Earlier this year, AEGIS London announced the launch of a new portfolio solutions division, led by Richard Palengat (pictured left) and encompassing property, casualty, specialty, and multi-line business. It’s a move that embodies a broader trend across the London market – towards leveraging underwriting expertise, and data and analytics amid challenging conditions.
Offering insight into this trend and how it’s shaping what brokers are looking for in their underwriting partners today, Palengat was joined by AEGIS London CEO Alex Powell (pictured right) for an interview with Insurance Business. Powell sees two key themes dominating conversations in the London specialty market today – the evolution of the subscription market and the greater digitisation of the marketplace.
‘Enhanced underwriting’ is the umbrella term encapsulating what’s happening, he said, and beyond all the noise around geopolitical uncertainty and interest volatility, it’s a term that captures the closer-to-home trends on the mind of the market. It’s an evolution that has been gaining traction for some time, though it’s now being more clearly articulated, and it’s led to the rise of key players including Beazley Smart Tracker and Ki on the follow side.
“Then there’s the emergence of digital trading exchanges,” he said. “We’ve seen some of that both inside broking and distribution, as well as in independent businesses trying to conquer that landscape. Then there has been a greater emergence of digital platforms. And I think no London market bingo scoresheet would be complete these days without mentioning data – and how the ready availability and quality of data is shaping the landscape, particularly towards portfolio-oriented products and solutions.”
Harnessing market momentum is one element essential to the timing of any launch, but the other is meeting the challenges of your partners. Zeroing in on the core areas in which brokers are looking for support today, Palengat highlighted that all brokers are having to work out what they want to do about their equivalent of the Aon Client Treaty (ACT).
Brokers need to work out whether they’re going to go about doing that in an analogue or a digital way, he said, and where they’re opting for the digital route, they tend to want some help and support. “There is also a lot of activity in the MGA M&A space. Some of them have got some quite interesting propositions, because they’re talking about pretty big figures if they can land the deal. And so, it’s good for them to have the opportunity to talk to frontline underwriters and have a chance to understand what our likes and dislikes are.”
It can be difficult for brokers to understand exactly who they should be dealing with, and to know going into a conversation whether it’s the kind of business that their potential underwriting partner will be interested in. When an offering includes a broad range of business, it can be difficult to piece together where something fits best or where there might be a clash, he said, and that’s why it’s so important to have open lines of communication and greater transparency about an offering.
“Talking to a few of the brokers who didn't have people doing portfolio and now do, some of their motivation is around their relevance in the same way it is for carriers,” Powell said. “And some of it is around creating something that is sustainable and survives the cycle because we recognise that the balance of power has started to shift, probably because there's plenty of supply on the capacity side and there's pressure on pricing.”
It’s not that brokers believe that these portfolio solutions solve earnings problems or placement problems wholesale, he said, but rather that they recognise that it’s a solution that gives them some scale. Done right, a portfolio solution can act as a magnet to attract ever-elusive ‘new business’ to the London market. “That is the holy grail that everyone’s been looking for. How do you actually bring different business to bear in the market? I think this is part of that – not the whole solution to that question.”
Without standalone critical mass within a business line, it can be hard to get risk capital to come to bear, he said, and the rising interest in portfolio solutions shows that brokers are thinking more creatively about how to solve that conundrum. “Because I think that they’ll all tell you that they don't want to increase their sort of footfall through extra brokers in the market every time they grow their business, because that isn't a sustainable model for them,” Powell said. “That’s in the same way that we want to write more business as underwriters, but not necessarily by putting more underwriters in the box. So, I think this is just another good tool for them and for their clients.”
