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An insatiable appetite for innovation, endless energy and a commitment to creating an internal team that reflects the rich diversity of the market they serve. These are the main ingredients in the recipe for developing a successful affinity insurance proposition, according to Phil Hobson (pictured), international affinity leader at Marsh and a long-standing advocate for the role of affinity products in augmenting customers’ experience of insurance.

When Hobson stepped into his current role in January 2021 – which meant moving his family from Hong Kong to the UK in the thick of the COVID crisis – his first port of call was to establish the broking giant’s affinity strategy which is focused on two core pillars. The first is the ambition to do a few things very well by taking a “narrow and deep” approach to building out the business.

“Narrow is our focus on our four core sectors of the business – automotive, equipment and consumer electronics, sharing economy and traditional sponsored programmes – and deep is the drivers that make us successful,” he said. “For us, those drivers are our talent, our technology, and our sales and marketing and placement.

“The second pillar of how we restructured our business was by looking at the very human capital heavy elements of our proposition and asking what we could do to digitise and how we could deliver our offering differently. So, that was my focus. I assumed the international role in 2021 which now includes 65 countries, seven regions and about 1,300 people across a very flat structure where everybody in the business is encouraged to be part of our affinity journey.”

What’s happening in the affinity insurance sector?

Assessing the lay of the affinity insurance landscape as it stands today, Hobson emphasised that “consolidation” is the word on the lips of many across the market. However, he noted that when discussing affinity, it’s important to be aligned on what that actually entails. Often, when people talk about becoming an affinity broker or carrier, they’re pursuing a one-to-one sales model. Real consolidation is where a client is tapping into a wider ecosystem to help acquire and retain its end customers.

How embedded insurance has evolved

Embedded insurance is lending itself naturally to these conversations, he said, and the discussion around embedded cover is changing as there’s increasing consideration about how it can be delivered as part of an ecosystem solution. Take, for example, an automotive manufacturer that supports a subscription base, who would have thought that people now automatically accept that this subscription includes insurance?

“There are so many examples of innovation across the consolidation model that I’m seeing in affinity business,” he said. “We’re looking at moving away from one-to-one acquisition and far more towards that embedded ecosystem solution. One-to-one acquisition still has its place because there are still products that require and support that model, with professional liability being one example.”

The consolidation currently happening in the market is taking place through carriers who can be truly global, he said, of which there aren’t all that many in the market. Clients are looking for a consistent customer experience across their embedded ecosystem and most carriers tend to be strong in one region, so it’s hard for them to deliver that consistency on a global basis. Meanwhile, many brokers are facing the same struggle.

Increasing engagement with service providers and partners

“The other thing I’m seeing, for us, is a lot more engagement in our ecosystem with service providers and partners,” he said. “That’s specialist technology providers, specialist education services, risk management services – and partnerships within our own organisation that allow us to tap into the wonderful insights and capabilities delivered by Oliver Wyman and Guy Carpenter.

“Another theme I’m seeing come through is the requirements of our core client – the affinity aggregator. They’re looking for far more than just remuneration, they’re looking for client retention and data insights. They’re looking for data. Data accessibility has been a challenge for them not just due to regulatory considerations but also just the way it has been collected in the past which has led to significant challenges around quality.”

Finally, he said, there’s a marked increase across the market for innovation. It’s easy to fall into the default position of conflating innovation with technology but, in reality, technology is just one piece of the innovation puzzle and serves as an enabler rather than the end goal.

“But that presents a wonderful challenge going forward and the opportunity for a lot of innovation,” he said. “For example, we’ve got products labs, we’ve started to invest in automotive engineers, data scientists and in more people with digital customer experience. And the way we’ve started to leverage that talent piece is by finding people from industry as opposed to finding people from the insurance industry.

“I’ve employed a lot of consultants and project managers and customer service people and people from sharing economy platforms and from the automotive sector. Because these are the people who can challenge the ‘norms’ in insurance and bring our product suite and capabilities far nearer to our clients’ ecosystems.”

What’s top of the agenda for Hobson and his team?

Looking across the full remit of the Marsh McLennan offering, Hobson said he feels “really blessed” to be part of an organisation with such incredibly diverse and endlessly accessible capabilities. It’s this which allows his team to really deliver innovation, he said, because there are always examples from other businesses to lean on and learn from – and to leverage for the benefit of clients.

