Consilium's FAC reinsurance: What does it mean for Aussie brokers?

Consilium's FAC reinsurance: What does it mean for Aussie brokers? | Insurance Business Australia

Consilium's FAC reinsurance: What does it mean for Aussie brokers?

This month, Consilium Insurance Brokers (Consilium), the global speciality (re)insurance broking business of the Aventum Group, announced the launch of a facultative (FAC) reinsurance division. The media release described the new division as “cedant driven.” The London headquartered firm also said the launch brings implications for its Australia market – but said this isn’t about getting boots on the ground.

“We don’t have a physical office or employees based in Australia, but that said, our strategy for international growth on the Consilium side of the Aventum business isn’t about getting boots on the ground in our target territories,” said James Baird (pictured above), CEO of Consilium.

Baird said local insurers could have trouble purchasing the same capacity they had last year and will have to pay higher reinsurance premiums.

A “discreet and confidential” option for insurers

“Our new cedant driven FAC division will allow those Australian cedants to manage their portfolio in a discreet and confidential way as we are not their treaty brokers, nor are we producing brokers to these insurance companies,” he said.

Read more: Consilium launches cedant fac reinsurance division

The CEO said his firm has access to global markets without the possible impact of delays caused by internal P&L (profit and loss) fee negotiations. Consilium is an accredited Lloyd’s of London Broker, with access to what it describes as “hand-picked insurer partners.”

Baird said his firm likes to deploy its expertise in areas where there is a lack of insurance liquidity.

“So that we create a market for our clients and deliver on their strategic renewal objectives,” he said.

The firm already works with a number of independent brokers and some managing general agents (MGAs) in Australia. “We support MGAs by securing them capacity, additional products and actuarial services to manage their portfolio,” he said.

Is the global market thirsty for an independent FAC viewpoint?

The Consilium media release referred to “a real thirst” in the current global market for an independent viewpoint on FAC.

“Given the general consolidation of brokers in the London market and the market share of the main players, buyers are left with very little choice at their greatest time of need,” said Baird.  “Therefore, we are creating a new division which does not have a ‘house’ view, is not limited to certain geographic markets, in order to provide more choice to cedants and to support them in managing their portfolio given the market dynamics.”

He said in London, the key renewal date of January 1 “was very challenging across the market, with cedants taking higher retentions, restrictions in terms and conditions and facing significantly higher premiums.” Baird said Australian insurance companies can expect similar challenges and a way of mitigating this outcome is by purchasing FAC on their portfolio. 

No direct physical presence in Australia

Consilium may not have boots on the ground in Australia but Baird said a number of its brokers have lived and worked here.

“Simon Richardson, who we’ve brought in to lead the new FAC division, has decades of expertise in this area, and of the Australian market, and a strong track record of establishing successful cedant driven FAC Reinsurance operations,” said Baird.

This week, Consilium expanded its international broking team’s Aussie expertise. Matthew Gould  was appointed associate partner placing international casualty risks. Gould, according to the media release, has experience placing complex Canadian, Australian and US construction liability risks in the London market.

Baird’s firm has enjoyed very strong growth in recent years. He said Aventum Group’s number of employees has trebled from 120 in 2020 to 360 at the beginning of 2023. He said Aventum is now a US$1.5 billion gross written premiums (GWP) business.

Read next: Aventum Group’s Consilium recruits industry veteran

Baird has more than 25 years of industry experience. He joined Consilium last year from Ardonagh-owned Ed Broking, where he was director of its strategic risk group.

Prior to Ed Broking, Baird worked at industry giants Marsh, JLT and WTW. He was also a founding partner at Glencairn Limited.

Aventum Group was the result of a global restructure and rebrand of Direct Insurance Group in 2021.

“We started with the Yellow Pages at a boardroom table, as Direct Insurance Agency in 1996, bringing in the butcher, the baker and the candlestick maker, if we could place it,” said group CEO David Bearman. “We’re proud of what we’ve achieved.”

The firm’s partner and brand ambassador is the celebrated explorer Sir Ranulph Fiennes.

According to Investopedia’s dictionary, FAC insurance is cover purchased by a primary insurer for a single risk—or a block of risks—held in the primary insurer’s book of business. It’s one of two types of reinsurance.

“Facultative reinsurance is considered to be more of a one-time transactional deal,” said the dictionary entry. “While treaty reinsurance is typically part of a long-term arrangement of coverage between two parties.”