What does it take to build a reinsurer that can manage volatility?
MS Re has undergone a period of significant growth in recent years and expects to top $4bn in GWP by 2025.
CUO Charlie Goldie explains on Behind the Headlines that the company’s strategy is to deliver long-term value creation for its parent, partnering with insurers across multiple classes to manage volatility.
He noted that conditions in casualty reinsurance are improving, but the work is not yet complete and underwriters need to keep pushing.
Plus, Insurance Insider’s Rachel Dalton breaks down the key takeaways from a frenzied period of Lloyd’s M&A.
Transcript
Sam Casey: Hello and welcome to Behind the Headlines, brought to you by Insurance Insider. I'm Sam Casey, and thanks for tuning in to the latest episode. Remember, you can subscribe to the podcast either on our website or on your podcast platform of choice. It's that time of year where the reinsurance renewals are solidly in focus, so for this episode it felt like a timely point to sit down with a real expert in reinsurance underwriting. Charlie Goldie, the chief underwriting officer at MSRE, has led the underwriting function of the reinsurer during a time of major growth, with premium income almost doubled over the last few years to $4 billion. He told me the company's strategy is to deliver relatively smooth returns in the long term in what is a notoriously volatile marketplace.
Charlie Goldie: Look, we're happy to have a multi-line, cross-class strategy. We won't ring the bell in a low cat year, the way some of the cat-heavy companies will ring the bell in terms of profitability. But we'll be much more stable over the long term. We may give up a little bit of return over the long term. But the return for us is the flatter volatility. And that's something that our parent company really values.
Sam Casey: First up, it's time for our news discussion. And boy, has there been a lot of news. There has been an absolute frenzy of MA in the Lloyd's market. And I'm pleased to be joined by Insurance Insigner's Rachel Dalton now to tell us more. Rachel, welcome back to the show.
Rachel Dalton: Hi Sam. Thanks for having me.
Sam Casey: Well, it was a pretty hectic couple of weeks in the world of Lloyd's deal making.
Rachel Dalton: It's been hard to keep up.
Sam Casey: And we've written extensively about why we expected to see a lot of transactions taking place this year and identify likely targets. One of the most noteworthy ones and certainly largest insured transaction in terms of scale was Convex's deal with Onex and AIG. Could you just talk us through what that transaction looked like?
Rachel Dalton: It's uh quite a complicated three-way deal, which values Convex at around $7 billion or 1.9 times tangible book value. So the way this works is that Onex, uh Convex's existing PA backer, has reinvested and now owns a 63% stake in Convex. And AIG has come in and taken a 35% holding. But there are some interesting details to this deal. So one of those is that Onex has moved its ownership of Convex from a limited partnership fund to its general partnership, which effectively brings its stake in Convex onto its own balance sheet, which we think is highly unusual for a live PC company. And as Stephen Catlin puts it, that gives Convex as close to permanent capital as you can get, which is the dream. And at the same time, AIG gets a 9.9% stake in Onyx, and it will also invest $2 billion in Onex funds with preferred access over the next three years. So it's quite an interesting deal with like multiple touch points between the three companies.
Sam Casey: It was a bit more out of the blue compared to other transactions that we've seen. I don't think any of us have predicted something like that coming out.
Rachel Dalton: No, exactly. It was surprising in that it's a less straightforward transaction than shifting ownership to another private equity investor or a strategic buyer. It blends the two. And that structure solves a few issues for Convex. So it gets them a better valuation than would likely have been possible through a sale to another private equity investor. But a vanilla sale to a strategic buyer would probably not have appealed to Convex's senior leadership given their experience of the Excel Catlin deal. It gets them the best of both worlds essentially. It's interesting because we're now seeing evidence that the pool of potential investors in Lloyd's businesses is wider than we thought. So you look at CRC and Atrium, that's a broker looking to gain footholds in more links in the value chain. And then you've got Radian and Inigo, which nobody predicted. Nobody thought a US mortgage insurer would come in as an investor. So we think we would probably see more interesting combinations of companies with Lloyd's businesses as we go through this MA cycle.
Sam Casey: And from the outside, people will be looking at this deal with AIG and speculating about how much influence AIG will have over Convex, how much independence they have going forward. How does that relationship look?
