Shake-ups at two major surplus line insurance brokerage firms are creating new competition and new headaches for the nation's excess-and-surplus lines community.

The changes concern Cigna Corp., Philadelphia, whose surplus lines companies have been unofficially on the auction block for some time, and London-based C.E. Health PLC, which officially announced the formation of its own new U.S. excess-and-surplus lines brokerage.While Cigna's surplus lines operations haven't actually been sold, four executives recruited from the insurer's Montgomery & Collins Inc. and California Union Insurance Co. divisions have forged an agreement to form a new company. It will be financed by American Financial Insurance Group in Cincinnati.

The new partners include California Union's chief executive Ken Woods, and Mike Fujii, California Union's president. Two branch managers from Montgomery & Collins - Bob Nagaishi, of Los Angeles, and Herman Roberts, of M&C's Charlotte, N.C. branch - are also part of the new outfit.

"They announced it to us formally (on Feb. 10)," said Robert P. Keul, president of Montgomery & Collins, speaking from his office in Los Angeles. He said Mr. Nagaishi and Mr. Roberts are considered two of Montgomery & Collins' best producers.

Responding to numerous reports at the midyear meeting of the National Association of Professional Surplus Lines Offices in Scottsdale last week, Mr. Keul said the executives have already packed up and moved "down the street," on Wilshire Boulevard.

The intent, he said, is to form an excess-and-surplus lines insurance company and an E&S brokerage operation "that's going to be very similar to something like Montgomery & Collins," with "its own brokerage staff and a facility in which to place the business.

"I view them as a competitor at this point," he said.

Interestingly, the changes could also pit Cincinnati-based American Empire Surplus Lines Insurance Co. against a new sister firm, American Financial. Carl H. Lindner is chairman of the firm, which is also parent to American Empire.

A spokeswoman for American Financial was unable to comment on the company's status last week.

One observer said the new outfit can be expected to offer railroad liability and builders risk coverages. California Union wrote a lot of railroad insurance, and builder's risk is "Nagaishi's specialty," said another broker.

In the second shake-up to the surplus lines industry, C.E. Health PLC confirmed Thursday that Thomas S. Bloom, previously president of Willis Faber Holdings Inc., Grand Rapids, Mich., would head its new U.S. excess-and-surplus lines brokerage, the Dallas-based Health Insurance Brokers Inc. Heath said it intends to establish offices in a number of major U.S. cities across the country.

Eugene J. Eisenman, Heath Insurance Brokers' new senior vice president, said the Dallas outfit would have 20 to 30 employees within the next 30 to 45 days and would specialize in coverages, including heavy products liability, directors and officers and errors and omissions coverage, construction risk and coverage for energy concerns.