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Everest Insurance targets London growth as international rates rise 7%

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Everest Insurance International is looking to capitalise on current specialty market dislocation, armed with a more-than 30 percent increase in capacity for its Syndicate 2786 for next year.

CEO Vincent Vandendael told this publication the syndicate had Lloyd’s clearance for 2020 capacity of £177mn ($227mn). The figure includes £24mn for Special Purpose Arrangement 1892, which was established earlier this year by medical mutual the Medical Protection Society.

Vandendael was appointed to the Everest Insurance International role last August, moving from the post of chief commercial officer at Lloyd’s. His immediate focus was on building infrastructure, including getting the carrier’s Brexit hub in Dublin up and running and establishing a branch of that hub in London.

The business also gained a US excess and surplus licence from the National Association of Insurance Commissioners.

In addition, he has been investing in the claims function, building underwriting teams and adding lines.

Vandendael’s appointment fits with a broader primary insurance push at Everest Re that began in earnest in 2015, when Jonathan Zaffino joined from Marsh & McLennan Companies to lead the US primary unit. Zaffino was made president and CEO of the whole of Everest Insurance in January 2018.

The hire of Chubb's Juan Andrade to succeed outgoing CEO Dominic Addesso at year end further underlines the board's commitment to growing its insurance business.

In the first nine months, primary insurance accounted for $1.43bn of Everest Re’s gross written premiums (GWP), almost a quarter of the total, with this set to climb over time.

From the London operation, new offerings include international casualty, credit, political risk and surety, global fine art and specie and real estate.

Within Lloyd’s, Vandendael said Syndicate 2786 is looking to capitalise on the business churn elsewhere in the market since performance management director Jon Hancock launched the Decile 10 review last year.

“We definitely see opportunities,” Vandendael noted. “We are on the other side of the range where we are saying, ‘What are we going to add’ and that’s a great position to be in.”

Vandendeal expects Everest Insurance to employ more than 100 staff in London and Ireland by the end of next year, up from just 26 at the start of 2018 and from an expected 80 at the end of this year.

Market rainmakers

As Vandendael and colleagues build the team they are mindful of the conduct debate currently raging in the London market.

“We have refused people that are considered rainmakers because sometimes rainmakers come with the wrong behaviour,” he stated.

“If we are to attract young talent we have to have the proper culture and live by it,” he added.

Syndicate 2786 began operations in 2016, deep in the soft market.

“It was a difficult time to set up a syndicate and if we are now in a position to benefit from how the market is changing it's down to the foresight of the senior management at the time,” said Vandendael.

The syndicate derived about £74mn of its £116.4mn of GWP last year from third-party liability.

Vandendael added that it will continue to have a long-tail focus despite the wider casualty market malaise. He noted that the London operation was relatively unexposed to the trouble spots and does not, for example, write many US-domiciled accounts.

Similarly, Zaffino told analysts after third-quarter results that Everest Insurance as a whole is not directly experiencing much of the casualty loss pressure of the wider market.

Market-wide Vandendael expects among the steepest rate growth in directors’ and officers’ cover and for professional indemnity (PI).

“The whole cladding issue has not crystallised and that will impact the whole market,” said Vandendael, referring to inquiries about the suitability of materials used for high-rise blocks that were sparked by the Grenfell Tower fire in June 2017.

“Construction and contractors’ PI are going through a really difficult time of hardening, not of firming,” he explained.

Syndicate 2786 had a 2018 combined ratio of 108.4 percent because of investments and lost £11.7mn in 2018, though this was down by 37 percent on 2017.

While Vandendael wouldn’t specify expectations for 2019, Zaffino told analysts last month that the entire insurance division’s combined ratio was 96 percent in the year to date, 2.1 points better than the year-ago period.

Zaffino said that overall international insurance rates were up 7 percent in the year to date.

Vandendael spent almost seven years at Lloyd’s before joining Everest. Before Lloyd’s he worked at Zurich insurance for 17 years, serving as Asia Pacific global corporate CEO in his final role there.

Verdict on Lloyd's Blueprint

The executive is supportive of the Lloyd’s Blueprint, though would have liked to have seen a formal system of acknowledgement of the oversight of syndicates provided by big-company parent groups.

“There’s not a single project here that would not get scrutiny” from the parent company, he said. “There must be a way to do that in a more effective and efficient manner for groups that have the track record.”

He also pinpointed Lloyd’s CEO John Neal’s plan for risk exchange for commoditised cover – the element that wholesale brokers have issues with – as the carrying the greatest execution risk.

“The value proposition will have to be really strong to make it work and you will have to have the broker community with you,” he explained.

The lead-follow model under development, the services ecosystem and the complex risk exchange have his unqualified support, though.

He pointed out that the lead-follow model could, for example, save onerous work checking on sanctions.

“Do leaders and followers all have to do the same work? Most likely not. There’s an enormous amount of efficiency that can be obtained.”

Everest Insurance plans to stick with a programme of organic growth rather than M&A as it expands, though will continue to hire in teams for elsewhere, according to Vandendael.

Chief commercial officer Dane Lopes added that, in recent months, “there’s not a transaction that Everest has not looked at, but our strategy is we are not looking to do a major acquisition.

“Organic is our strategy – M&A can become a distraction,” he added.

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