With the year stretching ahead, he noted that there are several pressing items at the top of his agenda for 2024. First is firmly establishing what the team want the future of embedded insurance to be within Marsh, he said, because it represents such a huge opportunity – and that delineation will be critical going forward.

Secondly, is ensuring that the affinity team continues to really deliver on the data insights piece so critical to their clients. That’s especially important, he said, because the more and better quality data they get, the more it supports their insurance buying decisions and their risk management decisions – which is an element that should be considered by the industry more broadly.

“And finally, the third focus for me is always the same,” he said. “It’s about getting my brilliant team to the end of the year and making sure they have some fun and celebrate the great work they’re doing along the way.”

Malago Insurance Brokers (Malago), an insurance brokerage based in Bristol, has announced the acquisition of Mulberry Insurance Brokers (Mullberry), following the retirement of Keith Johnson, its principal.

“After more than 40 years, the bitter-sweet moment has arrived when I have decided to retire. It was not an easy decision as I have enjoyed my role so much,” said Johnson regarding his retirement.

“Building up relationships with my clients was crucial to me, and I was conscious to leave them in safe hands. With a similar client base and values, Mathew [Rowles, managing director at Malago] is just that,” he added.

“Having known Keith for many years, I am really pleased to add his customers to our growing portfolio. We will offer continuity to his client base: something that I know was very important to Keith when he was contemplating retirement,” said Rowles.

“Our values at Malago, and indeed our existing client base, bear strong similarities to Mulberry’s, so I am confident that we will be able to offer a seamless transition.”

In order to ensure a smooth transition, Johnson will join Malago to make sure that the needs of clients are being met..

“We will continue to offer service to Keith’s clients in the same way that they appreciated it from him: with an emphasis on the personal touch and getting to know each business and their owners,” said Rowles.

“Current clients of Mulberry Insurance Brokers can be assured that any current insurances will continue to run until renewal, at which point we will be in touch under the Malago brand,” he added.

Malago is an independent insurance brokerage specialising in commercial insurance. Its compliance firm is Momentum Broker Solutions, which is the same as Mulberry’s.

Not content with the Herculean task that was building out a pure-play reinsurer in the thick of the COVID-19 crisis, the leadership team at Conduit Re founded the Conduit Foundation to run alongside the business as a privately funded Bermuda charity.

Among its London-listed peers, Conduit Re is unusual in that all its business operations are based in Bermuda, noted Stuart Quinlan (pictured) COO and deputy CEO of Conduit Re, and the leadership team have been very focused on the importance of establishing itself in the local Bermuda community, both within the industry and more widely.

How the Conduit Re Foundation came to life

The Conduit Foundation is part of that story, he said, and looking back on how the foundation came to life, he emphasised its mission statement – to support the Bermuda community through engagement in projects focused on the environment, diversity & inclusion initiatives, education and support for the vulnerable. Now three years into his Conduit Re journey and three years into enjoying a new pace of life in Bermuda after decades serving the London insurance market, Quinlan has first-hand experience of what it means to really get involved with the Bermuda community.

“There are only around 60,000 people across the 24-mile-long island of Bermuda, and you’re never more than a mile from seeing the sea,” he said. “You’re really never more than five minutes from seeing someone that you know, particularly as you get more established and it’s a phenomenally friendly place… And I see Bermuda as an almost microcosm of almost anywhere else in the world, but with everything closer together and a small population meaning fewer degrees of separation than elsewhere.

Assessing the wealth divide in Bermuda

In Bermuda, you’ve got examples of tremendous wealth, he said, with a sizable affluent segment of local society engaged in local and international business, while others live in real poverty, exacerbated by high housing costs and the implications of a high dependence on imports.

“For Trevor [Carvey, CEO] and for Neil [Eckert, executive chairman], they were driven about setting up a foundation if we were creating a business here,” he said. “We raised a significant amount of funds to create the organisation, and a significant portion of the initial seed fund of the foundation was donated by the banks who helped us create Conduit. So, the first year was really about establishing the protector committee and setting up all the necessary legal structures for the foundation.

“It was into 2022 that we got more active, but we determined very early on that we wanted our focus to be on Bermuda. And we have some simple goals – supporting the vulnerable, the advancement of education and supporting the health of the Bermuda community.”

In 2022, the inaugural year of donations, the Conduit Foundation donated to 14 local charities – among them the cancer care charity P.A.L.S, Meals on Wheels Bermuda, the Friends of Christchurch and the Bermuda Red Cross. These charities shared in donations of $280,000 but Quinlan noted that the support offered by the Conduit Re team goes far beyond financial considerations.

