Brace for a "very difficult" commercial property market, says Fortegra CEO | Insurance Business America
Brokers should be prepared to navigate a very difficult commercial property market in 2023. That’s based on the outlook of Rick Kahlbaugh (pictured), president and CEO of global specialty insurer Fortegra Group.
“I’d be cautiously approaching the commercial property markets, largely because pricing and availability of cat (catastrophe) coverage is a bit of a question mark at this point,” Kahlbaugh said.
“The renewals on cat covers will give us a lot more guidance in terms of what the year will hold for pricing and availability of capacity to support commercial property coverages, especially cat exposed.”
How did Fortegra grow in 2022?
Fortegra, a subsidiary of Tiptree, has had a busy year branching out its business in Europe. It sealed its acquisition of ITC Compliance, said to be the UK’s largest secondary intermediary Financial Conduct Authority network, in early 2022. The partnership allows Fortegra to leverage ITC’s digital platforms portfolio for the auto market.
The Florida-based insurer also announced the relocation of its London headquarters to accommodate its growing UK footprint. It first moved to the region in 2017, and now has offices in London, Prague, and Malta.
At home, Fortegra teamed up with Convelo Insurance Group, a managing general underwriter that specializes in niche segments, to launch a new management liability insurance program for non-profits.
Kahlbaugh said that like many specialty insurers, Fortegra has sought to steer through the insurance hard market by finding balance.
“Our growth was right in line with expectations, both in the specialty market and our traditional programs,” Kahlbaugh told Insurance Business.
The development of our European business continues in line with expectations and the development of specialty in the United States was slightly better than we expected, so, we’re very bullish on 2023.
“We are enjoying the benefits of a hard market in some respects; in others, it’s very difficult in that our cost of reinsurance is escalating both primary coverages and tack coverages. We’re trying to balance maintaining consistent pricing in the marketplace and absorbing some of these price increases.”
Opportunities and challenges in 2023
Pricing in casualty markets will likely remain relatively consistent with 2022, though specific lines such as cyber, employment practices liability (EP), and professional liability might see increases in line with the market, according to the CEO.
“I think brokers can expect pricing to be flat to slightly up with the exception of the lines that I’ve noticed,” he said.
Finding consistent capacity will be a top challenge for commercial property brokers this year and beyond.
“A recession and rising interest rates are going to create a more competitive market for carriers and capacity providers – when that happens, there tends to be a focus on top-line underwriting,” Kahlbaugh said.
“Then once the market softens, typically capacity over-reacts and carriers increase prices sharply, so consistency is something that we’re very much focused on.
“I believe those who are ultimately going to be successful in maintaining the expectations of their shareholders will be focused consistency as well.”
Fortegra’s focus is directed on continuing to grow its excess and surplus lines in the US, while expanding its lines of underwriting capacity in Europe.
“I think you’ll see us begin to expand our appetite for MGA business throughout the European Union, as we begin to further develop our underwriting capacity and thoughtfully put it in the market for MGAs to utilize and acquire large blocks of business themselves,” said Kahlbaugh.
Additionally, Fortegra is making a significant investment in its data, artificial intelligence (AI) and machine learning capabilities. In November 2022, the insurer tapped Joe Lettween to be its chief innovation, data science, and technology officer.
Lettween, who previously worked at Osso Capital as principal head of data & analytics, is tasked to lead the company in broadening its use of data technology in underwriting and claims over the next 12 to 24 months.
“We are not trying to be an insurtech, but we do believe mastering data will help us be better underwriters and to create better capacity for our partners, as we improve the quality of the book of business, utilizing the breadth and depth of data that we’ve been able to acquire over all these years,” said Kahlbaugh.
Do you have any thoughts about Kahlbaugh’s industry outlook for 2023? Share them below.