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It has been three months since Amersham-based Luker Rowe was snapped up by Clear Group, a move that came about after Luker approached Clear’s Howard Lickens – encouraged by their long-standing working relationship and the shared values at the heart of both businesses. They both joined Brokerbility at around the same time, he said, and through working together had generated mutual trust and respect.

“I had spoken to other people, and been approached more times than I care to remember over the years,” he said. “I’ve had conversations with some of those people, just to get an understanding of them so, when it came down to it, this was quite an easy decision for me really. It was about Howard and the people that he has surrounding him. We’ve been working with them more and more, and with their PI London placement team, and every time we had reason to do business with them, it was a positive experience for me and the whole of my team. And that probably says a lot.”

The success of an acquisition hinges on having the right cultural fit, Luker said, something he has seen from the deals he has managed in the past. Like so many, his foray into insurance was somewhat accidental and he first joined the business founded by his father and his father’s broking partner Simon Rowe four years after it was founded in 1989. Tragically, Simon Rowe died in 1996 and Luker remained with the business, which made its first acquisition in 1999, followed by subsequent deals in 2006, 2016 and 2019.

“For us, we always looked at businesses that we could buy and then merge into our business as I had limited appetite to run multiple offices,” he said. “And there were the cost advantages that go with being in one premise, but it was also about the ability to then integrate that both operationally and culturally, and that’s what makes culture so essential. And that’s why I went with Howard really. Because what was important to me was how my staff would react to this, and clearly, culturally, Clear is exactly the right fit for us, in the same way that some of the other consolidator models were absolutely not the right fit for us.”

Read more: Chief executive details how recent dual deal underlines group’s acquisition strategy

Settling in has been a positive experience, Luker said, though it has taken the team some getting used to reporting upwards after so long without the need for such a process. From his own experience and the feedback from his team, all interactions with Clear have been great and overall, he noted, not much has really changed for the staff except that now they have access to certain things that they simply didn’t have before.

Luker highlighted that it has always been part of his long-term plan to introduce some new product lines into the business, in areas such as employee benefits or trade credit, and that the deal has opened those doors to the business. Looking to the future, he said, his number one goal is to continue to grow. Operating as an outpost of Clear, where the group previously didn’t have a physical representation and with a team of 40 staff at the ready, Luker Rowe is poised to accommodate any acquisitions in its local vicinity.

“That was a big part of our plan before I decided to sell and that continues to be the plan,” he said. “We’re about organic growth and retention, but if we can plug some acquisitions in there then great, and I think that’s part of the Clear plan too. [Howard’s] business isn’t about cost-cutting, it’s about driving growth. And, of course, you have to watch costs along the way but they’re in growth mode and we’ve always been in growth mode, and we continue to be in growth mode. So, that, I think, works out well for all of us.”

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What’s the driving force behind that growth? The hard insurance market.

“In a challenging market, the capacity is not there, insurance premiums are going up, and there’s pressure from your stakeholders (maybe your treasurer, your CFO, your CEO) looking at all lines of coverage, trying to drive out costs in every single way they can, and looking under every single rock for savings,” said Michael Serricchio, Americas sales and advisory leader, Marsh Captive Solutions.

Captives are a natural solution to many of the challenges caused by a hard insurance market. They enable organisations to control their costs and improve their margins by increasing their risk retention and taking greater control of their insurance programs. These days, captive owners also have access to cutting edge software solutions and financial models to help them run their captives effectively.

Read next: Captives: A broker’s friend, not foe

“The challenging market is really driving clients of all sizes, of all industries, in all regions, to think more about their property program, their excess liability program, their D&O, product liability, product recall – these are all lines of coverage that are giving a lot of pain points to clients, and there’s no doubt in my mind that is why we saw this historic number of captive formations last year,” Serricchio said. 

Marsh Captive Solutions manages over 1,500 captive insurers globally. In the hardening market for commercial lines, many of Marsh’s existing captive clients have expanded the lines of coverage they’re insuring via their captive programs. 