Supporting communities – why it’s about more than just money

“In some ways, it’s easy to just give out cheques to charities, but for us, it’s about the doing as well,” he said. “We’re looking to foster long-term partnerships with our chosen causes, which includes volunteering from our staff, as well as knowledge and skills sharing. Looking at Meals on Wheels, for example, we’ve taken ownership of delivery route 16 on a Friday and on our intranet, we have a relay system of volunteers who go out to learn and teach the route allowing more and more of our people to get involved.

“The impact of the financial contributions from the foundation is amplified by our staff directly engaging in volunteering with the charities. In 2022 alone, over 2,000 volunteer hours were tracked by Conduit staff. And over 70% of our employees have local roots and are embedded in various community initiatives and activities. Additionally, financial support was given to a number of other local charity groups through specific fundraising event sponsorship and through donations under the staff donation matching program.”

Quinlan highlighted that the foundation seeks to align its contributions both to its objectives and the UN Sustainable Development Goals. During 2022, he said, the organisation supported 15 of the 17 UN categories through the support given to Bermuda charities during the funding review and approval process.

Conduit Re’s ‘Gala of Giving’

While Conduit Re is not unique in supporting local causes, Quinlan noted that he was keen to cast the net more widely and had the idea of a community ‘Gala of Giving’, drawing on his experience of organising similar events in the UK.

The leadership team at Conduit Re endorsed Quinlan’s ambition and the full force of the Foundation’s power was applied raising additional funds for the 14 local Bermuda charities chosen by the Foundation in 2022 to support. Looking back on the event, which was a mammoth undertaking, bringing together people from all over the island and beyond – and linking them up with representatives from the charities being supported, he emphasised the impact having that personal example of where this funding goes made on everybody present.

“It was a great experience to coordinate the organisation of the event, with the active participation of the Bermuda business community” he said, which, thanks to ticket sales and donated auction items, raised in excess of $310,000 which will be split equally to the beneficiary charities of the 2023 event. More than 30 Bermuda businesses contributed to the auction and 340 guests were welcomed on the evening which shows the integral link between business and community – which is so celebrated by Conduit Re. 

Understanding the link between insurance and the communities it serves

“I 100% believe it’s important to support the community you serve and the community you live in,” he said. “I feel very privileged to be living here now. Especially having had 30 years of commuting on trains and tubes! To come in and help build and create a business from scratch, to get involved in the community and have the chance to really impact it, and make a difference, it’s such a special experience.

“I also believe that being able to talk about the Conduit Foundation’s impact on the community, perhaps also encourages people to think about our industry as being a good industry to come into. One amazing thing about Bermuda for me, is that nowhere else in the world do you really have children growing up thinking they want to join the insurance and reinsurance industry. We’re so relevant as an industry here, and where we can give back some of our time and money, then we should do that with open arms.”

Utah-based SILAC Insurance Company (SILAC) has had its outlook adjusted from stable to negative by AM Best.

The shift to a negative outlook is primarily due to a decline in the quality of SILAC’s reinsurance counterparties and a decrease in risk-adjusted capital, as measured by Best’s Capital Adequacy Ratio (BCAR). This is attributed to increased reinsurance leverage following several agreements with unrated reinsurers and a strategy of maintaining high reinsurance leverage to manage capital strain.

Despite this change, AM Best has affirmed SILAC’s Financial Strength Rating at B+ (Good) and its Long-Term Issuer Credit Rating at “bbb-” (Good). The ratings reflect SILAC’s adequate balance sheet strength and operating performance, along with its neutral business profile and marginal enterprise risk management (ERM).

Although SILAC’s capital and surplus have grown over the past year, bolstered by retained earnings and investor capital contributions, its risk-adjusted capitalization remains weak. AM Best has also expressed concerns regarding SILAC’s limited financial flexibility for potential capital requirements to support new growth or offset investment impairments or recapture of ceded business.

SILAC has maintained a favorable operating performance, reporting net income of $41 million as of the third quarter of 2023. The company’s earnings are largely derived from investment spreads on its fixed-indexed annuity (FIA) products.

SILAC’s strategy of reducing sales to manage capital levels has also not significantly impacted its strong earnings. The company’s business profile is supported by its position in annuity sales and geographic diversification, offering a range of FIA and multiyear guaranteed annuity products.

