Insurance news

The directors & officers (D&O) insurance market underwent significant changes throughout 2023, with global markets facing a mix of challenges and opportunities.

Gallagher’s latest report analyses these developments, offering insights into the regional dynamics and trends that are shaping the D&O landscape as the industry moves into 2024.

The report elaborates on notable trends, developments, and obstacles encountered throughout 2023, while also forecasting the potential landscape of the D&O insurance sector for the upcoming year.

Among the key themes explored are the fluctuations in pricing, adjustments in capacity, the rise of new risks, and shifts in regulatory frameworks, all of which offer a glimpse into the current state of the D&O market across different territories.

The global D&O insurance scene is also characterized by its regional nuances. For instance, the Australian market is highlighted for its competitive nature, whereas the Middle East is undergoing significant regulatory transformations.

Meanwhile, Canada was singled out for its market stability, and the Nordics are facing an evolution of risks. That said, Gallagher noted that each of these regions contributes to a broader understanding of the forces at play within the D&O industry.

Looking ahead to 2024, the report underscores that the global D&O market will remain subject to the influence of various factors. These include geopolitical tensions, regulatory evolutions, technological advancements, and the emergence of new risks.

For insurers, brokers, and their clients, the ability to adapt through forward-thinking risk management strategies, innovative underwriting practices, and strategic alliances will be crucial. Such approaches are deemed essential to effectively navigate the impending challenges and capitalize on the opportunities that the future holds.

Developments for D&O in the US

In the United States, the public company D&O market has become more favorable for buyers, highlighted by the entrance of over 30 new insurers amid a decrease in IPO activity. This influx has resulted in more competitive pricing and broader terms for insureds.

Expected upticks in transactional activities may influence securities class actions, with regulatory oversight becoming more pronounced. As governmental enforcement intensifies, regulators are implementing new regulations including the SEC’s compulsory climate disclosures and mandates for public companies to disclose significant cybersecurity incidents.

Such regulatory measures are likely to heighten scrutiny and enforcement actions targeting directors and officers of public companies. In response, insurers in the United States and London are developing a product designed to cover investigations into corporate entities.

Gallagher’s report underscores the diverse factors influencing the D&O insurance market across different regions, from pricing dynamics and capacity changes to emerging risks and regulatory developments.

As the industry heads into 2024, these insights are expected to prove crucial for stakeholders to navigate the evolving landscape and leverage the emerging opportunities in the D&O market.

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Aspen Insurance Holdings has released its financial results for both the three months and 12 months ended Dec. 31.

The company posted improvements in combined ratio and net income, according to a news release.

“We are pleased to report an excellent set of results for 2023,” said Mark Cloutier, Aspen’s executive chairman and group CEO. “Aspen’s continued focus on underwriting discipline and operating excellence resulted in our adjusted combined ratio improving to 89.4%, our net income available to ordinary shareholders increasing to $485 million and an annualized operating return on average equity of 20.2%, all significant improvements over the prior year.”

Aspen’s investment income of $276 million represents a 47% increase over the prior year, Cloutier said. Aspen Capital Markets generated 4136 million in total fee income for the full year 2023. The fee income came from capital sourced across multiple lines in the company’s insurance and reinsurance segments.

“It is pleasing to note the quality of earnings we are now generating, with meaningful contributions from each of our core engines, underwriting, investments and capital markets fees,” Cloutier said. “We believe we have reached a state where we are able to sustain strong ROEs across investment cycles through the very healthy mix in the sources of our earnings.”

Cloutier said the company’s “One Aspen” approach, balance sheet strength and capital markets capabilities give it a “distinct advantage” in the specialty (re)insurance sector. He said Aspen’s scale was “an important source of capacity” to its customers, while still giving the company the ability “to be nimble, decisive, and opportunistic” when responding to market opportunities and changes in trading conditions.

“In a year that saw our sector challenged by climate, geopolitical events, and socioeconomic challenges, this fourth consecutive year of improved results gives us confidence we have the talent, strategy, platforms and brand to continue to perform at the top of our class, delivering strong returns for our shareholders through changing market cycles and across a wide range of industry loss event scenarios,” he said.

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Bishop Street Underwriters has revealed a new collaborative venture with Topsail Reinsurance.

