Inside Bermuda’s class of 2020

With corporate insurance buyers in their sights, two new Bermudians, Mosaic and Vantage, have hit the ground running this year, presenting the market with boxfresh capital and a panoply of new products. To find out how the two new arrivals will differentiate themselves and their views on how the market looks, Garry Booth spoke to their leaders: Vantage CEO Greg Hendrick and Mosaic’s co-CEOs Mitch Blaser and Mark Wheeler. What point on the underwriting cycle is the market at? Will the influx of new capital flatten the cycle? Mitch Blaser (MB): This market cycle is unique insofar as it is driven by result fatigue rather than catastrophe events and insufficient capital. In fact, the industry is well capitalised in relation to history. This observation is supported by the robust financial strength of the insurance industry today and the absence of carrier insolvency evident during previous hard markets. The closure of the court system during the pandemic has also caused a bit of a delayed response to the potential for claims litigation and the impact on legacy balance sheets. As the US has now reopened, the impact on the use of insurance company balance sheets as financial backstops will be tested. The other delayed impact on legacy balance sheets will come from macroeconomic factors, particularly inflation. Claims exposures will have to be adjusted for the growth in costs and will also keep stimulating the need for higher premiums to support both the legacy impact and future development. The market continues to firm overall. The degree varies by sector, product and geography, in accordance with anticipated returns and capital demands. Firming will continue until price adequacy is set to meet these demands. Capital, both old and new, will allow the cycle to flatten when that position is reached. The uncertainty of identification of that point in time will be impacted by many factors: social inflation, investment yield and volatility, legacy reserving, and uncertainty around Covid-19 fallout. Extreme weather scenarios are contributing to challenges of risk and price modelling. Greg Hendrick (GH): There is never just one cycle in the P&C insurance industry; rather, many cycles are happening concurrently. Factors influencing pricing vary across business lines and don’t simultaneously move in the same direction at the same time. Many of our target lines of business are in a complex part of the cycle, offering great opportunities for Vantage to provide needed capacity with strong margins. In particular, the long-tail lines of insurance have experienced dramatic price increases during the past two years. Conversely, workers compensation in the US is in a softening pricing environment. The influx of new capital is not big enough to change the marketplace, particularly in the syndicated business lines we write. Many programmes are still not fully placed, which is a testament to the fact that this additional capital is necessary and helpful. How are programme structures changing? Mark Wheeler (MW): Again, there is a great deal of variance between sector, product and geography. Mosaic is a pure specialty insurer and the business written is difficult to model. Loss data is either limited or emerging, and characterised more by severity than frequency. The underwriting response must be led by risk selection and client differentiation. With a few notable exceptions, carriers have remained committed to chosen lines of business. Most insurers have reduced available limits and that has seen programme layers restructured, with smaller stretches and excess-layer pricing increased by tighter limit factors. There are some cases of inverted pricing, where an excess layer is priced at a higher rate on line than an underlying placement. GH: Vantage is seeing more smaller layers on corporate insurance client excess towers. Reduced appetites mainly drive this for many of the existing carriers, for who we are securing smaller line sizes. Additionally, new entrants are placing more modest line sizes in the lower layers as they begin underwriting. What specific areas of corporate insurance are you targeting and why? GH: Vantage is focused on lines of business that present opportunities due to hardening market cycles and reduced capacity. In reinsurance, we focus on more short-tail property and specialty lines, including property catastrophe, specialty, mortgage, and new products emerging out of those classes of business. Our insurance business is focused more on longer-tail lines, including excess casualty, healthcare, D&O, political risk, cyber, and other professional lines. MB: We carefully researched and analysed the market before deciding on the products we would target. The result is a plan that contemplates a narrow range of specialised business with a high technical barrier to entry. We have identified products with strong underlying growth credentials that are expected to outpace normalised GDP. Through data and information analysis, in conjunction with experienced underwriters, we are positioned to outperform the market on both growth and margin in our chosen competencies. These are: transactional liability, cyber, political risk, political violence, financial institutions and professional liability. It’s been said that gaining acceptance in relationship-driven markets when remote working is the norm is not easy for startups – is that your experience? MW: At Mosaic, unlike so many startups, we have the advantage of not starting from scratch. We’re building on the tremendous reputations and relationships the team we’ve brought together already has. Our company is all about our people. The team consists of individuals with exceptional personal franchises built over decades in global re/insurance markets. That type of traction manifests with our stakeholders: clients, distribution partners, reinsurers, regulators, technologists, service providers, and professional advisers. We have benefited enormously from these relationships and that’s reflected in the submis-sion volumes generated to date, and Mosaic’s immediate impact in the market. In addition, we are investing in global distribution so we can make the syndicated Mosaic product available in insurance centres around the world. So, yes, it is our