“Even our largest captives […] that write more than $20 million in premium (which is a pretty large captive) grew by about 5% in 2020, showing that they’re constantly working with their brokers, looking at how they can leverage their captives, and how they can perhaps take premium out of the market and raise retentions,” Serricchio commented. “They’re being forced to do certain things, and the captive is the perfect vehicle to bridge that gap. And it’s just a testament, I think, to this industry and to what we’re doing here, that captives are really thriving like this.”

Read more: A “captive”ating opportunity

The most common type of captive is a single-parent or wholly-owned insurance company captive, but in recent years, there’s been a surge of interest in rent-a-cell captives (also known as protected cell captives), through which organisations get the benefits of a captive insurance company, without the upfront costs, capital investment, or significant maintenance costs associated with forming and managing a wholly-owned captive.

“Cell captive facilities are so efficient,” said Serricchio. “They’re relatively easy to set up and manage, they’re a little bit less expensive to run, they’re able to plug and play quickly at a renewal, and that’s why the cell captives have really increased over the last year, and I think we’ll find that this phenomenon will continue. Everybody wants efficiency. You want to be able to start up a captive in as quickly as a few days in some domiciles, and in a few weeks in others. The Americas, especially Washington DC and Bermuda, were cell captive utilisation domiciles that grew the most, but internationally, we saw a lot of growth as well.”

The benefits of cell captive facilities revolve around “optionality and flexibility,” according to Serricchio. He added: “The different cell [facilities] that we offer around the globe are able to plug and play for excess liability, they’re able to fund for D&O, they’re able to be a pass through for property insurance, and clients are able to take the large retention quickly. Parametric insurance for wind and earthquake are things that we’re talking about every single day, and rent-a-cell captives – cell facilities that we have vast experience in – are really allowing and promoting clients do this quickly.”

With over 50 years of captive experience, Marsh Captive Solutions has a large amount of data and analytics, risk financing work, and risk bearing capacity analysis that enables clients to make educated decisions on how to react to the hardening market. Global leader Charnley pointed out: “We now manage more than 1,500 captives around the world. And what that means for [our] clients is that it essentially creates more data, more experience, more staff, more resources, and more technology – so we’re very proud of that, and we’re certainly seeing that growth continue into 2021.”  

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Read more: How will increased consumer vulnerability impact insurance behaviours?

Dominguez, who joined Quadient in 2018, noted that her role within the software services firm enables her to be on the front line of assessing the root of the communications issues faced by insurance companies and how these challenges can be overcome. It was positive to see the downward trajectory among these nuisance communications, she said, and she hopes businesses will take the actions required to see this trajectory continue.

“It might be a bit of a pipe dream to wish that nuisance calls will be completely consigned to history but, in the meantime, it would be great to see these levels stay steady or continue to decrease. That would be wonderful to see, especially for the insurance industry,” she said. “[…] Because there’s so much value in what these businesses provide and frankly these scammers and spammers just get in the way and cause a lot of noise, distracting from a lot of the good work that insurers and banks are trying to do to serve their customers better.”

The challenge facing insurance companies, she noted, is that despite exponential technological advancements and changed consumer behaviour patterns, it has become very difficult for businesses to keep up this pace of innovation or even just with changing customer expectations. Insurance businesses are having to continually evaluate the balance of communications required for customer satisfaction, whether that’s regarding the channels they prefer or the devices that they’re using.

“It’s a fascinating space to be in,” she said, “because it’s really just as much an art as it is a science. Good science is the data piece of understanding those customer behaviours, of understanding what it is that they’re telling companies in terms of their channel, or communication preferences. But this is also about understanding behaviours, so there’s an aspect of behavioural economics here too.”