This partnership sees Topsail Re provide benefits to managing general agents (MGAs) and program administrators within the network. It will offer preferred capacity and access to Topsail Re’s underwriting and administrative proficiency.

Additionally, this initiative is designed to boost the development of new primary, fronting, and reinsurance carrier relationships, facilitating the expansion of existing programs, the introduction of new products and programs, and the acquisition of underwriting teams.

Bishop Street primarily collaborates with entrepreneurs, operators, and underwriters across specialized property and casualty (P&C) markets. Launched last year with leadership from CEO Chad Levine and president Chad Weber, Bishop Street benefits from the backing of RedBird Capital Partners.

Levine, with a history of leadership roles at Aon, including as Aon Affinity’s chief strategy officer, has a track record in growth planning and execution within Aon’s portfolio of North American specialty insurance programs.

Levine expressed enthusiasm about the partnership with Topsail Re, emphasizing the strategic use of capacity to support the growth of platform partners and the significance of preferred capacity for MGAs.

“Topsail Re is the ideal first partner for Bishop Street as we continue working with MGAs in the specialty P&C commercial space and is a clear differentiator in the marketplace,” Levine said.

Meanwhile, Weber brings experience as a former managing director at Guy Carpenter’s North America treaty practice, where he was instrumental in leading reinsurance placements and managing relationships with global insurance carriers and MGAs.

Weber noted the synergy between RedBird’s history of company development within the insurance sector, including Constellation Affiliated Partners, and Bishop Street’s multi-boutique platform model.

“The Topsail Re team recognized the potential of what we are building, and we are excited to work together to capitalize on this specialized segment,” Weber said.

Topsail Re CEO David Johnson and managing director Tom Gubash also expressed the company’s commitment to supporting Bishop Street’s diverse range of partners with necessary underwriting, distribution functions, and capital across specialty lines.

“For Topsail Re, this partnership with Bishop Street and RedBird is in direct response to two key factors: our existing partners consistently requesting strategic growth capital in addition to our risk-capital (reinsurance) capacity solutions, as well as our desire to continually evolve alongside our clients by expanding the breadth of our capabilities and partner-first solutions,” they said.

Following the joint venture’s establishment, Johnson and recently appointed Topsail Re chief strategy officer & executive vice president Christopher Miller will join the Bishop Street board of directors, with Gubash serving as a board observer.

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‘Between tradition and innovation, how is the broker landscape evolving?’

Understanding why and how the re/insurance broker landscape is changing was the order of the day at a recent panel discussion during the 2024 Insurtech Insights Europe conference. Amid developments in technology, data, competition and regulation, Oriol Gaspa Rebull, head of UK property analytics at Aon Reinsurance Solutions noted that the interesting timeline of the evolution.

“About five or six years ago, the whole broking landscape got extremely nervous [about] ‘insurtech startups’, thinking that things would be completely different and all of us would be out of jobs,” he said. “I think we’ve evolved to be a lot more savvy, and to have a lot more knowledge around what is needed.

“What’s interesting is that now, from insurance companies, to brokers, to reinsurers, to corporate clients, people have a much better idea of what they need and what kind of tech solution they’re looking for to solve that problem. And we’ve had to adapt to that.”

How brokers are changing

Offering a reinsurer’s perspective on how the broking landscape is changing, Cecillia Sevilliano, head of strategic partnerships at Swiss Re, said the evolution has been marked by several dynamics. The first theme, she said, is that of consolidation which is seeing larger brokers acquiring smaller brokers with a strong footprint.

Brokers are also, she said, moving towards becoming advisory services and providing analytics. Brokers are not only focusing on the placement of risk but really expanding the services they have to offer.

The third theme is the restructuring of data that is taking place across the sector, which is quite a new development, and one which means brokers are now buying more data, and structuring that data, as well as building their own assets.

Playing Devil’s advocate, panel moderator David Clamp, from the Camelot Network questioned whether, at the end of the day, brokers are only really interested in commission and getting GWP in the door. In response, Gaspa Rebull highlighted that while commission is very important, the evolutions taking place in the market reveal brokers’ focus on finding different ways to do business.

“Rather than just concentrating on the transaction and maximising that transaction, [it’s about] how I can help my client, and as they grow, grow with them,” he said. “And that’s quite a paramount shift. That means you can better leverage your data and how you [differentiate] your data from the competition when you all have the same numbers… That alternative view is what informs the clients and therefore the clients trust you to develop business with them.”

