Ahead of this year’s Rendez-Vous, Convex CEO Paul Brand met with The Insurer to highlight the carrier’s growth plans for the year ahead and provide his view of current market dynamics≤
Convex CEO forecasts tough European cat renewal for buyers with “screw tightening on retro”
New US MGU to target business that doesn’t come to London and part of strategy to diversify sources of income
Option of targeting a Lloyd’s presence remains “under careful consideration” as group examines strategies to enhance market share
Convex expects to grow by around 50 percent year on year in 2022 as it continues to build out its portfolio, according to group CEO Paul Brand.
Brand, who succeeded Stephen Catlin in the role in June having previously served as deputy CEO, told The Insurer the London-Bermuda carrier was continuing to achieve traction in building its client base, which in turn was presenting it with “more leads and greater influence”.
“While our appetite stays largely constant over time, our ability to establish the right relationships ensures the benefits of those partnerships in the market,” he said.
Convex has enjoyed rapid growth since its launch in 2019 under the leadership of Catlin and Brand, a partnership which oversaw the rapid expansion of Catlin Group prior to its $4bn+ acquisition by XL in 2015.
The group generated just over $1bn in gross written premium (GWP) during its first full year of underwriting, and has said it is on track to increase GWP to $3bn in 2022.
Brand said the group would likely see a modest shift in the balance of its portfolio towards reinsurance this year, reflecting premium growth on the back of price increases.
“Lots of people are running backwards from reinsurance at the moment, particularly for short-tail lines, which are having a pronounced impact on pricing,” he said. “While we are not growing our overall aggregate, we are growing premiums in that space.”
Brand said the biggest changes were in the property catastrophe reinsurance market, which faces continued uncertainty over the impact of climate change on losses as well as questions over what will happen in terms of retro availability at year-end.
Difficult European cat renewal ahead
For European cat-exposed business, Brand said it will be another difficult renewal for buyers.
“The screw is tightening on retro and that will have an impact. There have also been new losses, alongside the continued digestion of previous losses.
“You will see big players actively reducing or withdrawing from property cat reinsurance. It will be very tough for buyers.”
Brand said some opportunities were already emerging in classes impacted by the Russia-Ukraine conflict but added that Convex will take a “thoughtful approach”, and participate “where we think it makes sense”.
“You will see big players actively reducing or withdrawing from property cat reinsurance. It will be very tough for buyers”
He said the group remains cautious on cyber.
“We have not come to a decision that it is a good time to enter. However, it is a line of business clients increasingly want cover for and we are carefully looking at it.”
Brand said he remained concerned whether the industry had a full grasp on its cyber exposures.
“The industry is not good at looking around corners and seeing what might happen, and predicting the future loss cost of cyber is quite difficult.
“We are not at the point where we are convinced this peril is completely understood, and fear the market may be understating what a future cyber cat loss looks like.”
Addressable market share
Convex also recently announced the launch of a US MGU platform – Convex North America Insurance Services LLC – as it looks to target E&S business that is not accessible via the London market.
Brand said the move was “an addressable market share play at its core”.
“The US is clearly the biggest market for the types of insurance we do, but only a fraction of that business comes to London.
“For the business that doesn’t come to London, it makes sense to build a platform that can address that.”
“We will look at how much should be driven by profit on capital exposed to risk, and whether there is rationale to generate profit from fee generation as well”
As the company continues to expand, Brand said it will consider how to diversify its sources of income.
“We will look at how much should be driven by profit on capital exposed to risk, and whether there is rationale to generate profit from fee generation as well.”
Over time, he said the group will examine whether it can access a different pool of capital by using the MGU to write on behalf of other carriers as well as Convex.
While the group has until now opted not to have its own Lloyd’s syndicate, Brand said it is keeping the option of targeting a Lloyd’s presence “under careful consideration”.
“As with the MGU, the question is around increasing addressable market share. At some point we may consider addressing our market share by obtaining more licences and Lloyd’s could be a means of doing this.”
Brand is now approaching four decades in the (re)insurance world and has previously spoken of the need to be passionate about the business if you are to make a successful career of it.
But he also believes companies have an important role to play in making those entering the business feel engaged with what they do.
“People need to feel engaged, they need to understand the purpose of what they do, and bring part of themselves to their roles,” he said.
“The problem the industry faces is that, in terms of influence and relevance to clients, it is going backwards rather than forwards.
“To change that trajectory, the industry needs to address the people challenge, the technology challenge and improve its relevance to customers.”
Brand said he was taking an open-minded approach to working practices in the aftermath of the Covid-19 pandemic, with the focus being on productivity rather than presenteeism.
“Convex had quite a flexible approach even prior to Covid, and will continue to be flexible post-Covid.
“Speaking personally, I think I do my best work from the office, whether that be making connections, helping solve problems, or giving direction.
“But does everybody have to be in the office from 9 to 5 every day? No – that’s just presenteeism and doesn’t drive success. The question is how you make yourself productive as a company.”