Read more: Quadient on creating long-term customer relationships

The impact that COVID-19 has had on consumer behaviour and expectations over the last year or so is significant, Dominguez said, and she highlighted that when people are in a happy or stable equilibrium, their provider interactions are significantly different to when they are under stress. When consumers have a claim or need an emergency loan or have a medical concern, the high levels of stress change their interactions and with the additional stressor of COVID on top of this, it has been made increasingly hard for insurers to understand what channels they need to make available.

Insurers have needed to explore the best ways to communicate, balancing availability with not being seen as intrusive or as a nuisance. It was interesting to read the findings of the ICO report, she said, and to see that the number of nuisance calls dropped last year while the number of nuisance texts increased. For Dominguez, this indicated that organisations are getting pretty savvy about using other channels but the bad news is that insurance companies still have to be smarter about that.

Read more: Claims management firm slapped with fine – warning for insurance industry

Insurance companies, therefore, need to find the right balance between calls, which are a much more personal touch; texts, which can be timely, but could also be a nuisance; and emails or mobile push notifications or making information easily available or searchable on a customer portal.

“So, it’s good that those numbers have come down. Even though they’re still very high and there’s some work to be done, it’s a good indication that businesses are starting to understand the need to go digital. And that increase in SMS complaints is probably indicative of that,” she said. “But businesses are still trying to find that balance – to find how to create a one-on-one feeling for each individual customer.

“And that’s hard, particularly for a larger insurer, for example, to service their potentially millions of customers in a way that feels one-to-one, when really what they’ve done has just been really smart about how they set up their processes and their communication so that it just feels that way. So, it’s really about replicating that experience in a scalable way so that it feels much more personal.”

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“To put this into perspective, GMIs reported a much larger overall decline of nearly US$20 billion in net income,” the report said. “In addition, this does not include all of the financial consequences of the pandemic, which would include unrealised capital gains, reserve adequacy, and new business volume and value. A number of players, notably in the life business, did not single out the pandemic in their financial reporting as a key driver.”

However, no insurer among those rated in the report fell into a position where its capital position was insufficient to meet regulators’ expectations.

“Beyond 2020, we believe additional COVID-19-related losses could be manageable, given that GMIs reported a large share of incurred but not reported losses in 2020 earnings, and also due to the exclusion of pandemic claims that insurers have added to the terms and conditions of policies reviewed in 2021,” the report said.

Non-life takes the biggest hit

Overall, the pandemic hit non-life activities the hardest, according to the report.

“That’s because there is a large negative correlation between people insured against death and the segments of the population who have died from COVID-19 or other conditions that led to excess mortality,” the report said. “These groups notably include old people, who are less likely to have term life insurance, and lower-income people, who are typically less likely to be partly or fully insured.”

In contrast, non-life commercial lines were barely hit, according to the report. The pandemic’s negative effects on underwriting were mostly concentrated on a few products: business interruption, event cancellation, and – to a lesser extent – credit insurance.

“On the other hand, underwriting results increased for some non-life personal lines as the frequency of incidents, notably in motor insurance, dropped as lockdowns took large numbers of cars off the streets,” the report said.

Big losses for reinsurers

“The profitability of large reinsurers slid even more, on average, than for the GMIs,” the report said. “This is because reinsurance policies, especially in commercial lines, covered a large share of primary insurers’ exposure.”

For the top 20 insurers S&P rates across the world, the company estimated COVID-19-related losses at about US$20 billion – which corresponds to nearly four times their year-end 2020 aggregate net profit.

European GMIs face steeper losses

European GMIs were harder hit than those domiciled in other regions, although a large part of their losses came from non-European markets. The higher losses for several European players, including AXA, Allianz and Zurich, came primarily from their large commercial property-casualty lines.

“Overall, aggregate losses posted by the three most exposed players (AXA, Allianz, and Chubb) accounted for more than half of the US$8 billion loss for the 16 GMIs,” the report said.

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The European Insurance and Occupational Pensions Authority (EIOPA) will be chaired by Petra Hielkema come September.

In a release, the Council of the European Union stated: “In agreement with EIOPA and her current employer, De Nederlandsche Bank (the Dutch national central bank), Ms Hielkema will take over this role from September 01, 2021 for a period of five years. This term may be extended once.”

