of losing their client. It's imperative that we react quickly and let them know whether we can assist them or not. If we can, we'll provide the timeframe. Previously, we liked to get quotes out 30 days ahead of the effective date, but in this current market, due to everyone being so busy, it's more realistic to expect quotes about one to two weeks prior to the effective date. Sometimes, I don't see quotes until just days before, maybe four, three, or two days prior. If we can communicate this trend to our clients in advance, letting them know not to expect their quote until about one week before the effective date, it usually resolves issues as long as we clearly communicate what to expect. However, many wholesalers either don't feel the need to update their clients every step of the way because they believe their clients trust them, or they are from a newer generation that doesn't prioritize responsiveness unless it's convenient for them. This is a trend I've observed frequently.

You mentioned you have an 80% renewal rate. Why do the remaining 20% typically not renew? What's the main reason?

Sometimes it's because the premiums have become too high. Here in California, rates have been increasing for years. Just this year, property rates have started to flatten out, but in previous years, they continued to rise. So sometimes, clients decide it's becoming too expensive and choose not to renew their insurance.

They end up without any coverage.

Yes, or they've found an alternative. Here in California, we have what's called The California FAIR Plan. It's a government-issued policy that California provides. It's very limited in coverage but is much cheaper. So, we opt for The FAIR Plan, knowing that we're not getting everything you can provide, but we just can't afford it. The third factor is competition. Either the insured shopped around with another wholesaler who found something else, or our client did the same. Those are the main reasons for not retaining an account.

Has that 80% renewal rate been stable throughout your career? Is that considered a standard good year for renewal business?

The goal is to retain at least 80%. In my experience, it's always been more than 80%, whether in a soft market or a hard market. Currently, in a hard market, we're retaining more than 80% easily. But yes, the general rule is to strive to keep 80%, though I don't think I've ever been under 80%.

If you are the incumbent wholesaler, the chances are you will keep that renewal. Some retailers who have a good relationship might start a new relationship with another wholesaler and prefer them. In those cases, they'll give them an advantage by sending their submission to the other wholesaler first, which allows them to get their submission out to the marketplace first. By the time I get it, I'm blocked, putting me at a disadvantage. All I have is my incumbent market, and I have to hope that my market comes in very competitively. However, incumbents never want to come in below the expiring premium, which is a strange rule. We can become very aggressive on new business, but if it's a renewal, they can't go below the expiring premium if the market has shifted. If the market has gone soft and all the competitors are being very competitive on new business, then I'm at a disadvantage. This has been the case throughout my career. For example, in the US, if I'm a new customer to T-Mobile, I can get a cell phone very cheaply. But if I'm an existing customer, I don't get that benefit.

And how does RT Specialty incentivize you to think about your actual profit, rather than just the premium? You mentioned you get paid on the total revenue, but that's not actually profit. How do they encourage you to consider the cost of your operation? For instance, you could hire 20 or 50 people, right? How does that factor into the equation?

Yes, I can't just go out and hire as many people as I want. There's a metric involved. They have to consider the amount of revenue you're bringing in per employee, as well as your expenses, to determine how profitable each broker is. If you're exceeding a certain threshold, that allows you to hire additional employees. But it depends on what the metrics are. They look at how much you're bringing in, how much is going out, including my commission, the salaries of my employees, my expenses, and then they assess whether we can hire someone else and still be profitable. We have to make the pitch that hiring someone else will lead to growth. This is how it works, not only at RT, but with any wholesaler.

They have to justify it. It's an investment. We're going to spend more money, but we expect to generate more premium at the end of the day.

And they tell you that they aim for a 20% margin or some kind of margin?

Yes, there is a certain margin. I don't know exactly which one, but there definitely is one.

How do you see that in the market in terms of who's most attractive to join?

