SWG swoops for specialty segments left open by transient insurers

SWG swoops for specialty segments left open by transient insurers | Insurance Business Canada

SWG swoops for specialty segments left open by transient insurers
Rate pressures and premium inflation cause many headaches for insurance professionals.

The explosion of natural catastrophe losses in the past few months has been food for thought for the insurance industry, with many people expressing concern about potential pricing pressures.

But difficult changes to the pricing environment don’t equal bad news for everybody. Insurance Business spoke to John Barclay, CEO of South Western Insurance Group (SWG), who looked upon potential rate changes as a possible opening to new business.    

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“The industry has a close eye on pricing following the series of hurricanes and large cat events that all occurred in the last few months,” Barclay told Insurance Business. “There’s some indication that there might be pressure on rates as a result of these catastrophes.

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“Reinsurer results have been challenged and many standard insurers’ results in the aggregate don’t look as healthy right now as they have been in the last four to five years. The question is whether this pressure will result in a slight rate push.”

What would potential pressure on pricing mean for SWG or a similar MGA in the Canadian marketplace? More opportunities in specialty lines segments and a chance to service gaps left open by profit-driven insurers, according to Barclay. 

“It’s all about price and capacity. If the pricing environment stabilizes or goes up, then insurers might start to move their business to the most profitable channels. Why sell $1 premiums for product X, when you can sell for $1.10 for product Y?” said Barclay. “When insurers move their premium writings, the chances are they might leave some sectors behind, which opens opportunities for others to fill the gaps.

“As insurers start to notice pricing going up, they look at their return on equity (ROE), their cost of capital and they start to reconsider the premium buckets or industry segments that they write. If they decide to reduce their interest or appetite in some sectors - even if it’s just one or two little pockets – we see that as an opportunity to step in and help our broker channel in that space.”

SWG is not the only Canadian MGA hoping to get its finger in the left-over pies of incumbent insurers. There’s a “solid group of peer MGAs” that are forever testing each other, according to Barclay.

The way SWG has managed successful net growth in this “competitive market” is by targeting specialty lines. These are the niche pockets that are likely to be left unclaimed amid pricing pressures in the marketplace.

“A secondary market player like SWG has to keep looking at where insurer risk appetites get out of sync with each other and jump on any opportunities to help our broker partners solve their risk problems,” Barclay added.

“It might be a class of insurance that five or six standard markets write, but hidden within that class is a sub-segment void that we can fill. We always keep a close eye on the markets to ensure we continue to service our brokers in the best way we can.”