experience that acceptance is driven by relationships. We are absolutely thrilled by the support we have been shown and will take great care to continue cultivating existing and new relationships. GH: Vantage is a new company, with seasoned talent. Our team comprises a broad spectrum of industry veterans with the depth of experience and strong relationships with producers and clients. We have received a solid flow of reinsurance submissions on the back of our team leveraging their relationships as trusted business partners. The same is true for our insurance lines as we continue to build. This is already evident with the initial lines we have started writing in the US and Bermuda. What aspects of a legacy-free start-up are most attractive to clients and brokers? MB: Just as we are fortunate to have the legacy benefits of a personal franchise, it is also fantastic to have a legacy-free balance sheet in terms of the volatility and additional risk that comes with it. This is a privileged position for a limited period. It means the entire team is free to focus on the future and the opportunities that exist in the market today. In the same way, and more pronounced today than ever, it is a huge competitive advantage not to have the burden of legacy technology. Our open-architecture approach is structured around three deliverables: data and analytics; data sharing with trading partners; and process. From both a client and broker perspective, Mosaic is free to engage without the distraction and prejudices of legacy issues. We can bring advanced analytics to bear, which will provide superior data in a timely fashion and increase operating efficiency, which ultimately lowers costs. GH: As brokers represent our clients’ interests, collectively their perspectives are relatively the same. Clients have been very receptive to an increase in capacity in our target lines of business, at a time when it is not available from existing players. They appreciate a clean balance sheet with no legacy liabilities and are keen to leverage newer technology to deliver a more efficient product and better client service. How do you avoid bringing a ‘legacy mindset’ to a brand-new venture: what will you do differently? MW: This question is fundamental to Mosaic; we are positioned as a next-generation specialty insurance company that intends to do things differently. We have thought carefully about existing structures and identified the frailties and intentionally sought to eradicate them. Our business model itself is unique, as a hybrid capital structure that offers syndicated capacity in market centres around the world. Mosaic combines proprietary and agency balance sheets to match risk with capital, under syndicated structures and consortia that provide greater protection to our clients. Another differentiator in this regard is our leading-edge technology and how it is combined across underwriting and corporate functions to maximise revenue and lower our claims and operating expenses. GH: The talent that has joined the Vantage team all shares a collective desire to continue to grow as a team and build something new and unique in the re/insurance business. The collaborative nature, curiosity and creativity of our people is key to our success. Technology has boosted our ability to work well together, regardless of our physical location. It gives us the ability to lift our performance on an efficiency frontier and in our analytics and risk selection, which is highly important to us. The Vantage team shares a willingness to challenge ourselves to be better, all the time, at everything we do, whether it’s internally or externally focused. That’s a critical part of being a trusted partner for the clients we serve and the brokers who help us deliver our products. VANTAGE PROFILE Vantage was launched in 2020 by CEO Greg Hendrick, a 30-year industry veteran and former CEO of AXA XL; and Dinos Iordanou, retired president and CEO of Arch Capital, serving as non-executive chairman. Vantage was backed at launch by the Carlyle Group and Hellman & Friedman, together with management, who invested $1bn of equity capital with the potential to increase their investment as growth opportunities arise. The startup began writing reinsurance risk on 1 January 2021 through its Bermuda Class 4 company, Vantage Risk. Initially writing property catastrophe and specialty reinsurance products, Vantage Risk has expanded its offering to include financial lines, healthcare and excess casualty insurance products. In July this year, it acquired an Illinois-domiciled domestic surplus lines insurance company licensed in 47 states. Renamed Vantage Risk Specialty Insurance Co, the acquired company secured an A- (Excellent) AM Best rating, extending the current A rating held by Vantage. MOSAIC PROFILE Founded by Mitch Blaser (a founding executive of Bermuda-based Ironshore) and backed by long-term Investor Golden Gate Capital, Mosaic launched in February 2021 as a Bermuda-based “next generation global specialty insurer”. Mosaic’s leadership team has also invested in the company. Co-CEO Mark Wheeler is a seasoned Lloyd’s syndicate founder and market-leading underwriter. Mosaic opened with operations in Bermuda, London, the US and Asia. It combines Lloyd’s Syndicate 1609 with a wholly-owned syndicated capital management agency, enabling the company to identify, source and underwrite business on behalf of itself along with other trade-capital partners. Mosaic has partnered with Asta Managing Agency, the third-party managing agent at Lloyd’s, which will provide oversight and governance services to Syndicate 1609. A primary-layer lead market, Mosaic focuses on high-value, specialty lines of business, including transactional liability, cyber, political risk, political violence, environmental, financial and professional lines. Mosaic emphasises its use of disruptive technologies, including blockchain, machine-learning algorithms and actuarial software to build an insurtech platform.

Inside Bermuda’s class of 2020

Widespread improvements in pricing and conditions prompted a wave of capital-raising activity last year, giving birth to several new insurance and reinsurance startups on both sides of the Atlantic, writes Garry Booth

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