As a broker, Brown & Brown, I believe, are they number four? Yes, I think they're a significant number four. There's a significant gap between number three and four. If I were to move, I would look at Amwins because they're number one. I wouldn't consider CRC or Brown & Brown because they're number three and number four. The reputation and size of a broker command a lot with our markets. At RT, we are number one with many of our markets. This matters because when an underwriter is reviewing a submission and they have several, they prioritize those from brokers like RT, Amwins, and CRC who give them the most business. Local wholesalers, like XBT, are at the bottom because we barely do any business with them, so they don't get priority. This makes a huge difference. When we go to wholesale events where we have several competitors, we'll see that Amwins and RT are always at the top, followed by CRC, and then you might have Brown & Brown much lower down.

Because Brown & Brown have retail brokers, wholesale, and MGA business under one roof. How does having retail and wholesale under one roof potentially benefit them versus a company like RT, which is mainly wholesale?

I think it's always a bad idea to have retail and wholesale under the same roof. It really limits your options. For the retailer, they should be able to go to any wholesaler they want because their in-house wholesaler may not be the best. They might have limited markets, and we want to go somewhere else. This is a relationship-based business, and people want to work with those they have been working with for many years.

So, nobody likes being forced to give their in-house wholesaler the first shot. I'll give you an example. We work with a very large retailer nationwide; they have an in-house wholesaler and are told that they must give their wholesaler the first opportunity. When they come to me, I'm reluctant to work with them. I know they're a big retailer, but I really don't want to work with you because you already gave the first shot to your in-house wholesaler.

My first choices of markets have all been blocked, and so I'm left with whoever's not blocked. I'm at a very disadvantageous position to win this business, so I don't think I want to work on it for you. Nowadays, I ask if they have sent it to their in-house team. If they say no, then it's fine, I'll work with you. But if they have, then I'll just say sorry, I'm going to have to pass.

That client is probably not pleased because they know that the capabilities of their in-house wholesaler are not the same as a big wholesaler like RT Specialty, Amwins, or CRC. They're going to get a much smaller pool who just doesn't have the leverage with the markets.

Do they get better prices though? Do the in-house retailers like Brown & Brown offer better prices than you can?

Yes, because it's all going to the same parent company, they can offer them a higher commission. That's probably one advantage, I guess.

What advantage is there in being just wholesale, like Ryan and Amwins versus Brown & Brown? What's the advantage of only having wholesale?

The advantage of being wholesale-only is that we don't have any limitations. Not having an in-house retailer is a factor. If we owned a retailer, it might be an advantage, but then we would have to pay them more commission as a broker. As an individual broker, I know that paying an owned retailer more commission would ultimately increase costs that go to Ryan Specialty. Consequently, my compensation would be reduced because I have to pay someone else who is not owned by the same company.

Do you offer binding authority or MGA services in your business?

Yes, we have several MGA teams. I am currently not involved with MGA.

You're not involved.

Yes. When I encounter an account that would be a better fit for MGA, I send it to them. Generally, the ones that fit MGA are the smaller-sized accounts. In brokerage, we have minimum premiums. I prefer not to work on anything under a $5,000 premium. I prefer at least $10,000. However, I will work on some accounts that are $10,000 and $5,000 if it's a special relationship or an add-on line of business that I already control. For example, if an insured has other business with me and they have another small account they want to add. Generally, the smaller accounts go to MGA, and the great advantage of MGA is that our broker teams underwrite it themselves, so they can turn it around very quickly.

Is that the same for binding authority as well as MGA? Smaller accounts turn around quicker and are less complex?

Yes, it is less complex for smaller accounts. However, a couple of disadvantages of MGA are that you'll probably get slightly less coverage and the premiums will be slightly higher. This is because when a company gives authority to an underwriter who is not an employee, they have to include a buffer in case of mistakes. They'll put a higher premium or rate and will automatically include limitations, excluding certain risks to control their exposure. As a broker, my coverages will generally be broader than what an MGA can provide.