The assessment of SILAC’s ERM is influenced by the deteriorating quality of its reinsurance relationships and a heavy dependence on reinsurance to manage capital strain. While SILAC has identified key risk categories and established risk appetite and tolerance levels for each, its reliance on reinsurance remains a concern. AM Best will continue to monitor SILAC’s efforts to develop and enhance its ERM program.

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White Mountains subsidiary Ark Insurance Holdings Limited, specializing in property and casualty reinsurance and insurance, has renewed its agreement with reinsurance sidecar Outrigger Re for the 2024 calendar year. The terms of the renewal are reportedly similar to those of the previous year.

Outrigger will continue its partnership with Ark through a quota share arrangement. This agreement is set to provide collateralized reinsurance protection for a segment of Ark Bermuda’s global property catastrophe portfolio, starting January 1, 2024.

For the renewal, Outrigger secured $250 million in total investor capital as of January 1, including a $130 million contribution from White Mountains. The remaining funding was sourced from both new and existing third-party investors.

“We are pleased to continue supporting Outrigger Re and the underwriting team at Ark. We view new investor interest as recognition of Ark’s strong execution in the on-going hard market,” White Mountains CEO Manning Rountree said.

“Outrigger remains an important strategic capability for Ark in the current market. We are pleased to see expanded investor interest in supporting Outrigger including White Mountains’s ongoing lead commitment,” Ark CEO Ian Beaton said.

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AM Best has reaffirmed the financial strength rating of A- (Excellent) and the long-term issuer credit rating (Long-Term ICR) of “a-” (Excellent) for Harrington Re Ltd. (Harrington). In addition, the long-term ICR of “bbb-” (Good) for Harrington Reinsurance Holdings Limited was also affirmed.

Both companies, headquartered in Bermuda, have been given a stable outlook for these ratings.

The ratings are based on Harrington’s robust balance sheet strength, which AM Best categorizes as very strong. Other factors contributing to the ratings include Harrington’s adequate operating performance, its neutral business profile, and effective enterprise risk management strategies.

Potential factors for a negative rating action include significant adverse reserve development affecting Harrington’s capitalization, substantial negative fluctuations in investment performance, or a material decline in its risk-adjusted capitalization. While not anticipated in the near future, positive rating action could result from a consistent trend of favorable reserve development.

Founded in 2016, Harrington is backed by AXIS Capital Holdings Limited (AXIS) and The Blackstone Group Inc. The company’s risk-adjusted capitalization, evaluated using Best’s Capital Adequacy Ratio (BCAR), aligns with the highest level of assessment. AM Best anticipates that Harrington’s BCAR scores will continue to support a very strong assessment of its overall balance sheet strength in the future.

Harrington employs an alternative asset strategy that has positively impacted its net income historically. The company is also developing a diversified, multiline reinsurance portfolio, with a focus on medium to longer-tailed casualty lines.

Business for Harrington is primarily sourced through cessions from AXIS, as it does not directly engage the market. The company benefits from a well-established risk management function and draws on the expertise and systems of its sponsors.

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Philippine Rating Services Corporation (PhilRatings) has assigned the National Reinsurance Corporation of the Philippines (Nat Re), the nation’s sole professional reinsurer, a financial strength rating of PRS A with a stable outlook, signifying that Nat Re possesses strong financial security characteristics, though it may be more susceptible to adverse business conditions than insurers with higher ratings.

Nat Re’s stable outlook indicates the likelihood of this rating remaining consistent over the next 12 months. This rating and outlook reflect several factors, including Nat Re’s established market presence, reputable shareholders, experienced management team, sound investment portfolio, and robust capitalization.

As of the end of 2022, Nat Re’s total investment assets were valued at PHP9.2 billion, increasing to PHP9.7 billion by the end of June 2023. The company’s investment portfolio is predominantly low-risk, with 92.4% allocated to fixed income investments and 7.6% to equities as of end-June 2023. Government securities form most of the fixed income portfolio, followed by corporate bonds. For equity investments, companies listed on the Philippine Stock Exchange (PSE) comprise 94%.

With an equity of PHP5.8 billion as of end-September 2023, Nat Re comfortably exceeds the minimum net worth requirement of P3.0 billion set by the Insurance Commission (IC). The company’s risk-based capital (RBC) ratio also significantly surpasses the IC’s minimum requirement of 100%. Nat Re anticipates maintaining compliance with regulatory capitalization standards in the future.

Nat Re is unique in the Philippine insurance market as it is the only domestic professional reinsurance firm. Legislatively, it has the advantage of being entitled to a minimum of 10% of all outward reinsurance business from domestic insurance companies.

