Unique business model sets insurance company apart

THERE WAS NO DOUBT IN Ross J. Buchmueller's mind that the insurance company he helped start in his basement in 2006 was not going to stay below ground for long.

With investment help from Stone Point Capital in Greenwich, it was only a matter of weeks before Buchmueller, CEO, and co-founders, Martin Hartley, chief operating officer, and Jeffrey Paraschac, chief financial officer, were running Privilege Underwriters Inc. at the Gateway Building in downtown White Plains.

By 2011 they had moved again, this time up the street to 44 S. Broadway to what is now the headquarters for the growing insurance company, a major player in the niche market of what Buchmueller called "high net worth individuals and families."

His company specializes in coverage for America's most successful people, who typically have more than one house, more cars than drivers and valuable collections of art or wine.

Buchmueller, who is originally from Boston and graduated from Trinity College in Hartford, devoted a combined 19 years to Chubb Group of Insurance Cos. and American International Group Inc. before making them two of his biggest competitors.

"There were a lot of strategies to put in place that you need to serve these unique needs," Buchmueller said. "And this is what I had spent my whole career doing, so that's what we set out to do."

What sets the corporation apart from bigger companies like Chubb and AIG, Buchmueller said, is that "none of our competitors are predominantly consumer-oriented, let alone high net worth oriented." And the company's use of a "reciprocal exchange" business model proves that.

Privilege Underwriters Inc. is the parent company of PURE Insurance Co. and PURE Risk Management LLC.

The foundation of the company's financial capital - and where the name comes from - is in a combined pool of the Privilege Underwriters Reciprocal Exchange, which is made up of PURE's members, or policyholders, who pay premiums and surplus contributions for the first five years, and PURE Insurance Co., which provides additional capital flexibility.

PURE Risk Management LLC is a member-appointed entity that is paid a fee to run the exchange by doing the underwriting, rate calculations, settling claims and other management duties.

This arrangement "creates a really interesting alignment," Buchmueller said, because, as the membership guide puts it, members "pool their insurance risks among a carefully selected membership."

"It's not enough to be rich," Buchmueller said. Members have to exemplify responsibility and low-risk qualities like a minimal history of claims in order to qualify as a policyholder.

PURE, which had fewer than. 2,000 members in its first two years of business, topped 36,600 in 2014, up by about 10,000 from the previous year. The steady increase in membership has also resulted in gross premiums growing by more than 40 percent every year since the company started. In 2014, PURE reported roughly $351 million in written premiums and expects to reach nearly $500 million by the end of the year.

And the growth doesn't stop there. PURE has nine offices in eight states nationwide and offers coverage in every state except Alaska and Idaho - gaps the company is trying to fill by year's end. Buchmueller said the company is looking to take over another floor in its office building, which would add at least 100 employees to that location and significantly add to its more than 300 employees nationally. The space will also be used as a training facility to foster employee development.

Buchmueller, who lives in Mamaroneck with his wife and two children, said he and the other co-founders had debated about starting the business in midtown Manhattan but decided that a better work-life balance was more feasible in Westchester County.

"It's a lot of hard work to start a company from scratch and if you can still be able to make Little League games that would be a nice thing. So we decided to stay in Westchester, and White Plains has been great to us," he said.