So even though the carrier trusts the MGA and allows them to underwrite to specific terms, they still set the price a bit higher to cover themselves in case of a mistake?

Yes, the rates are generally higher and the coverages are more limited.

How does having an MGA impact profitability compared to just having a broker?

It's great. As a wholesale broker, I think they have to complement each other. For instance, if a client approaches us with a specific need, I can determine if it would be a better fit for our MGA department. Conversely, if someone approaches the MGA department, they might find it's a better fit for the broker and then they send it to me. They have to complement each other because, several years ago, when firms were predominantly MGA or predominantly brokerage, we would have to refer business elsewhere and walk away from it. Nowadays, everyone has both.

Everyone has MGAs.

If you don't have both, you're going to walk away from business, and that's really important business. The other thing is that MGA business is what we call low-hanging fruit. It's the easy stuff, the small stuff that anyone entering the business as a retail broker can handle. When they first start as a retail broker, they're not going to land huge corporate accounts. They will likely get smaller accounts like a liquor store, convenience store, or a small apartment. These go to the MGA. It's low-hanging fruit. When we approach our clients, we say, "We have an MGA department that can handle these things. They can turn around for you within 24 hours or less and provide quick quote turns." It's a very easy sell, saying, "We have an MGA department that can work on your smaller accounts with a very quick turnaround." That's a very good selling point.

And what are the risks of having an MGA internally for RT Specialty and Brown & Brown? 

The risk for me as a broker is that some companies tell their MGA underwriters, "You are strictly an MGA," which is beneficial for me because then they can't work in brokerage. However, many MGAs, including RT, allow their underwriters to also engage in brokerage. They're a hybrid. This poses a risk when I introduce them to one of my clients for MGA work, but the client might approach them for brokerage instead. Consequently, they might handle it themselves as a brokerage, brokering it out to different companies instead of coming back to me.

Additionally, if I'm working on a large property piece and a small GL piece, I might send them the GL piece. Once they see where I place the property, they learn which market suits this type of risk. The next time they encounter a similar situation, they might go directly to the property brokerage market instead of sending it to me. This dilutes the niche because the MGA underwriter should be focusing strictly on MGA work and might not be as familiar with brokerage. If they attempt brokerage, they might not choose the best market based on their limited experience. I believe MGA underwriters should strictly stay within MGA roles and brokers should stay within brokerage roles, fully separate. Yet, I've observed people stepping out of their designated lanes.

What do you think is the biggest risk to brokers, especially with the significant consolidation you mentioned, like RT and Amwins acquiring many brokers? What's the biggest risk in today's business models?

The main risk to an individual wholesale broker like myself is that due to acquisitions, we might have a client who previously worked with both myself and another broker. Now, if that other broker and RT are part of the same group, when they send a submission to me, I might find in the system that they've already sent it to someone else who is now part of RT. This is a major downside of these big consolidations. Our client base is shrinking because they might already be working with someone else within the RT family, eliminating our ability to compete.

With all these changes, including the shifts in non-compete agreements, do you think this is on anyone's radar as a risk, or is it not a major concern? At least in California, it doesn't seem to be, but do you know if it's a concern elsewhere or how it could impact the business?

I think it's a very serious matter that any broker moving from one company to another must take into consideration. They need to leave very cleanly, not taking any lists of renewals or clients. While anyone can look up a client on the internet, knowing specific accounts is proprietary information. Therefore, brokers must leave cleanly, knowing they must walk away from this and hopefully, when their non-compete expires in two years, they can return to their client and try to regain that account.

Companies recruiting from other companies know they should expect to gain zero dollars from the existing book. However, they must have confidence in the broker's ability to rebuild. Everything in the first few years will be new business, and hopefully, after two years, when the non-compete expires, they can pursue those accounts again. Companies must compensate the broker for the business they are losing and should not expect to get any of it back immediately. If they're lucky, they might get some, but they can't go into it thinking they will get any of it back. They really shouldn't.