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Global insurance services provider McLarens has announced the appointment of Kristen Early to the newly created role of global head of third-party administration (TPA). In her new role, Early (pictured above) will spearhead the strategic expansion of McLarens TPA.

Early has 20 years of experience and is a recognised industry leader in TPA services. She has held senior management roles at Marsh, ESIS and Crawford, and has extensive experience working with brokers, insurers, captives and corporates.

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By providing around £210 billion in insurance cover, the temporary trade credit reinsurance (TCR) scheme has protected over £575 billion of business turnover.

Those were some of the numbers highlighted when the government and the Association of British Insurers (ABI) announced that, as planned, the scheme will close on June 30. It was noted that TCR has directly benefitted more than half a million businesses across Britain.

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Dye joined Allianz in 2003, becoming its CEO in 2013, and during his tenure he has overseen several acquisitions including that of the general insurance businesses of Liverpool Victoria (LV=) and Legal and General (L&G), aiding Allianz in becoming one of the leading personal and commercial lines insurers in the UK.

In a Press release, Allianz noted that Dye’s legacy includes the successful integration of Allianz UK and LV= and his role in helping Allianz achieve a step-change in its market position.

Chris Townsend, board member Allianz SE, said: “I would like to thank Jon for his leadership of Allianz Holdings since July 2013, in particular for working through our recent UK acquisitions and successfully navigating through the challenges of the pandemic. We look forward to Colm joining us to take our business forward and capitalizing on our strong market position.”

Meanwhile, commenting on the news, Dye noted that he had thoroughly enjoyed his 18 years at Allianz and that it had been his privilege to lead the business as part of a successful team. He said he would be working closely with his colleague during the handover period of the next six months to ensure that the business is in the best possible shape for Holmes to take on.

Holmes, who has held senior leadership positions at JP Morgan Chase, Zurich Financial Services, and most recently, Aviva, where he served as CFO and GI CEO, was noted by Allianz for his deep understanding of the UK P&C market. The release noted that he will work towards strengthening Allianz’s position in the UK.

The change is subject to regulatory approval.

Aviva has also revealed who will be stepping up to take over Holmes’ role, with Adam Winslow being appointed CEO of Aviva UK & Ireland General Insurance. Winslow, who was most recently CEO of Aviva’s international businesses, will continue to report to Aviva Group CEO Amanda Blanc in his new role. He will also remain a member of Aviva’s group executive committee.

Winslow brings over 20 years’ experience in the general and life insurance industry, including roles at AIG and Allianz as well as senior management experience in personal and commercial lines, across operations and broker relationships.

Commenting on Winslow’s appointment, Amanda Blanc, group CEO of Aviva, noted that the insurer has significant ambitions for growth in general insurance in the UK & Ireland as it continues to transform the performance of its core businesses following the reshaping of the group.

“Adam’s talent and capability have been amply demonstrated in his leadership of our successful programme of eight divestments over the past eight months,” she said. “Having now concluded the strategic refocusing of our portfolio, I am delighted to appoint him to this pivotal role, and his next challenge in Aviva.”

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“You can’t stop a hurricane heading towards your plant,” he said, “but you can certainly put structures in place to protect the building, to envelop the roof, walls, windows and doors to ensure that they aren’t damaged as the storm passes over. The thing that causes the most damage in a hurricane is the elements inside the building getting water damage so [by preventing this] you can be up and running very quickly. And our clients have done amazing things in previous hurricane events and that’s all testament to what people have done before the event is there.”

Read more: FM Global report assesses 130 countries on their resilience amid COVID-19

It’s all too easy to fall into the zone of thinking ‘there’s nothing I can do’ about risk, Bryson noted, when the reality is that there is an awful lot that business leaders can and should do to protect themselves. Preventing a loss in the first place rather than looking to insurance as the solution of first resort needs to become standard because, at the end of day, insurance is never going to be able to offer complete restitution.

