What is Velocity?

Another prominent player in the insurance market is Velocity Risk Underwriters. Velocity is headquartered in Nashville, Tennessee. Like AmRisc, Velocity has crafted its own arbitration clause that requires Texas policyholders to travel, at their own cost, to its home turf – Nashville – to conduct arbitration unless Velocity agrees otherwise. And like the AmRisc program, the terms of Velocity’s arbitration provision do not depend on whether or not the policyholders and properties involved – or, for that matter the insurers – have any connection to Tennessee.

What types of commercial properties is Velocity marketing its policies to?

Small Commercial

Velocity also touts its products to smaller commercial properties, including:

  • Artisan Contractors
  • Health Care
  • Office/Retail/Restaurant
  • Schools/Municipalities
  • Wholesale Distribution
  • Commercial Habitational
  • Hospitality / Hotels
  • Real Estate/Lessor’s Risk
  • Warehouses
  • Worship Centers

Large Commercial

Velocity markets itself toward the following classes of business:

  • Commercial Habitation / Condominium
  • Real Estate / Lessor’s Risk
  • Office / Retail / Restaurant
  • Public Entity / Municipality / School Districts

Certain brokers, such as AmWINS, solicit potential policyholders and bring them to Velocity, which then places the policyholders with non-admitted surplus lines carriers, including Certain Underwriters at Lloyds, Interstate Fire and Casualty Insurance Company, and Independent Specialty Insurance Company.

What Exactly Does Velocity Do

According to its own website, Velocity has “an unmatched appetite and capacity for catastrophe risk.” Although Velocity denies that it has any type of “program” or “targets” anyone, the fact is that, as a managing general agency, Velocity engages in underwriting activities that market toward specific classes of policyholders; and, the company does so without taking on financial risk of its own. Instead, all risk is borne by the insurers whose names appear on the insurance policies that Velocity underwrites. In doing so, as a managing general agency engaged in underwriting activities, Velocity insulates itself from the risks actually underwritten by the insurers.

So How Can A Policyholder End Up With A Velocity Managed Insurance Policy?

Most commercial policyholders go to an agent or broker to find an insurance policy. That “retail” broker may not, however, be able to sell the type of insurance coverage required. This is particularly true in places where most commercial insurance is written by surplus lines insurers because only certain brokers are licensed and authorized to procure a surplus lines policy. Accordingly, the retail broker will find another “wholesale” broker like AmWins to procure surplus lines coverage. The wholesale broker will then turn to a managing general agent like Velocity to underwrite the risk on behalf of various insurers.

Unaware commercial consumers may not have any visibility into what is taking place. Velocity establishes relationships with insurance entities, some of which are foreign and not required to be licensed in the state where the insured property is located. These insurers are not subject to the same regulations and oversight that is required insurers that are licensed and admitted in the State of Texas. To be eligible to engage in such activities, surplus lines insurers must only be licensed in their home state or country, not in Texas. These surplus lines insurers determine their “underwriting appetite” which Velocity helps satisfy. Velocity is a managing general agency and as such performs the underwriting, participates in setting the premiums, and collects them on behalf of the insurers, all without bearing the insurance risk. Velocity also has authority to make certain claim decisions.

The Terms of a Velocity Managed Policy

The terms of a Velocity managed policy can include provisions that may not be present in other commercial insurance policies. Some of those terms include:

  • “All matters in dispute between the Named Insured and the Insurer(s) … in relation to this insurance . . . shall be referred to an Arbitration Tribunal…”
  • “The parties shall each bear their own costs, expenses and attorney’s fees in any Arbitration proceeding.”
  • “Any Arbitration hearing shall take place in Nashville, Tennessee, unless [Velocity] is agreeable to a different locale.”
  • “The Arbitration Tribunal may not award exemplary, punitive, multiple or other damages of a similar nature.”

Unfortunately, the various insurance brokers that can be involved in producing a Velocity managed insurance policy may not always promptly notify their customers of these terms; therefore, leaving unsuspecting policyholders surprised after a claim is made.

Our Velocity Arbitration Experience

While the Velocity program is fairly new to Texas, we represent multiple large institutional and commercial policyholders whose claims require arbitration. Raizner Slania LLP has handled a substantial number of arbitration related matters involving AmRisc and Velocity over the past several years.