Rachel Dalton: Yeah, this is the part that could become a little bit thorny for Convex's leadership. They need to manage the perception of AIG's degree of control over the company, seeing as AIG has a 35% stake in Convex and then an indirect interest through its investment in Onex as well. But it's important to remember that Convex's board composition remains largely similar. You have representatives from GIC and PSP on the board now who will be replaced by AIG nominees, but they can't be actual AIG staff. So there's a kind of degree of separation there. And both Stephen Kapnan and Paul Brand at Convex and Peter Zafino at AIG have all issued quite strong statements about Convex's continued independence. So that's the stance they're taking at the moment.
Sam Casey: It's going to be interesting to see how it develops.
Rachel Dalton: And on the other side, we also have had another interesting transaction in the past few weeks with STAR and IQ. Can you talk us through the details of that trans transaction and why it might be seen as a little bit more conventional?
Sam Casey: Yeah, I think if we look back to the predictions we've made about MA and Lloyd's, this was much more of a textbook case. You've got Star, a large US insurer, just under $12 billion, which would have generated a lot of excess capital over the last few years, looking to expand in a softening market. So MA is quite a clear route. And IQ, on the other hand, was another classic example of a business which was reaching the end of its time horizons for its private activity backers. It had long been gossiped about in Monte Carlo, say who's going to buy it. It was seen as a very likely contender. So in that sense, yeah, it it kind of fitted the mold in terms of the sort of deals we were expecting to see.
Rachel Dalton: Okay. And what does it tell us about Starr's strategy?
Sam Casey: Well, even though it looks quite conventional, it does represent quite an interesting shift in Starr's strategy. In particular, what we identified is this represents effectively a launch into the reinsurance market for Star. IQ has built quite a substantial reinsurance portfolio house in Bermuda. And that's really seen as noteworthy because of Star's leadership. It's led by Jeff Greenberg, who's also the founder and CEO of Aquiline, the private equity house, which was one of the crucial backers of the launch of Validas. So he has real pedigree in the reinsurance market, has been very successful, uh, knows that space very well. So I think it's going to be one to watch about how ambitious Star proved to be in that area. It's not going to be uh a massive expansion overnight, but I think we can expect to see them gradually starting to ramp up the impetus they put on that part of the business, which does reshape the whole nature of the beast.
Rachel Dalton: Okay. And when we have these sort of corporate takeovers, one concern that everybody usually has is the integration project. So what do we think will be the key considerations for Star as it integrates IQ into the existing business?
Sam Casey: Well, the interesting thing is Star already has a Lloyd's presence. It has a smaller syndicate, long-standing participants in the market, but it hasn't really grown in any any way like IQ has. It's, you know, since 2021 to 2024, it's hovered in the mid 400 million in terms of gross written premiums. And during that same time, IQ went from in 2021 about $250 million to well over a billion. So when you've got that dynamic, there's obviously things to manage in terms of personnel, relationships. IQ also loses its branding. It'll become part of STAR eventually. So it changes the nature on that front. And there's always differences when it between working for a nimble startup type company to being integrated into a long-established, large global conglomerate. So that's what they'll need to think about and manage. But as you say, this is a challenge which people face whenever they do MA transactions. So I'm sure it's been considered significantly before they went ahead.
Rachel Dalton: So it's watch this space and we'll see who comes next.
Sam Casey: Yes. Well, there's a diminishing pool of potential uh candidates for deals, but there's still a few more to go, so I'm sure we'll speak about it again.
Rachel Dalton: Yeah.
Sam Casey: Thanks for coming on the show, Rachel.
Rachel Dalton: Thanks, Sam.
Sam Casey: Conference season is behind us, and reinsurers are now thoroughly in the midst of the busiest renewal season of the year. There's been much talk about market softening, competition, and growth ambitions. Charlie Goldie of MSRE is a seasoned figure in the reinsurance market and has helped execute a period of major growth at MSRE. To discuss how the current renewal is shaping up as well as MSRE's wider strategy, I'm delighted to be joined by Charlie now. Charlie, thanks for coming on the show. Hi Sam, great to be here. Thank you. To start off, it would be great to hear a bit about yourself. You've been at MSRE since, I think, the start of 2021.
Charlie Goldie: Uh start of 2021, right. So I'm a US casualty actuary by background. I tell people sometimes I'm a I'm a recovering actuary. I haven't worked as an actuary in about 25 years, moved over to the business side back around 2000, and just really enjoy the reinsurance industry and all the things you learn. It's a fascinating business. Spent many years with Partnere, joined MS Re at the start of 2021 when we were going through a bit of a turnaround, uh, as a lot of folks were at that time. And you know, have really been enjoying building the team, building out the portfolio and the progress we've made so far.