This privilege also provides Nat Re with significant access to local reinsurance business and insight into the reinsurance needs of domestic insurers.

The state-owned Government Service Insurance System (GSIS) is the largest shareholder in Nat Re, holding a 25.8% stake. The Yuchengco Group’s Mico Equities, Inc. (MEI) and the Bank of the Philippine Islands (BPI) are other major shareholders, with ownership interests of 12.9% and 13.7%, respectively.

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Chicago-based insurance company Ryan Specialty is acquiring London-headquartered managing general underwriter platform Castel Underwriting Agencies for an undisclosed sum. A definitive agreement has been signed to snap up Castel from Arch Financial Holdings (UK) Limited and minority shareholders, according to an emailed release.

Set up in 2014, Castel consists of 13 niche MGUs that specialise in areas like marine and construction. Outside the UK, it has offices in Belgium and the Netherlands. For the 12 months ended November 30, Castel generated approximately £35 million of operating revenue. 

“Castel is a first-class organisation with a history of exceptional performance on all metrics, including underwriting profit and growth,” Ryan Specialty founder, chair, and chief executive Patrick G. Ryan said.

“Bringing Castel into Ryan Specialty expands our UK and European footprint in delegated authority, and the lines of business underwritten by these MGUs are both complementary and accretive to our firm. We are very much looking forward to further expanding with this very talented team.”

Meanwhile Castel CEO Mark Birrell had this to say: “We have built Castel around attracting and retaining the industry’s best underwriters, and providing those underwriters with tools and resources to reach extraordinary levels of performance.

“Ryan Specialty shares the same philosophy, and we could not be more excited to be joining forces with this great firm. I am confident that as part of Ryan Specialty we are positioning our MGUs for continued success and our underwriters to further accelerate their careers.” 

The transaction is expected to be completed in the first half of next year.

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“2023/24 appears set to be another record tax-take for Insurance Premium Tax with receipts 11% up on the same point last year.”

Those were the words of OAC insurance consulting head Cara Spinks when the actuarial consultancy revealed that, based on HM Revenue & Customs receipts, the Treasury has collected £6.03 billion in IPT for the first eight months of the 2023-24 financial year that started on April 6.

In a statement sent to Insurance Business, Spinks said: “Rising insurance cost across most sectors have driven increased premiums which have hit households, adding to budget concerns amid the cost-of-living squeeze.

“We have also seen other drivers emerge such as growing demand for private health insurance as employers and individuals look for alternatives to the overburdened public health service.

“With the Treasury eyeing up tax cuts ahead of General Election in 2024, minimising IPT increases could create a two-pronged economic boost in both easing the pressure on household finances and reducing economic inactivity.”   

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The Chartered Insurance Institute (CII) Group’s charity, the Education and Training Trust, is set to transfer its assets of around £2 million to The Worshipful Company of Insurers (WCI) Charitable Trust.

This move aims to bolster resources available to the WCI, supporting various initiatives within the insurance sector and beyond.

For the past five decades, the CII’s Education and Training Trust has played a crucial role in supporting the educational and training endeavours of insurance and allied professionals, often working collaboratively with the WCI.

The assets transfer, which will create a combined asset pool estimated at £4.4 million, was proposed by the Education and Training Trust’s board of trustees and endorsed by the CII Group.

According to an emailed news release, two trustees from the Education and Training Trust will join the board of the WCI Charitable Trust for continuity purposes.

The completion of the fund transfer is anticipated in the first quarter of 2024, after which the CII Group will systematically wind-up the Education and Training Trust.

“Benefiting even more people in the insurance profession”

Simon White, chair of the trustees of the Education and Training Trust, highlighted the collective potential of the transfer.

“Combining our undertakings with the Worshipful Company of Insurers Charitable Trust will enable us to continue collectively to greatest effect, benefiting even more people in the insurance profession for many years to come,” he said.

Dr Helen Phillips, CII Group chair, expressed gratitude and assurance regarding the move.

“The legacy and objectives of the CII’s charitable aims will be preserved through this move, ensuring that those in need will continue to have an opportunity to find the support that will enable them to pursue their career in the insurance profession,” she said.

Meanwhile WCI Charitable Trust chair Katie Wade welcomed the transfer.

“We are delighted to accept the transfer of funds from the CII’s Education and Training Trust and the responsibility to provide for future generations of insurance professionals,” Wade said.

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