As a reinsurance broker, he said, the best value you can add is by getting closer to the reinsurer and the client, a relationship built on transparency. A lot of that work is driven by underlying data analytics and the new technologies that support reinsurance brokers in maximising their use of that data.

How broker relations are changing

Amid so many developments in the broker landscape, the relationship between the broker and the reinsurer is also evolving, Gaspa Rebull said. Where traditionally, the broker was seen as the transaction vehicle, the new advisory component to what they do now means they need to focus on growing the trust of their clients. That means giving the best advice possible and understanding that it’s no longer just about the transaction itself, but also about helping buyers actively manage their risks.

“Up to now, a broker might have been seen as someone coming to your door and trying to sell you a shovel, and constantly pushing you,” he said. “Whereas now, we’re coming to the door and saying, ‘do you have any holes that you need to dig? Because I have the tool to help and if you have no holes to dig, I’ll move on’. It’s just a different perspective.”

Sevilliano emphasised that the role has become more multi-dimensional. It’s not linear anymore, she said, and on one side, reinsurers have a great deal of data, models and platforms but, for some time now, they have also been providing clients with insurance and client advisory services and analytics.

“So, it’s interesting because, on one side, we are collaborating and on the other one, we are competing,” she said. “And it’s a fair competition because we know and we respect each other, and so what we’re trying to do is find this win-win spot. Today, brokers have become reinsurers’ clients. They’re buying our tools, our licencing, our platforms, maybe some data as well.

“We are co-creation partners. So, we are bringing together capabilities, bringing together knowledge, and our financial power to come to market with something really innovative. And lastly, some brokers are becoming distributors, re-sellers of our solutions. It’s really interesting because it’s an ecosystem with dynamics on all [sides]. We work well and trust, of course, is the first step – but once we get to that point and identify that sweet spot, it’s powerful.”

Fitch Ratings has highlighted the exceptional financial performance of Europe’s leading reinsurers in 2023, noting their ability to strengthen reserves and balance sheets, which is poised to bolster their ratings into 2024.

In its latest report, the agency views the cohort — comprising Munich Re (rated AA/Stable), Swiss Re (A+/Positive), Hannover Re (AA-/Stable), and SCOR SE (A+/Stable) — as well-positioned for a robust year ahead, although it predicts a plateau in reinsurers’ margins by 2024.

These reinsurers witnessed a strong average return on shareholders’ equity of 19% at the close of 2023, a figure that doubles the rate seen at the end of 2022. This surge was largely fueled by substantially higher pricing and improved conditions, coupled with a reduction in natural catastrophe claims, which drove the average property and casualty (P&C) reinsurance combined ratio down to 90% – a nine percentage point improvement year-over-year.

Additionally, the life and health (L&H) reinsurance segment saw increased profits due to a significant drop in excess mortality claims, while investment results were buoyed by increased recurring income and positive fair value adjustments.

In light of favorable underwriting margins in property insurance, the four reinsurers have allocated additional reserves for liability lines. This strategic move not only fortifies the balance sheet’s resilience but also offers the flexibility to even out earnings over time, thereby supporting their credit ratings. Despite higher shareholder payouts, capital adequacy remains robust across these entities.

A closer look at EU reinsurers’ performances

The profitability of P&C reinsurance significantly improved for three out of the four companies in 2023, driven by favorable market conditions that included stronger pricing at renewals, enhanced terms and conditions, and fewer natural catastrophe claims.

Munich Re was noted as the exception, reporting a slight deterioration in its combined ratio due to added reserve prudence. Nonetheless, its underwriting margins were among the highest in the group, benefiting from a large and diversified P&C reinsurance portfolio.

SCOR exhibited the most significant improvement in its combined ratio, reflecting the extensive corrective measures the company has implemented over the past two years, notably reducing its exposure to climate-sensitive perils.

The report suggests that the reinsurance pricing cycle, along with the margins of reinsurers, will reach a peak in 2024. Despite a slowdown in risk-adjusted price increases at January 2024 renewals, insurers were able to maintain improved program structures, such as higher attachment points, as well as favorable terms and conditions.