Sam Casey: Would you be able to just explain MS Re, where it fits within the wider, you know, Mitsui empire almost, because it's such a big, big company, but you're you're your own independent part of it.
Charlie Goldie: Sure. So you've got MSNAD, a holding company in Japan, and then you have the MS, the Mitsui Sumitomo, and the AD, the I Nisinawa. Those two will be merging over the next few years. MS Reinsurance is a direct subsidiary of MSI, so the MS half of MSNAD report directly in to Japan. Currently, about a little over 2 billion surplus will probably hit 4 billion US dollar denominated premium in 2025, which is roughly double what it was four years ago. And A plus rated. We've built a very nice company and enjoy great support from our shareholders.
Sam Casey: You've brought me on to what I was going to ask next. You've been on a significant growth trajectory over the last few years. How's that been and what's been driving that?
Charlie Goldie: A few things drive it. One is, you know, our parent company, uh, obviously the Japanese economy is not a big growth economy now. And so as our parent company wants to grow, the focus is on international. And certainly non-life treaty reinsurance is something that you can scale reasonably effectively without having to build a ton of infrastructure. And the market opportunity that was created gave us the ability to do that.
Sam Casey: So it's been a pretty exciting time to be a pure play reinsured the last few years.
Charlie Goldie: It has, um especially because you can really hook in with what your clients are looking for. So in challenging markets, buyers of reinsurance, they're going to pay a price they don't like. But if they're also getting something, getting a reinsurer that's hooked into what they're looking for and what helps them kind of build their business over the long term, that's been our focus. That it's been a good, healthy market from a profitability standpoint has been great to kind of give us a tailwind.
Sam Casey: Yeah. And to that point, when you're looking to forge these long-term partnerships with sedents, what are you looking for from them? And what's your selling point? You say what you bring to the table as a reinsurer.
Charlie Goldie: It's embarrassingly kind of sad, Sam. What we bring to the table and what we just try and do over and over is know who you're talking to, what they're looking for, what's the problem they're trying to solve. Second is be easy to work with, meet deadlines, give answers quickly. Don't play a game for five weeks and then say no at the last minute. Just bad use doesn't age well, doesn't it? Right. And just do what you say you were going to do. And third, run an efficient shop at RN so that we're not building up a massive expense ratio that our clients have to pay for kind of our bad infrastructure. And if you can do those three things over and over, it's sort of sad, but you you actually become a very effective reinsurer. And there aren't a lot of reinsurers that do those three. Know your client, be easy to work with, run an efficient machine. There aren't a lot that do that consistently. And so that's been our formula is just focus on those three things, do them over and over. Now, what it takes to get to know a client and the difference between some of the, you know, sometimes two big names will look very similar on paper, but what's driving their reinsurance buying decisions are very different. And you've got to get in and know those things. But at the very highest level, it sounds really, really simple. And I think from a client perspective, that consistency is something that they really look for. You know, a lot of them wear the scars of 1-1 2023 when different partners, you know, I told them one thing for years and years, and suddenly the world changed. And we've been spectacularly boring, really, since 2022. Once we got our kind of new strategy up and running, it's been sort of the same message every year and just deliver, execute on that message. And so I think that consistency in partnership, consistency in how we approach their business, you know, having good conversations about here's how we'll act in this market, here's how we'll act in that market, here's what we'll do when things go left, here's what we'll do when things go right. But being very transparent with our clients about how we'll work together, I think gives them a lot of comfort in kind of how they can plan their business over the intermediate term.
Sam Casey: And we're speaking in early November, so we're out the back of the hectic conference season, which is when everyone's setting out their priorities for the renewal. Then we're now kind of in the thick of it. How's the renewal shaping up?
Charlie Goldie: In many respects, it's it's a little boring. You hear a lot of noise about property cat pricing, and we we follow that. We're not a big property cat company. We offer it to our clients that need it, but it really doesn't drive our profitability the way it may drive some others. And so we watch that noise, but it's not really what's driving us. For us, it's really the multi-line, broad relationships. There we see most things looking relatively stable. You know, you're seeing some lines of business that have performed well over the last few years, and you're seeing a little bit of price pressure to come down. You've seen some little bumps along the way, and those are holding steady or correcting a bit. But outside of the property cat world, it seems to be a relatively flattish, ordinary market where you're really, you know, competing on what you can bring to your clients in terms of things that they're looking for, be it stability or consistency across multiple lines. Yeah.
