New kids on the block
After many years of falling rates, the insurance market is becoming more challenging for buyers as carriers look to improve their underwriting profitability following an increase in large claims. Insurers are reducing their capacity and raising rates in some risk areas while also tightening their policy terms and conditions. It is therefore good news for insurance buyers if new players enter the market and stimulate competition.
One of the new players is Convex. Launched by industry veterans Stephen Catlin and Paul Brand at the beginning of 2019, the international specialty insurer and reinsurer has $1.8 billion of initial committed capital to underwrite complex specialty risks.
Catlin and Brand state that they are able to keep costs low because their operations are free of legacy and because they use modern technology. In July, Convex announced that it would be using an artificial intelligence (AI)-powered platform for commercial insurance underwriting. The firm’s strategy includes outsourcing anything that does not need intellectual input, such as claims processing, while keeping in-house anything that does require intellectual input, such as claims adjustment. This gives Convex more flexibility, according to the company.
Convex faces competition from another recent addition to the London market. Bermuda-based Fidelis Insurance Holdings Limited was founded by Richard Brindle and Neil McConachie who previously built Lloyd’s specialist insurer Lancashire Holdings. Fidelis received authorisation from the Prudential Regulation Authority (PRA) to underwrite business in December 2015 and offers specialty insurance and reinsurance products in the London market through its UK unit Fidelis Underwriting Limited (FUL). Since its creation, FUL has expanded quickly. In 2018, it grew gross premiums written to $315.1 million from $171.0 million in the previous year. The combined ratio improved to 99.2% from 112.6% during the period.
Fidelis operates via several platforms. The Bermuda operations focus on catastrophe reinsurance, the London platform on bespoke deals as well as select specialty and catastrophe reinsurance. Niche products are underwritten via its managing general agent (MGA) platform, Pine Walk, while its Dublin platform focuses on Continental European insurance.
Both Convex and Fidelis may indicate a market trend in specialist capacity writing London market business outside the Lloyd’s infrastructure. Despite operating outside Lloyd’s of London, the underwriting expertise and quality of the operations are perceived as equally solid. Established players such as Allianz, Berkshire Hathaway and Munich Re also offer insurance capacity outside Lloyd’s which may well reduce compliance cost and perceived bureaucracy.
Confidence in the services from Convex and Fidelis is based on the founders’ reputation and was further boosted through the hiring of a number of well-known and experienced underwriters. Following an assessment of their financial and intellectual capabilities, Lockton approved both Convex and Fidelis as trusted partners and can fully recommend their services to clients. Lockton London undertakes significant due diligence and makes sure that there are no disadvantages in areas such as claims handling.
Like any other specialist insurer, their appetite for risk is driven by their individual strategy but is likely to be less affected by recent losses in the Lloyd’s market. They are flexing their muscles to take advantage of the current hardening market and Lockton London will evaluate these options on behalf of clients seeking to keep insurance spend down wherever possible.
For further information, please contact:
Ian Harrison, Partner, Global Head of Recall Practice Group
Direct Tel: + 44 (0) 20 7933 2297