Overall, the financial health and capital adequacy of these leading reinsurers was deemed very strong at the end of 2023, with earnings generation and positive market effects largely balancing out capital used for new business and increased capital distributions to shareholders. The slight improvement in financial debt leverage on average also underscores the sector’s robust financial position, it was suggested.

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Brookfield Reinsurance has filed its 2023 annual report, which includes audited financial statements for the year ending December 31, 2023.

The report was filed on Form 20-F with the US Securities and Exchange Commission (SEC) on EDGAR and with Canadian securities regulatory authorities on SEDAR.

Brookfield’s acquisition of Argo – in-depth

As per the annual report, the acquisition saw Brookfield Reinsurance take 100% of Argo Group International’s issued and outstanding shares. This all-cash transaction amounted to $30 per share, valuing the acquisition at $1.1 billion.

Following the deal, Argo Group was re-domiciled as a US corporation and renamed Argo Group International Holdings, Inc. (“Argo”) on November 30, 2023. Argo specializes in underwriting specialty insurance products within the property and casualty market.

Upon finalizing the acquisition, Brookfield Reinsurance took over all of Argo’s assets and liabilities as of the closing date and has since consolidated the acquired business for financial reporting. From November 16 to December 31, 2023, Argo contributed revenues of $191 million and a net profit of $1 million to Brookfield Reinsurance.

Consolidated annual results

The annual report for 2023 also revealed the reinsurer’s consolidated financial results, which show an uptick in net premiums to $4.137 billion in 2023 from $3.011 billion in 2022, marking a substantial increase from the $1.016 billion recorded in 2021.

Additional revenue streams also saw a notable rise, with other policy revenue climbing to $413 million in 2023, up from $224 million the previous year. The company’s net investment income nearly doubled, reaching $1.809 billion in 2023 compared to $978 million in 2022, and a dramatic leap from the $76 million reported in 2021.

Furthermore, investment-related gains reversed from a loss of $185 million in 2022 to a gain of $534 million in 2023, indicating a positive shift in investment outcomes.

Total revenues for the year stood at $7.020 billion, a significant increase from $4.309 billion in 2022 and $1.041 billion in 2021.

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The recent collapse of the Francis Scott Key Bridge in Baltimore is expected to impose significant financial burdens on the reinsurers involved, as an analyst indicates that they are poised to cover most of the insured costs stemming from the incident.

Matilde Jakobsen, senior director of analytics at AM Best, highlighted the critical role of protection and indemnity insurers (P&I clubs) in providing liability coverage for maritime vessels, including the one implicated in the bridge collapse.

“Reinsurers will bear the bulk of the insured cost of the collapse of the Francis Scott Key Bridge in Baltimore,” Jakobsen said in a report. “Liability cover for most shipping vessels is provided through protection and indemnity insurers known as P&I clubs.”

Jakobsen elaborated that the P&I clubs, predominantly part of the International Group of P&I Clubs, insure about 90% of the world’s ocean-going tonnage. This extensive coverage is bolstered by mutual reinsurance agreements among the member clubs for claims surpassing $10 million.

The group secures general excess-of-loss reinsurance cover in the open market, extending to $3.1 billion.

Given the magnitude of the disaster, the financial repercussions are expected to be substantial, potentially surpassing the $100 million threshold that triggers the excess-of-loss (GXL) reinsurance contract.

“While the total cost of the bridge collapse and associated claims will not be clear for some time, it is likely to run into the billions of dollars,” Jakobsen said.

She also noted the complexity of the insurance implications, which could span multiple insurance lines, including property, cargo, liability, trade credit, and contingent business interruption, not including its effects on the increasing challenges in reinsurance availability.

The incident involving the container ship, owned by Grace Ocean Pte Ltd and managed by Synergy Marine, occurred in the early hours of March 26, according to crisis management firm MTI.

AM Best has underscored the need for P&I clubs to adjust their premium levels. This adjustment is deemed necessary for the clubs to sustain breakeven underwriting results amid the current inflationary economic climate and the possibility of facing a more challenging pool year ahead.

Further insights from a previous AM Best report reveal that the International Group of P&I Clubs successfully renewed its reinsurance program at a reduced cost. That said, this renewal did not incorporate widespread exclusions for cyber and pandemic-related claims by its reinsurers.

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Marsh has unveiled a new insurance solution designed for custodians of digital assets, including financial institutions.