Sam Casey: And do you still feel you're going to be able to grow much in this market?
Charlie Goldie: I do. I think it's funny. Most reinsurers, right? Everyone wants to grow.
Sam Casey: Yeah, that was the real message of Monte Carlo, I think, is everyone wants to grow.
Charlie Goldie: Right. And if you were to kind of sneak in in the middle of the night and get everyone's business plan for 2026 and add them up, you just say, well, this just can't happen. There's just not that much business for everyone to hit their growth targets. You know, I think it really comes down to there's not really a shortage of capacity. Rates are going to do what they do. I think for the most part, outside of Property Cat will be roughly stable, which means that buyers are going to pay a price that they don't love. It's probably better than what they got a few years ago, but it's much higher than what they were getting six, seven years ago. So it's a market price they don't like in a syndicated market, but they have a lot of choice about who they buy from. And that's what we've really been trying to do is to kind of make sure our clients understand the value we bring, both through the way we execute, the strategy we take of playing broadly across most of the business that our client buys, trying to be consistent over time with how we do it, and then sort of the strength of our balance sheet and of our parent and sell that continuity. And we think that creates a great value for many of the buyers and the way they look at the reinsurance business. And so I think we still have a bit of a tailwind in terms of what we're offering in this market. And so, as opposed to a transactional buyer that's just looking to trade on price for the next 12 months, I think the continuity we bring gives us a little bit of a tailwind.
Sam Casey: Is that what drives your portfolio approach, partnering cross-class? Because, you know, I think sometimes re-insurers can have a perception of the pricing's up. We're going to pile into this class, but then walk away when they don't fancy it.
Charlie Goldie: I think every strategy is valid. And the world needs transactional players, the world needs line of business specialists. Our strategy is really driven by our shareholder. Our shareholder is looking for international growth, but you know, our shareholders publicly traded. They're not looking for a ton of additional volatility. And so when we had conversations with them about, look, here's five or six different strategies we can have in the reinsurance business and talked about the pros and cons of each. We landed on, look, we're happy to have a multi-line, cross-class strategy. We won't ring the bell in a low cat year, the way some of the cat heavy companies will ring the bell in terms of profitability. But we'll be much more stable over the long term. We may give up a little bit of return over the long term, but the return for us is the flatter volatility. And that's something that our parent company really values. So with the strategy we're taking, we're able to provide that. And it also happens that it becomes something that I think is very attractive in the current market in terms of being a long-term cross-class strategy. Yeah.
Sam Casey: And thinking about the current market, we had a very challenging start of the year with the awful wildfires in California. But then with the exception of Hurricane Melissa recently, it's been really quite a quiet cat season. So I think in general, the perception seems to be results are going to look pretty good. Do you think that quiet cat season we've seen is going to add some extra pressure to the reinsurance market in general?
Charlie Goldie: One of the things that always bothers me, Sam, right, I am a recovering actuary. I haven't practiced in 25 years, but it drives me nuts when I go back to my actual roots. The idea that there's a quiet season or a busy season in terms of activity has such an impact on pricing. We haven't learned anything new about catastrophe risk. You would wonder why suddenly you'll see prices come off 10%. Similarly, there are years where there'll be a major storm, but it's a storm that kind of in the standard set of storms and prices go up, and you wonder, well, we haven't learned anything new. I was uh joking with someone recently. I said, I guess last year, the storm that was headed at Tampa, Category 5. And so people panicking. You think, well, what are you panicking for? If you're riding Florida wind, you had to know this was a possibility. I get it. If somebody says there's a category five storm headed for Seattle, nobody thought that was a possibility. You may want to take some defensive action here. But why that was such a shocker for people drives me nuts, kind of from a technical standpoint, that people's view of risk can be so impacted by the randomness of weather in one year.
Sam Casey: Yeah. Nonetheless, that's the market. You've got to be able to do that.
Charlie Goldie: This is where we live.
Sam Casey: So speaking about being a recovering entry, I read in your results that the portfolio is shifting a bit towards longer tail classes. We've seen a lot of headlines in the last few years about back year challenges people have had with their casualty portfolios. What makes you confident about growing in that area now?
