In our third episode of All Eyes on FIs, WTW Financial Institutions broker, Trenton McNee, based in London, interviews Adam Brown, a Senior Underwriter from the Financial Institutions team at Inigo Insurance also based in London, where they explore the current market conditions for global financial institutions.
Trenton and Adam highlight the lasting effects of COVID-19 and they also discuss other turbulent events that are happening across the globe and how the insurance industry is reacting to this turbulent environment.
Join us for a chat and tune in now.
To listen to the podcast, click here.
All Eyes on FIs - Episode 3: Navigating the FI insurance market – an interview with Inigo Insurance
ADAM BROWN: More time should be spent discussing potential and existing claims matters and what remedial action insured has taken. It's not a taboo subject, and shouldn't be left for the last few minutes of a presentation.
SPEAKER: Welcome to All Eyes on FIs, a podcast series from the WTW Financial Institutions team. Our experts have their eyes on risk management, regulatory changes, and coverage challenges faced by financial institutions of all kinds and sizes, from professional liability to crime and everything in between.
TRENTON MCNEE: My name is Trenton McNee and I'm a Financial Institutions Broker in the FINEX Financial Institution's major accounts team at WTW based in London. Today, I'm joined by Adam Brown who is a Senior FI Underwriter from Inigo also based in London.
For those that may not be aware, Inigo started writing business in January 2021 through its Lloyd's Syndicate 1301 and works exclusively with the broker intermediary market and serves some of the world's largest commercial and industrial enterprises. Adam, welcome to All Eyes on FIs.
ADAM BROWN: Yeah, thanks, Trent. Great to be here.
TRENTON MCNEE: To start things off Adam, you have insureds in every part of the globe and are across claims trends in every continent. What makes London a preferred marketplace for writing sustainable FI insurance business across the globe versus other insurance markets? And secondly, how do you underwrite across such a broad jurisdictional landscape?
ADAM BROWN: I was going to twist your question slightly from how do you underwrite across such a broad jurisdictional landscape to why. I think we need to accept that FI is a class of businesses systemic by nature and I'm sorry to hit you with some stats so early on into this podcast, but I think they are relevant. You only have to look back to the Lloyd's FI results between 2004 and 2016 where the total incurred loss ratios for non-US business was a moderate 56% for crime, 50% for D&O, and 83% for PI.
However, this includes the infamous GFC 2007, 2008 in which incurred loss ratios were 124% for crime, 180 for D&O and a whopping 290 for PI and as you would suspect in the US, these figures were substantially higher.
So I guess what I'm trying to get at is us as FI underwriters have to actively create and manage a diverse portfolio spread by the type of FIs that we look at. Geography and what class of business, be it D&O, PI, crime, or even EPL and PTL as well. Answering how we underwrite across such a broad jurisdictional landscape is fairly simple as the London market in general is such an attractive destination for insurance business.
Working for a Lloyd's Syndicate has provided us with a global licensing platform, allowing us to write business all around the world, as well as receiving a strong capital rating and efficiency. There's also a further level of protection of the central assets and funds provided to all Lloyd's Syndicates, which is just kept for a very, very rainy day.
I'd say relatively speaking, the reason our international clients keep coming back to London is down to two key reasons. One, it's a center of excellence for insurance talent, whether it be brokers, underwriters, or claims professionals and, two, consistency of underwriting and claims service. Sadly in our class of business historically there have countless cases where local insurers have abruptly exited from FI insurance, which is naturally been frustrating for clients.
This leads to clients and their brokers tending to turn to London to provide immediate solutions, and sometimes, rather frustratingly, at the 11th hour. London's subscription style marketplace ensures that new, old, and challenging risks are able to be completed in a short time scale. Clients see London as a long-term sustainable marketplace.
TRENTON MCNEE: Thanks, Adam. Following your two points, one thing I've noticed since working in the London market is that it can create bespoke solutions specific for a client's risk exposures and requirements due to the specialized underwriting broking and claims model of the London FI market. Just giving you an example here.
There's over 50 markets that I've personally dealt with in the last 18 months. There's always both the capacity and capability for risk transfer solutions, be it from traditional FI insurance products or via alternative risk transfer providers for non-traditional risks.
I've even seen some creative solutions available, such as multi-class, multi-year policies with profit sharing options available to the end client in the event of a minimal claims activity. I will disclose, however, that these alternative risk transfer deals are more focused on traditional property and casualty products rather than FIs. However, interest from FIs is increasing, so watch this space.
ADAM BROWN: I should also add that FI is not a distressed product class and we've got a lot of data available which can be used to highlight some of the pitfalls and lessons learned from the past. It would be rude not to do some self-marketing. Inigo is uniquely analytics focused where more than 50% of the workforce are cap modelers, actuaries, and analysts
and we've made the conscious decision to embrace the level of historical data available, investing heavily in third party data sets as well as our own systems. So enables that or assists the underwriters, but not control underwriting decisions in general. This in the long run will provide further consistency to the market.
TRENTON MCNEE: 2022 was a very turbulent year. Starting off with the Omicron variant which resulted in forced working from home, and the Russia-Ukraine conflict which hasn't slowed down. We've also had several catastrophic events, such as the Turkey earthquake which has affected the insurance industry in 2023.
Now we're on the precipice of a potential long recession, rising interest rates, hyperinflation, low economic growth, and the soaring cost of living crisis, namely energy, transport, and food. How do you stay on top of all these ongoing macroeconomic factors which may lead to volatility in the FI space? And, furthermore, how quickly does this affect your pricing and rates?
