In conversation with ReInsurance Business, Banyan Risk co-founders Peter Horrobin (pictured right) and Tim Usher-Jones (pictured top) shared insights into the “tale of two worlds” in the excess casualty and D&O insurance markets.
It's a fast-changing risk landscape, Horrobin said, not least because of the questions being raised from a regulatory and legislative perspective about what changes being implemented by the current US administration will mean for D&O exposures. While what the new administration will mean for the D&O space is still largely unclear, a pressing concern remains that a lot of markets are still struggling from historical losses, similar to the excess casualty space.
“There’s a lot of activity from 2016, 2017 and 2018 that’s still on the books and is still coming through,” he said. “Even though 2021, 2022 and 2023 are generally believed to have been quite profitable for the D&O space, the legacy carriers are still feeling the pain of the best. The tail on this business is nothing compared to casualty, which can be decades, but D&O can still be between 5-to-7 years.”
Horrobin noted that Banyan is in a strong position given the niche areas of the market that it operates in and, in that context, the MGA is seeing “tonnes of new opportunities”. The big news is the expansion of its relationship with PartnerRe and the move from the reinsurer to come on board its D&O program alongside SiriusPoint – a move that underscores the scale of the opportunity that still exists in the niche D&O space.
Usher-Jones also shared highlights from the PLUS symposium, noting that market studies reveal the continued de-acceleration of D&O pricing trends. “But those kinds of volatile markets are great for us,” he said. “We’re more like a D&O hedge fund than a mutual fund in that we pick our spots, find niche areas and then play within those.”
On the casualty side, it’s a very different proposition, Usher-Jones said, as there Banyan acts as a more of a traditional Bermuda player. The appointment of excess casualty veteran Alan Rodrigues to lead its Bermuda-based subsidiary Banyan Excess Liability Ltd. (BELL) as CEO showcased the firm’s ambitions in that space, he said, and there is so much opportunity in that market right now amid ongoing capacity constraints.
“You used to be able to get a US$75 million line, now a $15 million line is about as much as you’re going to find,” he said. “The layers are split up between markets, they're not big blocks. And the losses of years past – from 2015 to 2020 – are really coming home to roost right now with a five-to-eight year tail.
“So, we see there’s tremendous opportunity there. Alan has been doing this for many years and he says it’s one of the most dynamic markets he’s ever worked with. Normally if you’ve got pricing that's up 300%, you would see a ton of markets come in and flood it with capacity and increasing their line size. But that's not happening right now.”
With the backing of PartnerRe, which has been in the market for some 40 years, and combining Banyan’s platform with a generative-AI supported approach to claims, Banyan can see the opportunities as well as the risks presented by present market conditions. “I think everyone else is reacting to problems past,” Usher-Jones said. “And we’re fortunate in that we’ve got fresh legs in the race.”
There’s a strong consensus around the responsibility of the market to help facilitate a strong and sustainable excess casualty space, where risks are turned down if the pricing isn’t right. However, Horrobin noted that this simply isn’t also possible for certain markets. “We understand that,” he said. “But our retention on our D&O book is less than 60%, whereas at other companies, between 80-90% is the goal.
“But you can’t have a high retention goal and a book that moves with the markets. So, what we're doing is putting our money where our mouth is. We took half our D&O team and put them into the excess casualty team, because we’re growing where the market is and where there’s room to grow. For instance, in D&O, we used to write Fortune 100 companies, and we're out of that market right now - but it's not to say we'll be out of that market forever.”
It's a strategy that’s resonating strongly with Banyan’s partners, he said which he believes is largely due to the flexibility being displayed and how the generates benefits in the long term. Being an owner-operated business means you’re able to really evaluate where the cost-benefit is of investing the right sources into the right places at the right time.
“What has also been interesting to see, and I think it’s something only an MGA can do, is how we’ve used this to help us attract great talent,” Usher-Jones said. “We can offer people the opportunity to spend six months doing D&O and then a year doing casualty which does allow us to attract more young people. And I think, as we see the world change, we want our underwriters – particularly the young ones – to have across-the-board knowledge about different markets, and the ability to adapt and pivot to changing market conditions.”