Charlie Goldie: You're never 100% confident. And I grew up in U.S. casualty. You know, for us, it's really where the business is. And I think we were underweight in the US back 2021. And so US has always been an important part of our growth strategy. And if you're growing in the US, it's a big casualty market. And so that's naturally going to lengthen our tail, bring us additional casualty business. I think it's a great business. I think there are some companies that do it really, really well. We look at the sort of social inflation challenge, feel very fortunate to not have a legacy from that period, sort of the 14 through 18 period, and even not much from the shoulder years of 19, 20, 21. We don't have the reserving challenge that a lot of other folks have. And we're able to look a little bit more forward at the business. I think the business needs to keep correcting. It had a little lull back about 18 months ago where I think the market got a little bit, I wouldn't say soft, but stopped pushing. And I think they've gotten back to pushing. And I and I think, you know, it's one of those markets, US casualty, where you really need to keep pushing and correcting until you can see the results. And I don't think anyone really is at a point where they can look and say, I think underwriting year 2025 is a clear success story. I think the best we can do is say that 25 is better than 24, and 24 is better than 23, all the way back probably to 2019. But I don't know that you can declare it good, okay, or still needs improvement. Trevor Burrus, Jr.
Sam Casey: A positive trajectory, but the work's not fully done.
Charlie Goldie: I like what I see coming out of the direct market in terms of how they're continuing to push, both on the rate side, but I think you're seeing companies now pushing a little bit, trying to understand the claim environment and do some things on the claim side to get things under control.
Sam Casey: Aaron Powell We've lasered in a bit on the immediate renewals coming up, but are there any particular more long-term big economic trends which you're really keen to try and latch on where you see opportunities? I think, you know, we write a lot about the energy transition as an emerging opportunity. There's lots written at the moment about data centers. Is there anything like that that you really um think about a lot?
Charlie Goldie: The biggest thing for us is always where are our clients going, right? I think to be a valuable reinsurer, it's not to say I like class A, but not class B. It's really understanding your clients and where they need support and making sure you understand the risk well enough to be able to support them and understand how losses will accumulate so that you don't put yourself in jeopardy and not able to continue. So energy transition is interesting. I don't have a good word for it, but the energy sort of detransition is, I think people realize a lot of the energy transition is not quite ready. And suddenly you're bringing coal back on, you're talking about nuclear suddenly. And so all of these things get really interesting. The data center question that was really a hot topic from a construction standpoint, an operating standpoint, a financing standpoint creates a lot of interesting risk.
Sam Casey: They're just big, big numbers, aren't they?
Charlie Goldie: Spectacularly big. And people worry about bubble, the Gartner hype curve, right? I I think there's certainly an element to that. But these things, you know, many of them will be built, will operate. So it's, you know, getting in there, understanding the risk. For a re-insurer, the biggest thing is how does it accumulate? How might I take this and get a loss or an event across multiple clients and make sure that we're able to continue participating the way we need to.
Sam Casey: And once we've got the upcoming renewal out of the way, is there anything in particular you're targeting for 2026?
Charlie Goldie: Continue to grow in the US, build out our team there, build out our client base there. Be doing a little bit more on the energy side in 2026, AH in certain regions. But you know, we tend to go where our clients are going. And I get the question a lot of times from either brokers or or even clients, and you know, what business do you like? And I don't really think that's for me to say, right? A re-insurer supports their clients. And so if our client can show us that they're assessing a risk in an appropriate way, and we can understand that risk and how it accumulates in our portfolio, we're happy to write it. We may not love the pricing. We may need to build something broader that supports pricing in take a bad apple over here, but you know, get a few other apples that we like somewhere else. It's not really for us. It's certainly not in our strategy. Like I said, there's room for transactional reinsurers, the market needs them, the market needs the line of business specialists. But our place in life is really to understand what risk our clients feel they have, and then figure out how we can create a package that helps them get done what they need to get done, but helps us build our business as well.
Sam Casey: Well, Charlie, I'm afraid that's more or less all we've got time for. But it's been a pleasure speaking today.
Charlie Goldie: I've really enjoyed it, Sam. Thank you. Uh, it's been a lot of fun.
Sam Casey: Finally, here are some of the top headlines of the past fortnight. The Fidelist partnership launched a data center construction consortium, as the insurance opportunity linked to data centers continues to gather pace. In aviation, the market is expecting yet another claim after the fatal UPS cargo plane crash in Kentucky. And in the niche mining market, fears are mounting that an Indonesian mining accident may deliver a $700 million loss to the market. That's all for this time, but do tune in again in two weeks.