ADAM BROWN: We'll always see macro regional issues globally in the FI space and, fortunately, unfortunately, whichever way you look at it, they're normally on the front page of newspapers like the FT. This goes back to what I was saying earlier about how important it is to have a balanced portfolio in the FI space, and that the use of data is crucial. The better the data, the quicker it is to react in changing market conditions.
As a market, we need to work with our clients to better understand what they perceive to be their biggest issues and what they can see happening on a macro regional level in the future. By doing so, we as a FI market will be able to provide consistent and stable underwriting even during the tough years.
TRENTON MCNEE: Just stopping you here, Adam. Inigo are a relatively new market which grew very quickly during the tough years that you just mentioned. I'm referring to commercial D&O here and we have both witnessed changes in the FI marketplace, particularly in the last 12 months with rate reductions.
Albeit this is not as severe as rate reductions we have seen in commercial D&O, with cyber also proving to be volatile. Can you, please, comment on how your FI team have adapted your approach with clients more recently to work more closely with them?
ADAM BROWN: We work in the service industry. So first and foremost, top service is at the forefront of everything that we offer. We always try to push for face to face one to one meetings so we can really get to understand the client's needs, better serves us in understanding their business and we also think we have a great story to tell.
We'll also try to bring a claims manager to these meetings as ultimately it's claims service is what clients are buying, and we feel that they should be talking to our clients just as much as we are and that's the same goes for traveling as well. We're also not afraid to share various insights or appropriate data and this is normally well received.
What is most important is you can't just do one of these things. You need to do all of them. You have to go the extra mile now to differentiate yourself and this is the same for other product lines such as commercial D&O and cyber.
TRENTON MCNEE: Thanks, Adam. How aligned are you with these other departments?
ADAM BROWN: In short, very. It's within our interests that we collaborate as much as possible, whether it be sharing pricing models or wording reviews, industry insights, joint presentations to the market. We're fortunate that our team sit right next to each other, and we have frequent joint meetings to ensure that we're not missing anything.
One of Inigo's core values that I most enjoy is parking of the ego. We want to be as welcome and open to different thinking, and that allows us to collaborate more effectively. Good example, I guess, recently is this-- is where we naturally find a gap in what is an FI or commercial D&O account between our teams at Inigo. We will find a home for it between our two teams rather than decline what could be good business.
TRENTON MCNEE: Finishing off here in our last question. For any clients listening today, how can insurers present themselves in a more positive light to mitigate some of these exposures we've discussed today?
ADAM BROWN: For me in general I think it makes a big difference/ what is a big difference, who attends a market or one to one insurance meeting. We want to hear from the senior executives of a particular insured.
Listening to the head of investor relations is fine in general, but I've personally found that all you get is a great summary of an insurer's latest annual report and less of an idea about the culture or tone from the top of a company. By senior people attending these meetings, it also shows their commitment to their insurance program.
TRENTON MCNEE: Yeah, thanks. I just thought I'd interject here with a little sound bite from my own underwriting days. I clearly recall an underwriting meeting a few years ago where the CEO of this listed company used to have a printout in front of them of all the insurers, the underwriter's name, and their participation on the program.
The CEO would also personally greet you by name when you ask questions, and was always very engaging. Furthermore, they'd always remember if you had attended previous insurer presentations. Because of this and other personal experiences, the c-suite representatives generally are very well versed in answering tough underwriter questions that they used to handling from live Q&As, from investor roadshows, AGMs, and analyst calls.
Underwriters that I speak to generally find that the c-suite and the CRO, legal counsel, and the company secretary are generally the most polished presenters at insurer presentations. And I'd also like to mention on more challenged risks, holding personalized one on ones with an insurer can be very helpful to a client in achieving a desirable outcome. This leads to an improved knowledge of a client's specific risk profile rather than reading it via third party media article.
ADAM BROWN: Yeah. And I think also sometimes there's a lack of discussion around claims. Ultimately this is what we are here to look at and pay for when the occasion arises and where relevant more time should be spent discussing potential and existing claims matters and what remedial action insured has taken. It's not a taboo subject, and shouldn't be left for the last few minutes of a presentation.
I should also note this is a collaborative point between all parties being the insured, the broker, and the insurer and I think also this question is aimed at what the insurer can do, but it isn't all about the insureds. Underwriters have a lot to ask for in these meetings, and need to be engaged and ask questions where necessary.
If a client makes the effort to travel to London and take time out of their busy schedule, then we as the London market need to make the same effort in these meetings and I guess, finally, the delivery of meetings is now an important issue. Coming out of the COVID crisis we've seen the introduction of hybrid meetings, which can be challenging.
I've personally sat in a broker's office for a meeting where there have been various other underwriters on the screen. When the meeting finished the broker said, we were not able to ask any more questions or discuss anything as it is. It was not fair for the underwriters that had dialled in. The old-fashioned face-to-face meeting always seems to get the best result wherever the meeting takes place, and rewards underwriters who have taken the time and effort to attend the client presentation.
TRENTON MCNEE: Just like to interject again and say that in the London market, it isn't always possible to have questions answered straight away due to the sheer volume of underwriters who attend meetings versus the number in other insurance markets, which are often less than 10.
Some of the programs we place in London have over 35 markets on the program, which means that Q&As need to be held usually at the end of each chapter or else the meeting will never end. We've just about covered all the topics we had on our agenda today. Thank you, Adam Brown from Inigo for taking the time out today to discuss all things relating to FI insurance in the London market.
ADAM BROWN: Thanks, Trent, for having me.
TRENTON MCNEE: And thank you to those who have listened today to the latest episode in the All Eyes on FI series.
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