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| Market Background
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In simple terms, there are two types of markets
through which professional liability
coverage is available for intellectual property law firms:
(a) traditional insurance companies, and
(b) the subscription market.
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| Traditional
Insurance Companies |
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Traditional insurance companies write professional
liability insurance directly
and may employ brokers, a managing general agent, and underwriters.
In the
traditional market, U.S. insurance carriers hire underwriters
to work with brokers
in the procurement of business based upon established
budgeted premium targets, i.e., sales goals.
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| Subscription
Market |
The subscription market,
which is utilized by the PilotLegis program,
has
a lead underwriter and a number of other entities
(often large international
insurance companies) which join with, or "follow" the lead
underwriter in
agreeing to provide professional liability insurance
coverage for a specific law firm.
PilotLegis
accesses a subscription market facility through Lloyd's
of London.
The PilotLegis lineslip, a list of insurers
which follow the lead underwriter,
is composed of several large Lloyd's of London syndicates
and
major insurance companies such as Swiss Re.
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| Broker
of Record |
A Broker of Record (B0R)
letter is required to secure an indication (typically
offered prior to a final premium quotation) through the
London insurance
market. However, the London insurance market generally honors
only the
first BOR that it receives on behalf of a law firm. Thus,
if a law firm asks two
different brokers to obtain quotes through the London subscription
market,
usually only the first broker who contacts London with a
BOR will be able to
provide an insurance indication for the firm.
The "first to contact" rule
exists in the London subscription market because a
professional liability underwriter may participate in several
different insurance
programs. An underwriter cannot compete against himself
by providing two
different pricing indications for the same business. Thus,
if one program
is designed to have special pricing considerations (such
as available in
the PilotLegis program), those pricing considerations
will be lost if an
indication has already been secured by a broker for another
program
on which the same underwriter participates.
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