Specialized Markel Alternative Risk Transfer (SMART) is the division within Markel Re that produces and underwrites alternative market business. Within the alternative market arena, SMART targets its marketing and underwriting efforts to leverage insurance and reinsurance products on books of business using non traditional distribution channels, alternative risk financing mechanisms, and bundled or unbundled claims services.

Our current product focus includes both controlled books of homogeneous insured business linked by distribution source, underwriting/coverage need and risk sharing mechanisms as well as individual risk casualty opportunities with captive applications. We have access to both admitted and non-admitted Markel paper which is A rated by Bests. The division does not write any workers compensation coverage.

The definition of alternative markets varies greatly within the trade press and among insurers. However, the elements common to SMART's entry into the alternative markets area are:

Controlled books of program business or individual medium to large accounts with:

• Non-traditional distribution systems
• Alternative approaches to providing service
• Profitable performance history
• Preferably homogeneous (programs)
• Commitment to risk sharing in frequency layer
• Support infrastructure in place (policy issuance/billing+collections)

Examples of potential groups are as follows:

• Agent or broker captives involving controlled blocks of commercial accounts
• Self-insured groups, RRGs, and Purchasing Groups
• Third Party Administrator controlled blocks of business
• Homogeneous books linked by a common distribution source

Minimum Program Premium Size

• $5MM annual gross written premium

Risk Participation

• Quota Share working layer
• $100,000 to $250,000 depending on risk characteristics

Alternative approach to financing risk

SMART can cede working layer risk to financially qualified single parent captives, agency captives, association captives and rent-a-captive companies. To protect accounts from the inherit volatility of risk, SMART may provide both specific and aggregate loss protection. Appropriate collateral is required to guarantee payment for Markel's cession to the captive.

Account Design

By grouping commercial risks and by unbundling certain risk management functions, SMART can tailor services to specific customer needs or business requirements. As a result, the division can provide groups with underwriting, loss control, claims services, and actuarial support as separate components in their program design. This approach allows us to work with partners with certain skills or service abilities who desire to share the underwriting risk or reward of their business. This opens up opportunities with groups or other potential business partners such as agents or associations who may want to provide some of the services traditionally included in a bundled insurance product.

Non-traditional distribution systems

SMART generally does not use a broad network of individually appointed retail agents. Rather, the division's preferred position is to work through a single source program administrator. The program administrators can contract with their own network of retail agents.

Account Management

A staff of seasoned underwriters performs the underwriting for individual programs and accounts written by the division. Pricing levels are provided by consultation with Markel actuarial. Peer review, management review, and account referral guarantee integrity of pricing standards.

Limited underwriting authority may be granted to qualified program administrators for homogeneous programs. Substantial oversight for this delegation of authority is achieved through the assignment of a Program Manager to each program who is responsible for all aspects of the program. Management oversight is achieved through mandatory on-sight audits, policy reviews, monthly pricing and account reviews and quarterly formal reviews for each program by experienced SMART personnel.