Between uninsured losses, reputational harm, and the loss of customers during downtime – there is so much more at stake than just a claim and c-suite executives need to understand this.

“Insurance alone is not enough,” he said. “And when you are running a major global business, making informed decisions is absolutely critical. And having the right information and analysis at your fingertips is key to informing those decisions… It’s all about making sure you make very clear, informed decisions about what direction your supply chain takes so that you can build resilience at the start of any supply chain mapping process that you go through.

“And, for me, risk managers and the C-suite need to understand the limitations of insurance and make sure that they plan for risk in a more holistic way so that insurance [can do] its job, but you’ve also limited your own loss to within your appetite…. There’s a danger, perhaps, of over-reliance on pure insurance to be a risk management tool in and of itself, rather than as a suite of products put in place to make sure that particular risks are effectively managed.” 

Read more: World Economic Forum reports on business leaders’ top risks

The good news is that the debate around this has started to shift, Bryson said, and people are coming to accept the mantra that FM Global has long sought to instil in the wider insurance marketplace – resilience is a choice. You can either choose to invest in resilience or instead become a hostage to fortune.

The pandemic and other recent events have shown insurance as the first port of call simply isn’t the solution. The time is right, he said, for businesses to start reflecting more keenly on where their key supply chain pinch points are and making sure they have a plan B in place. If C-suite leaders are horizon scanning, then they will have an educated viewpoint on the environmental, financial and societal shifts that are headed their way and will be better placed to plan for these.

“Resilience really is a choice,” he said. “It’s not cheap, it usually requires a different perspective and it may require, depending on where your manufacturing base in your supply chain is located, significant financial investment. And it’s sometimes hard to build a business case when a business has short term demands on that same capital to perhaps improve productivity or reduce the costs within the supply chain by investing in better equipment. But, at the same time, you’ve got to have that longer-term view of how you’re going to invest to make sure that you are not going to be interrupted materially when that storm comes or the river enters your factory.”

Knowledge is key when it comes to managing your supply chain risk, Bryson said, and both the pandemic and the Suez Canal incident have shown that extended supply chains can be very tenuous and quite easily interrupted. Information is essential to ensure that your manufacturing risk stays within your appetite for risk. So, his key advice for businesses is this: “be aware of what your exposures are, and have plans in place accordingly.”

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The RISX Index uses ICMR’s transparent weighting algorithm based on reported premiums written, which offers a more appropriate mix of underlying risk than a traditional market capitalisation weighting, and also ensures sufficient liquidity in the underlying index components. As a result, the aggregated weighted underwriting return profile of the index has mimicked that of Lloyd’s.

Quentin Moore, co-founder of ICMR, said the team was excited to launch the RISX Index, given the difficulty investors have traditionally encountered in benchmarking specialty insurance risk investment.

“We are delighted to be working with Moorgate Benchmarks as our regulated benchmark administrator and index partner,” he said. “Their experience and regulated status allow all stakeholders to have full confidence in both the calculation quality and the governance of the index, as well as to develop investment products.”

Meanwhile, Markus Gesmann, co-founder of ICMR, noted that the index is a first in the industry, and opens up the potential for new research concerning more liquid Lloyd’s-related investments, as well as providing alternative metrics to measure and benchmark performance.

Gesmann added: “I would like to thank the team at Moorgate Benchmarks, who have been instrumental in bringing our idea to market.”

Commenting on the news, Gareth Parker, chairman and chief indexing officer of Moorgate Benchmarks, said: “We are delighted to be the administrator of ICMR’s innovative index. ICMR’s insurance markets expertise and our index design input has resulted in a hugely interesting, important and tradable proxy for returns made from specialty (re)insurance business.”

Neither ICMR nor Moorgate Benchmarks nor RISX nor RISXNTR are associated or affiliated in any way with Lloyd’s of London or the Society of Lloyd’s or the Corporation of Lloyd’s.

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