This new facility offers up to $825 million in insurance coverage to Marsh’s global clientele and is crafted to cater to organizations holding digital assets in cold storage — offline storage — as well as those seeking insurance for risks associated with assets safeguarded through Multi-Party Computation (MPC) or other custody technologies not solely reliant on offline methods.

Supported by Lloyd’s syndicates and London-based international insurers, the facility aims to safeguard organizations’ digital assets from a variety of risks, including natural disasters, physical theft by external parties, and insider threats involving employee collusion. The launch comes at a time when various sectors are keen on establishing their presence in the digital asset custody space, riding the wave of a decade’s growth and maturation within the digital asset market.

Marsh’s 2023 global technology industry risk study indicates that half of the technology industry’s global respondents are either currently involved with or exploring digital asset opportunities. Additionally, 136 banks insured by the Federal Deposit Insurance Corporation in the United States are embarking on or are already engaged in digital currency-related projects.

The new insurance facility is the brainchild of Marsh Specialty’s Digital Asset team, based in New York and London, specializing in offering risk transfer solutions for businesses involved with blockchain, cryptocurrency, and other digital assets.

“With the digital assets space continuing to evolve rapidly, organizations are navigating a complex risk landscape amid an expanding ecosystem of stakeholders,” global digital asset leader at Marsh Specialty Jacqueline Quintal said.

“Our new facility equips custodians with critical protection against the foremost operational risks encountered in digital asset management. We are eager to assist our clients worldwide in matching their risk financing with their commercial strategies, enhancing operational resilience, and solidifying their market position in this burgeoning sector.”

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What impact have the COVID-19 pandemic and the ongoing geopolitical tensions worldwide had on mergers and acquisitions? A new insurance brokerage report suggests the market has been soft but might be about to make a comeback.

BMS, an independent specialist insurance broker, has released the fourth edition of its global Private Equity, M&A, and Tax (PEMAT) report.

“The market in 2023 was suppressed by challenging socio-economic and geopolitical developments and with those circumstances going nowhere fast and several upcoming elections, they will continue to influence deal flow. However, 2024 promises to be dynamic,” said Tan Pawar, managing director and head of private equity, M&A and tax at BMS.

Private equity funds were found to have increased their committed but unallocated funds and there has been a 21% increase in overall enquiries, which suggests a strong transaction appetite in the market.

“Reduced interest rates and substantial dry powder within PE houses are likely to stimulate investment activity. At the same time, the appeal of emerging markets, as well as the resilience of sectors like renewables and infrastructure, will keep market conditions evolving,” said Pawar.

The report found that the soft market had showed the disparities in valuations between buyers and sellers, which had served as a challenge when it comes to completing deals. The secondaries market got off to a slow start in 2023 but it eventually increased activity when Q4 rolled around as LP-to-LP transfers began to dominate transaction volumes.

Warranty and indemnity claims saw a surge in activity in 2023, influenced by the boom of M&A activity in 2021 and 2022. The most resilient sectors were renewables & energy, financial services, and retail & consumer as they saw increases in deal volume even with the downturn of M&A.

The PEMAT report analyses the trends of the 2023 market and provides an outlook for the M&A markets of the UK, Europe, North America, Asia, Middle East, and India.

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Insurtech MGA Coterie has secured $27 million in its latest round of growth capital funding.

The funding round, which was oversubscribed, included new investment from Hiscox, alongside existing investors Intact Ventures, Weatherford Capital, and RPM Ventures.

“We’re incredibly grateful for the recognition and belief in how we’re reimagining the small commercial insurance space through continued innovation and dedication to independent agents and brokers,” said CEO David McFarland. “This is an incredibly exciting time in Coterie’s growth as we focus on bringing enhanced value for our partners by pushing boundaries to shape the future of insurance.”

Coterie has reported a developed ultimate loss ratio below 60% for eight consecutive quarters. In 2023, the company achieved a revenue increase of over 200% and expanded its reinsurance panel by adding two top-tier reinsurance markets, both rated A or better by S&P Global.

The funds from this latest investment round will be channeled towards developing new insurance products, enhancing underwriting processes, and further automating services for policyholders, according to a company release.

“Coterie continues to impress us with their innovative use of technology, data and automation to simplify the quoting and binding process,” said Drew Weatherford, founding partner of Weatherford Capital. “We’re confident in this team’s ability to truly transform small business insurance.”

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