Sompo ready to ramp up European and international corporate business

Sompo International, a global specialty provider of property and casualty (re)insurance, is about to embark on a significant communications effort to “demystify” the organisation for brokers and risk managers, according to Julian James, CEO of international insurance.

Sompo Holdings, the parent of Sompo International, has made no secret of its ambition to become a top 10 global insurance group by 2021. It wants to establish itself as a leading and relevant market for corporate risk managers beyond the group’s core Japanese multinational customer base.

This journey really started in March 2017 when Sompo acquired Bermuda-based Endurance Specialty Holdings Ltd for $6.3bn. At that time, Endurance had operations in all the key global markets. After the deal closed, income from Sompo’s overseas insurance business as a percentage of the total group income rose from 12% to approximately 27%.

In addition to their global reach and underwriting expertise, Endurance came along with its charismatic and highly successful CEO John Charman. He had built AXIS Capital Holdings along with Bob Newhouse, after selling his Lloyd’s managing agency Tarquin/Charman Underwriting Agencies to ACE for £350m back in 1998.

Sompo Group CEO, Kengo Sakurada, made the wise decision to lock Mr Charman into the acquisition as founding chairman of Sompo International. Perhaps to the surprise of many in the market, Mr Charman has been there ever since, building the Japanese group’s international capabilities and scale through Sompo International, so that overseas business has now reached $7bn in premium income and is planned to rise from 7% of group share in 2010 to 40% next year.

Mr James, formerly head of international business at Lloyd’s of London, CEO of Lockton International and president of Allied World Global Markets, said it was an easy decision to stop focusing on his sailing skills and take the opportunity to join Mr Charman.

When Mr Charman was selling the deal with Sompo to Endurance shareholders back in 2016 his core message was simple: The corporate and multinational insurance business has become too international, complex and specialist for smaller and medium-sized insurers to be able to offer the scale, global reach, capital strength and expertise that corporate customers need.

Today, this message is more relevant than ever, as companies of all shapes and sizes grapple with the huge challenges presented by the Covid-19 pandemic, a rapidly hardening market and dwindling capacity in many lines.

“What attracted me to the role? The vision that Mr Charman outlined to me. I have always had immense respect for him, his abilities and track record. He called me last year and outlined what Sompo was trying to do to become a top 10 global insurer, building its services outside of its core Japanese market and customer base. Insurers that can build the products and services that customers really want, have the financial strength and ability to invest and have successful leaders will succeed in this market and so it was an easy decision to make,” explained Mr James.

The “demystification” process is required because, while Mr Charman and his team have been working hard and successfully to build the international business since 2016, it has been a relatively quiet process, perhaps not surprising given how challenging the market was for commercial and corporate insurers before it began to turn in 2018.

Now is the time to really move onto the front foot and explain the Sompo International messages to brokers and risk managers across Europe and worldwide, believes Mr James.

“Risk managers will see clearly what Sompo International has to offer in the coming months,” he explained. “Within this business we have the full range of geographic reach and capabilities by sectors and product groups. Additionally, Sompo International’s Global Risk (GRS) Solutions business also takes a unique approach and underwrites by industry verticals,” he said.

Sompo GRS, led by CEO Michael Chang, currently focuses on financial institutions, hospitality, life sciences, professional services, real estate and technology sectors. It offers guaranteed cost and alternative risk transfer mechanisms – deductibles, SIR, retro rating plans and captive programmes – to small, mid-sized and large accounts. In July of this year the group announced the creation of Sompo GRS Europe based in London to serve the European market through retail brokers.

One interesting move as part of this process, and something that Mr James picked up when he joined in February this year, was Sompo’s decision to exit Lloyd’s at the end of 2020. It will no longer write business from Endurance at Lloyd’s (EAL) or Syndicate 5151. All renewals and new business will be written from Endurance Worldwide Insurance Ltd.

It will focus its resources on its London company market, wholesale and specialty platform, its Luxembourg European headquarters and growing network of mainland European offices.

Sompo International’s exit was regarded by some at the time as something of a potential portent of doom for the historic market as it continued its renewal effort under new CEO John Neal within challenging market conditions. Not so, says Mr James.

“This decision was always about Sompo International, us not Lloyd’s. My remit is to expand the international insurance footprint and we need the best platform to do that. With Sompo International’s rating equivalent to Lloyd’s, we can utilise that rating and our existing operation to be an even more streamlined and efficient provider of risk solutions, while maintaining a meaningful and diversified trading relationship with Lloyd’s in the years to come,” he explained.

“Personally, I am very supportive of what John Neal and his team are doing at Lloyd’s. We provide quite a lot of reinsurance support for syndicates and investment in funds at Lloyd’s too. In terms of offering insurance to end customers we felt it was simpler to use our own platform to provide the growth we want. Lloyd’s offers financial security, a global licence network and a brand. We already have all of those core strengths, so why complicate matters for risk managers and brokers?” continued Mr James.

On top of this, Sompo International’s long history of providing support around the world for Japanese multinationals means that it has the capability to deliver global programmes for customers, another key selling point as Mr James and his team reach out to the broker and risk management community.

“We have a network of offices around Europe in leading markets such as Germany, the UK, Spain and Italy, which have been servicing multinational business for many years, supporting Japanese business as they expanded internationally. Now we are doing more domestic business as we invest and make acquisitions, increase our underwriting capacity and launch new offices. To be effective and win that business it is really important to be able to offer local underwriting capabilities and services that are supported by our London market specialty wholesale business,” explained Mr James.

When asked about the specifics of Sompo International’s growth plans, Mr James focused on the absolutely fundamental and currently quite contentious topic of claims as insurers in the US, UK and France, in particular, grapple with pandemic related business interruption claims that are currently taking centre stage.

For Mr James, risk managers and brokers will have to choose their insurance partners more carefully than in the past – and during the long soft market – because willingness and ability to pay will become more important than ever as the market hardens further post Covid-19.

“In the current trading environment, it’s all about risk transfer. Risk managers want to transfer their risk to carriers that will be able to pay claims, and this will be more important than ever in the post-Covid-19 world. This is exactly what we have to offer. Meaningful capacity is needed to help customers through the current crisis, and we are increasing capacity in the classes that it is right to do so. I feel there is a need for more leadership in terms of pricing risks and the right products and this is where we are,” he said.

The current hardening commercial and corporate insurance market does not really play a significant factor in the Sompo International expansion plan, according to Mr James. And to be fair, the Endurance acquisition and following expansion took place during a long soft period.

“It is about what customers want and need and being able to meet that. There is a current adjustment to pricing, terms and conditions in certain markets and good reasons why. I don’t really worry whether it’s a hard or soft market. What I worry about is whether we are offering the right products to customers and that claims are being paid. Bad things happen every day, ships collide, planes crash and it’s important to remember the basics of what we do. We take on the risks of our clients and we pay the claims,” he said. “I hope that customers and brokers will look at us as a company, appreciate the strong financial security and A+ rating we offer, our expertise across all the major lines and the meaningful capacity we offer for key risks around the world and ask us to be their long-term partners,” concluded Mr James.